Friday, November 19, 2010
Summary of Economic Outlook Survey Conducted by FICCI in July 2010
Annual Forecasts for 2010-11
♣ GDP growth – 8.5 percent
♣ Agriculture and allied activities growth – 3.5 percent
♣ Industry growth – 10.0 percent
♣ Services growth – 9.0 percent
♣ Fiscal Deficit – 5.1 percent of GDP
♣ IIP – 10.6 percent
♣ WPI inflation rate (End March 2011) – 6.5 percent
♣ Money Supply (M3) growth – 17.0 percent
♣ Trade Balance – (-) 8.2 percent
♣ USD / INR exchange rate (End March 2011) – Rs. 44.5/USD
♣ Bank credit growth – 20.0 percent
Quarterly Forecasts for Q1 (Apr- June) and Q2 (July- Sep) of 2010-11
♣ GDP growth – 8.7 percent (Q1, 2010-11) and 8.5 percent (Q2, 2010-11)
♣ Agriculture and allied activities growth – 2.6 percent (Q1, 2010-11) and 4.0 percent (Q2, 2010-11)
♣ Industry growth – 11.0 percent (Q1, 2010-11) and 10.0 percent (Q2, 2010-11)
♣ Services growth – 9.2 percent (Q1, 2010-11) and 9.1 percent (Q2, 2010-11)
♣ IIP – 13.1 percent (Q1, 2010-11) and 11.0 percent (Q2, 2010-11)
♣ WPI inflation rate – 10.0 percent (Q2, 2010-11)
♣ Money Supply (M3) growth – 15.8 percent (Q2, 2010-11)
♣ Trade Balance – (-) 8.0 percent (Q2, 2010-11)
♣ USD / INR exchange rate – Rs. 46.0/USD (Q2, 2010-11)
♣ Bank credit growth – 19.5 percent (Q2, 2010-11)
Economists’ views on Expected monetary policy action by the RBI.
Majority of economists feel RBI would continue to move ahead on the path of monetary tightening and anticipate a hike of 25 basis points each in the
repo rate and reverse repo rate in July 27, 2010. Given the present liquidity situation, a hike in CRR on July 27, 2010 was however ruled out by the participating economists. Surveyed economists feel non-food manufacturing inflation is now rising at a fast pace and this could be a source of worry for the RBI.
Further, the full impact of the fuel price revision on inflation numbers is yet to be seen according to the economists. On the growth front, surveyed economists
believe that while the recent IIP numbers may have shown a decline from 16.5 percent in April 2010 to 11.5 percent in May 2010, such a growth is still reasonable and may not dissuade RBI from restricting monetary policy action.
Though the above is the majority view, a few respondents opined that given the moderation in IIP growth and the expected slowdown of inflation in the coming months, a further rate hike by RBI during the policy review appears unlikely at this juncture. They also feel that such frequent rate hikes could derail the growth momentum the economy is witnessing presently.
Potential downside risks to growth in 2010-11.
Downside risks to growth emanate from both domestic and global developments. Domestic factors that could pull down growth include 1) progress and spatial distribution of the monsoon, 2) inflationary situation, 3) premature and aggressive monetary policy action and 4) Four, social unrest leading to output losses,
Data shows that cumulative rainfall in the country between June 1 and July 14 was below normal by 13 percent. A less than optimum monsoon would adversely impact agricultural growth. Even if the rains were normal this year, overall agricultural performance may not be ‘too strong’ as overall soil productivity is now on the lower side. Further, if less rainfall can impact agricultural output, excessive rains and subsequent floods too will be a negative development. Some of the northern states are already seeing floods and this will have a bearing on agri output.
The headline inflation continues to remain stubbornly high. The recent fuel price revision will have an inflationary impact in the months ahead. Economists have pointed out that high prices are eating into the budget of the middle class population as far as their outlay for industrial produce is concerned. Thus if
inflation persists at the current levels for a long time or if there is a sharper than anticipated pick-up in inflation then consumption demand could get dampened.
While normalization of the monetary policy is expected and RBI would continue to tighten rates in the months ahead, premature and aggressive rollback of easy money policy can jeopardize growth. Rapid tightening of monetary policy will affect both consumption and investment demand and this could ease the growth impulses.
