INTRODUCING. (Posted Jan., 2021) India is a strategic location for pharmaceutical manufacturing and processing, as it has an excellent growing economy with tremendous potential for medical advancement. Besides being a key driver of overall economic growth, pharmaceutical, foreign direct investment (FDI) has also been a significant source of foreign financial resource for the country’s medical development. Numerous companies have made commitments to invest in India, which shows the surge of interests among companies from around the globe.
Recent globalization trends have forced most companies to look for new markets to expand their business and reach out to the growing population. Pharmaceutical companies have in particular shown an inclination to invest in India. In the next five years, foreign direct investments (FDI) in India will rise by nearly 20%, as the pharmaceutical industry looks forward to new growth opportunities. According to estimates, over $100 billion dollars will be invested in the pharmaceutical industry in India over the next five years, which is expected to spur the country’s medical advancements and create more job opportunities.
Areas of prime importance for pharmaceutical FDI in India are healthcare, life sciences, cosmetics, chemical products, diagnostics, nutrition, and veterinary medicine. Pharmaceutical companies are pouring in large investments in research and development centres in India under the Pharmaceutical Development Agency of India (PDDA). As per the latest industry scenario, the four main sectors for FDI in India are: Biotechnology, Nanotechnology, Traditional Pharmaceuticals, and Food ingredients. The rising importance of these sectors in overall development outlook of India will propel it to become one of the top destination for foreign investment.
There is also a burgeoning business scenario in China due to the presence of innumerable domestic and international players. However, while exploring investment options in India, it should be kept in mind that majority of the investments in China are done by the Chinese pharmaceutical giants – Cipla, Cebu Pacific, Ranbaxy and Synaura – and a few others. A recent study by the Boston Consulting Group found that there has been an unprecedented leap in investments in the last five years in India. However, the fall in the economy of China has also resulted in a fall in the rate of FDI in India. Some of the reasons for this fall include the slowing down of industrial activity in China, the impact of default on the Chinese market, and liberalization policies of the Chinese government. While all these factors have contributed to the fall in FDI in India, the growth rates of the pharmaceutical industry and health care sectors have risen sharply and so have the benefits.
Besides being a key driver of FDI in India, the health sector is another significant economic development that contributes significantly to the Gross Domestic Product (GDP). The growing number of health-care hospitals in India can be gauged from the fact that there has been a tremendous upsurge in the number of physicians over the last decade. In fact, the number of physicians has been increasing at about 30% annually, and this pace is expected to continue. A rapid upsurge in the number of medical institutions can be gauged from the fact that there has been a remarkable expansion in the number of accredited hospitals in India, which have grown by about one percent annually, and this rate is expected to continue.
The third major economic driver behind FDI in India is the availability of jobs in various sectors in India. Jobs in the pharmaceutical industry in India can be gauged from the fact that there has been a tremendous upsurge in the number of pharmaceutical engineers in the last two decades. These engineers are recruited largely from China and Pakistan. In addition to that, there has been a rapid upsurge in the demand for medical staff in India and domestic staffing companies have started specializing in filling the need for medical staff in the medical community in India. Finally, the last but not the least, the third economic driver underlying FDI in India is the liberalization policy pursued by the government of India over the last thirty years or so.