Given the recent pick up in naxal activities there is a fear that greater social unrest in times ahead may also lead to output losses and thus impact the growth trajectory.
External factors that could pull down growth include One, uncertainty regarding global recovery and Two, high commodity prices.
There are evident concerns with regard to developments taking place in the Euro Zone. Many believe that the next shock to the capital markets could come from evolving situation in the Euro area. This could increase volatility in capital flows and restrict availability of funds for supporting growth. Besides Euro area, economists are also skeptical about the direction of the US economy. There is a slight chance, some believe, of US economy getting into another recession. This, if it happens, will put a cap on our export growth (services sector like IT will get hit) and in turn affect GDP performance.
High commodity prices including crude prices is also being seen a risk to India’s growth in 2010-11 by a small set of economists.
♣ Inflation situation.
Majority of the economists do not expect inflation rate to fall to the 5 percent mark by end December 2010 as estimated by the government. The general view is that headline inflation would continue to remain around the present levels for the next few months and then gradually trend downwards. There are three broad reasons which economists feel would prevent headline inflation from coming down at least in the next one or two months –
Impact of recent hike in the fuel prices - Fuel price hike will add to the transportation cost for primary articles as well as increase the input costs for manufactured goods.
Sticky food inflation - Spatial distribution of monsoon will be a key factor under watch here
Depreciation of INR which is preventing any meaningful reflection of lower global prices in metals on inflation rate in India
Although inflation would after some time trend downwards, but a good number of economists expect that by December 2010, headline inflation rate would continue to be in the range of 6 percent to 8 percent.
Looking at the prognosis for the two key components – primary articles and manufactured articles – the trend is expected to be the same as for overall inflation. The only difference being that primary inflation will start to cool down from July / August 2010 onwards as the ‘negative base affect’ will
come into play then and manufactured articles inflation would trend down from November 2010 onwards as it was in November 2009 when manufactured goods price index had shown a spike. Besides this base effect, some of the other factors that should help ease inflation later this year include –
1) Low probability of further high MSP hikes (Primary articles inflation)
2) Slowdown in global growth which would keep a lid on commodity prices particularly those of industrial metals (Manufactured articles inflation)
♣ Annual Forecasts for 2010-111
The economists who participated in the third round of FICCI’s Economic Outlook Survey have estimated annual GDP growth rate (at factor cost) for the fiscal year 2010-11 to be 8.5 percent. The estimates from different participants for GDP growth rate range from a minimum of 7.8 percent to a maximum of 9.0 percent. The economists’ forecast for annual GDP growth rate this time is very close to the 8.4 percent forecast made in the last survey (April 2010).
The sector wise GDP forecast by the survey respondents shows that agriculture and allied activities will grow by 3.5 percent during the year 2010-11, which is lower than the forecast of 4.0 percent obtained in the earlier survey. Primary sector’s growth forecast varied from 2.5 percent to 5.4 percent.
Forecasters have revised industry sector growth number upwards to 10.0 percent during 2010-11 from 9.2 percent in the last survey. At the same time, they foresee that service sector will clock a growth rate of 9.0 percent in 2010-11, which is a lower estimate from the 9.3 percent obtained in the previous survey for the same year. While the range for industry sector growth is 8.8 percent to 12.0 percent, the range for services sector growth is 8.1 percent to 10.0 percent.
Economists see central government fiscal deficit at 5.1 percent during 2010-11, which is a downward revision from 5.8 percent obtained in the earlier survey. The estimate ranges between a minimum of 5.0 percent to a maximum of 6.0 percent.
The respondents anticipate that IIP would grow at a rate of 10.6 percent during 2010-11 against the earlier forecast of 10.0 percent. The surveyed participants adjusted both the WPI and the CPI (IW) against their earlier estimates. The WPI inflation rate is revised by about 1 percentage points to be placed at 6.5 percent by end March 2011 against 5.5 percent in the earlier estimate. The CPI (IW) inflation also is expected to settle at a higher rate of 8.0 percent. This is however lower than the previous estimate of 8.5 percent.
The range of both the WPI and the CPI (IW) varies between a minimum of 3.5 percent to a maximum of 9.1 percent and a minimum of 7.0 percent to a maximum of 11.4 percent respectively. The money supply (M3) growth is projected to be 17.0 percent during 2010-11. This was projected to
be 19.6 percent in the previous survey.
Economists have revised the export and import estimates upwards for 2010-11 from the earlier projections. While the median forecast for export growth is 16.5 percent, the same for imports is 26.0 percent. The earlier projections for export and import were 15.0 percent 12.0 percent respectively.
In this round of survey, the economists revised the trade balance slightly downwards to - 8.2 percent of the GDP during the current fiscal against a - 8.3 percent of the GDP in the last survey.
Economists expect that bank credit growth for the year 2010-11 would stand at 20.0 percent against the earlier forecast of 19.0 percent.
♣ Quarterly Forecasts for Q1 (Apr-June) and Q2 (July- Sep) of 2010-112
The surveyed economists estimate that the GDP growth (at factor cost) for Q1 (Apr- June) 2010-11 to be 8.7 percent and then move down to 8.5 percent during Q2 (July- Sep) of 2010-11.
Looking at a sector wise growth projections the economists foresee a lower growth for agriculture and allied activities during the first quarter of 2010-11. Agri and allied activities are estimated to grow at 2.6 percent during Apr-June. The sector however is expected to register a robust growth of 4.0 percent during the second quarter of the current fiscal as per the projections made by the respondents.
Both the secondary and the tertiary sector are projected to have a lower growth in the second quarter compared to the first quarter. Economists foresee that the industrial sector will clock a robust growth of 11.0 percent during Q1 and the slide down by about one percentage point to 10.0 percent during
Q2 of 2010-11. The service sector is projected to grow at 9.2 percent in the first quarter and then fall marginally to grow at 9.1 percent during the second quarter.
Economists expect that IIP would clock a growth rate of 13.1 percent and 11.0 percent in the first and second quarter of 2010-11 respectively.
Economists anticipate that the WPI inflation rate will be 10 percent in the second quarter of 2010-11.
They also expect the CPI (IW) to reduce to 11.0 percent in the second quarter from the projected figure of 13.7 percent in the first quarter. Economists foresee money supply growth at 15.8 percent during Q2 of the current fiscal year.
The survey respondents feel that the export growth will fall from 32.1 percent in the first quarter of 2010-11 to 27.3 percent in the second quarter of 2010-11. Imports are expected to see their growth going a notch down to 36.3 percent in the second quarter from a 38.8 percent in the first quarter of 2010-11.
The economists feel that the country’s trade balance will be in a negative zone in both the first and second quarter of 2010-11 and also expects the trade balance to widen in the second quarter. The trade balance is projected at (-) 7.0 percent of GDP for Q1 of 2010-11 and at (-) 8.0 percent of GDP in Q2 of
2010-11.
The forecasters feel that exchange rate of Rupee would be around 46 per USD in Q2 of 2010-11.
Economists have projected bank credit to grow by 19 percent in the first quarter of 2010-11 and then slightly increase to reach 19.5 percent during the second quarter of 2010-11.
♣ Economists’ views on expected monetary policy action by the RBI
On July 2, 2010, the central bank announced a hike of 25 basis points in both repo and reverse repo rates. This intra policy date hike came as a surprise to many of the market participants who were expecting RBI to stay on status quo mode till July 27, 2010 when the quarterly review is due. Most of the economists who participated in the FICCI Economic Outlook Survey said that they were expecting RBI to tighten rates while announcing the monetary / credit policy review on July 27, 2010.
A similar view was obtained when FICCI had interacted with the economists last month on the Greece Debt Crisis and how RBI would react keeping in mind developments in the Euro Zone. Given this and RBI’s pre-emptive move, they asked the survey participants on what they thought RBI would now do at the forthcoming monetary policy review.
The responses received show that an overwhelming majority of economists feel that RBI would continue to move ahead on the path of monetary tightening and that they should be prepared for another hike of 25 basis points each in the repo rate and reverse repo rate in July 27, 2010. Given the present liquidity situation, a hike in CRR on July 27, 2010 was however ruled out by the participating economists.
Economists have pointed out that non-food manufacturing inflation is now rising at a fast pace and this could be a source of worry for the RBI. Further, the full impact of the fuel price revision on inflation numbers is yet to be seen according to the economists. They feel that this second point also gives RBI
reason to continue with its policy tightening drive. On the growth front, surveyed economists believe that while the recent IIP numbers may have shown a decline from 16.5 percent in April 2010 to 11.5 percent in May 2010, such a growth is still sizable and may not dissuade RBI from restricting monetary
policy action.
Though the above is the majority view, a few respondents opined that given the moderation in IIP growth and the expected slowdown of inflation in the coming months, a further rate hike by RBI during the policy review appears unlikely at this juncture. They also feel that such frequent rate hikes could derail the growth momentum the economy is witnessing at this point.
♣ Economists’ views on potential downside risks to growth in 2010-11
According to CSO, Indian economy registered a growth of 7.4 percent in 2009-10. This improvement in performance over the previous year (6.7 percent), and the continued momentum being seen both in consumption and in investment demand in the economy raised expectation about growth performance in the fiscal 2010-11. Both government and RBI have pegged GDP growth for 2010-11 at the level of 8 percent plus. More recent estimates coming from the IMF show that India may well clock a growth of 9.5 percent in 2010. While such forecasts are certainly encouraging and underline the steady growth being witnessed in the economy, there are at the same time a few factors that can pull down these favourable estimates for growth in 2010-11. In course of our discussion and interaction with the participating economists, FICCI requested them to list out the downside risks to growth they see in fiscal 2010-11. Feedback received shows that the downside risks to growth emanate from both domestic and global developments.
♣ Economists’ views on inflation situation
In May 2010, headline inflation touched 10.16 percent. In June 2010, the figure went up further to 10.55 percent. According to the Planning Commission there could be some further increase in inflation rate in July 2010 when the full impact of fuel price revision will come into effect. However, after that inflation
rate is expected to trend down slowly and be around 5 percent by the close of this year. They asked the participating economists on how they viewed the inflation situation and are there an upside risk to inflation from here on.
Source: FICCI Economic Outlook Survey – July 2010
Compiled into article by CA. Aparna RamMohan. You can reach me at caaparnasridhar@gmail.com.
Thursday, November 18, 2010
Indian Pharmaceutical Industry
The Indian Pharmaceutical Industry today is in the front rank of India’s science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology. A highly organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously.
Playing a key role in promoting and sustaining development in the vital field of medicines, Indian Pharma Industry boasts of quality producers and many units approved by regulatory authorities in USA and UK. International companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world.
The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical companies control 70% of the market with market leader holding nearly 7% of the market share. It is an extremely fragmented market with severe price competition and government price control.
The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. There are about 250 large units and about 8000 Small Scale Units, which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulations.
Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. Technologically strong and totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market.
Playing a key role in promoting and sustaining development in the vital field of medicines, Indian Pharma Industry boasts of quality producers and many units approved by regulatory authorities in USA and UK. International companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world.
The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical companies control 70% of the market with market leader holding nearly 7% of the market share. It is an extremely fragmented market with severe price competition and government price control.
The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. There are about 250 large units and about 8000 Small Scale Units, which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulations.
Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. Technologically strong and totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market.
Competent workforce: India has a pool of personnel with high managerial and technical competence as also skilled workforce. It has an educated work force and English is commonly used. Professional services are easily available.
Cost-effective chemical synthesis: Its track record of development, particularly in the area of improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides a wide variety of bulk drugs and exports sophisticated bulk drugs.
Legal & Financial Framework: India has a 53 year old democracyand hence has a solid legal framework and strong financial markets. There is already an established international industry and business community.
Information & Technology: It has a good network of world-class educational institutions and established strengths in Information Technology.
Globalisation: The country is committed to a free market economy and globalization. Above all, it has a 70 million middle class market, which is continuously growing.
Consolidation: For the first time in many years, the international pharmaceutical industry is finding great opportunities in India. The process of consolidation, which has become a generalized phenomenon in the world pharmaceutical industry, has started taking place in India.
THE GROWTH SCENARIO
India's US$ 3.1 billion pharmaceutical industry is growing at the rate of 14 percent per year. It is one of the largest and most advanced among the developing countries.
Over 20,000 registered pharmaceutical manufacturers exist in the country. The domestic pharmaceuticals industry output is expected to exceed Rs260 billion in the financial year 2002, which accounts for merely 1.3% of the global pharmaceutical sector. Of this, bulk drugs will account for Rs 54 bn (21%) and formulations, the remaining Rs 210 bn (79%). In financial year 2001, imports were Rs 20 bn while exports were Rs87 bn.
STEPS TO STRENGTHEN THE INDUSTRY
Indian companies need to attain the right product-mix for sustained future growth. Core competencies will play an important role in determining the future of many Indian pharmaceutical companies
in the post product-patent regime after 2005. Indian companies, in an effort to consolidate their position, will have to increasingly look at merger and acquisition options of either companies or products. This would help them to offset loss of new product options, improve their R&D efforts and improve distribution to penetrate markets.
Research and development has always taken the back seat amongst Indian pharmaceutical companies. In order to stay competitive in the future, Indian companies will have to refocus and invest heavily in R&D.
The Indian pharmaceutical industry also needs to take advantage of the recent advances in biotechnology and information technology. The future of the industry will be determined by how well it markets its products to several regions and distributes risks, its forward and backward integration capabilities, its R&D, its consolidation through mergers and acquisitions, co-marketing and licensing agreements.
Domestic Trade
More than 85% of the formulations produced in the country are sold in the domestic market. India is largely self-sufficient in case of formulations. Some life saving, new generation under-patent formulations continue to be imported, especially by MNCs, which then market them in India. Overall, the size of the domestic formulations market is around Rs160bn and it is growing at 10% p.a.
Exports Trade
Over 60% of India’s bulk drug production is exported. The balance is sold locally to other formulators. India’s pharmaceutical exports are to the tune of Rs87bn, of which formulations contribute nearly 55% and the rest 45% comes from bulk drugs. In financial year 200, exports grew by 21%. India’s pharmaceuticals imports were to the tune of Rs20.3bn in FY2001. Imports have registered a CAGR of only 2% in the past 5 years. Import of bulk drugs have slowed down in the recent years.
The exports of Pharmaceuticals during the year 1998-97 were Rs 49780 million. From a meager Rs 46 crores worth of Pharmaceuticals, Drugs and Fine Chemicals exports in 1980-81, pharmaceutical exports has risen to approximately Rs 6152 Crores (Prov.1998-99), a rise of 11.91% against the last year exports. Amongst the total exports of India, the percentage share of Drugs, Pharmaceuticals and Fine Chemicals during April-October (2000-2001) was 4.1%, an increase of 7%.
Future Prospects
As per WTO, from the year 2005, India will grant product patent recognition to all new chemical entities (NCEs) i.e., bulk drugs developed then onwards. The Indian Government's decision to allow 100 percent foreign direct investment into the drugs and pharmaceutical industry is expected to aid the growth of contract research in the country. Technology transfer to 100 percent Indian subsidiaries of MNCs is expected only in 2005.
Indian pharmaceutical interests in making a mark on the global scene got a boost when Dr. Reddy's licensed two of its anti-diabetic molecules to Novo Nordisk and when Ranbaxy licensed its Novel Drug Delivery System (NDDS) of ciprofloxacin to Bayer. MNCs in India faced the problem of having a very high DPCO coverage, weakening their bottom lines as well as hindering their growth through the launch of new products. DPCO coverage is expected to be diluted further in the near future benefiting the MNCs. New legislation is also expected in the OTC segment increasing the number of brands in the Over the Counter (OTC) segment.
Indian pharmaceutical interests in making a mark on the global scene got a boost when Dr. Reddy's licensed two of its anti-diabetic molecules to Novo Nordisk and when Ranbaxy licensed its Novel Drug Delivery System (NDDS) of ciprofloxacin to Bayer. MNCs in India faced the problem of having a very high DPCO coverage, weakening their bottom lines as well as hindering their growth through the launch of new products. DPCO coverage is expected to be diluted further in the near future benefiting the MNCs. New legislation is also expected in the OTC segment increasing the number of brands in the Over the Counter (OTC) segment.
The Indian pharmaceutical industry is also getting increasingly U.S. FDA compliant to harness the growth opportunities in areas of contract manufacturing and research. Indian companies such as Ranbaxy, Sun Pharma, and Dr. Reddy's are increasingly focusing on tapping the U.S. generic market, projected to be around $18 billion by 2004.
Research & Development
The pharmaceutical advances for considerable improvement in life expectancy and health all over the world are the result of a steadily increasing investment in research. There is considerable scope for collaborative R & D in India. India can offer several strengths to the international R & D community. These strengths relate to availability of excellent scientific talents who can develop combinatorial chemistry, new synthetic molecules and plant derived candidate drugs.
R & D in the pharmaceutical industry in India is critical to find answers for some of the diseases peculiar to a tropical country like India and also for finding solutions for unmet medical needs. Industrial R & D groups can carry out limited primary screening to identify lead molecules or even candidate drugs for further in vivo screening, pre-clinical pharmacology, toxicology, animal and human pharmacokinetics and metabolic studies before taking them up for human trials. In such collaborations, harmonized standards of screening can be assured following established good laboratory practices.
The R & D expenditure by the Indian pharmaceutical industry is around 1.9% of the industry’s turnover. This obviously, is very low when compared to the investment on R & D by foreign research-based pharma companies. They spend 10 - 16% of the turnover on R & D. However, now that India is entering into the Patent protection area, many companies are spending relatively more on R & D.
R & D in the pharmaceutical industry in India is critical to find answers for some of the diseases peculiar to a tropical country like India and also for finding solutions for unmet medical needs. Industrial R & D groups can carry out limited primary screening to identify lead molecules or even candidate drugs for further in vivo screening, pre-clinical pharmacology, toxicology, animal and human pharmacokinetics and metabolic studies before taking them up for human trials. In such collaborations, harmonized standards of screening can be assured following established good laboratory practices.
The R & D expenditure by the Indian pharmaceutical industry is around 1.9% of the industry’s turnover. This obviously, is very low when compared to the investment on R & D by foreign research-based pharma companies. They spend 10 - 16% of the turnover on R & D. However, now that India is entering into the Patent protection area, many companies are spending relatively more on R & D.
When it comes to clinical evaluation at the time of multi-center trials, India would provide a strong base considering the real availability of clinical materials in diverse therapeutic areas. Such active collaboration will be mutually beneficial to both partners. According to a survey by the Pharmaceutical Outsourcing Management Association and Bio/Pharmaceutical Outsourcing Report, pharmaceutical companies are utilizing substantially the services of Contract Research Organizations (CROs).
Indian Pharmaceutical Industry, with its rich scientific talents, provides cost-effective clinical trial research. It has an excellent record of development of improved, cost-beneficial chemical syntheses for various drug molecules. Some MNCs are already sourcing these services from their Indian affiliates.
The Pharmaceutical and Biotechnology Industry is eligible for weight deduction for R&D expense upto 150%. These R&D companies will also enjoy tax holiday for 10 years. A promotional research and development fund of Rs.150 crores is set up by the Government to promote research and development in the pharmaceuticals sector.
Indian Pharmaceutical Industry, with its rich scientific talents, provides cost-effective clinical trial research. It has an excellent record of development of improved, cost-beneficial chemical syntheses for various drug molecules. Some MNCs are already sourcing these services from their Indian affiliates.
The Pharmaceutical and Biotechnology Industry is eligible for weight deduction for R&D expense upto 150%. These R&D companies will also enjoy tax holiday for 10 years. A promotional research and development fund of Rs.150 crores is set up by the Government to promote research and development in the pharmaceuticals sector.
India is gaining in importance as a manufacturer of pharmaceuticals. Between 1996 and 2006, nominal sales of pharmaceuticals were up 9% per annum and thus expanded much faster than the global pharmaceutical market as a whole (+7% p.a.). Demand in India is growing markedly due to rising population figures, the increasing number of old people and the development of incomes. As a production location, the country is benefiting from its wage cost advantages over western competitors also when it comes to producing medicines.
Since the end of the 1980s India has been exporting more pharmaceuticals than it imports. Over the last ten years the export surplus has widened from EUR 370 m to EUR 2 bn. At 32% in 2006, the export ratio was about twice as high as in 1996 and will likely rise further in the coming years (Germany: 55% at present).
Legal changes in India in 2005 made it considerably more difficult to produce “new” generics. Foreign pharmaceuticals, which enjoy 20 years of patent protection, can no longer be copied by means of alternative production procedures and sold in the domestic market. Hence, a reorientation was required in India’s pharmaceutical industry. It now focuses on drugs developed in-house and contract research or contract production for western drug makers.
Compiled into an article by CA. Aparna RamMohan (Chartered Accountant). You can reach me at caaparnasridhar@gmail.com
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