Economic Survey: FDI in pharma gets pandemic boost; up 200% in FY21

Indian pharmaceutical sector witnessed a 200 per cent increase in foreign direct investment (FDI) in 2020-21, the Economic Survey 2021-22, tabled in Parliament by Finance Minister Nirmala Sitharaman on Monday, said. 
 
FDI in the pharmaceutical sector saw a sudden spurt in 2020-21 vis-a-vis the previous year showing a 200 per cent increase. In 2021-22 (April-September), the FDI inflows continued to be buoyant at Rs 4,413 crore, growing at the rate of 53 per cent over the same period in 2020-21, according to the Survey. 
 
"The extraordinary growth of foreign investments in pharma sector is mainly on account of investments to meet COVID-19 related demands for therapeutics and vaccines," it said. 

Indian pharmaceutical industry ranks third in the world in production by volume. During 2020-21, total pharma export stood at $24.4 billion, while pharma imports were at $7.0 billion, thereby generating trade surplus of $17.5 billion.  
 
Industry experts believe that India's pharmaceutical sector has gained renewed global attention due to the crisis brought about by COVID-19, with the FDI inflows firmly establishing India's credentials as a safe and key investment destination in the world.  
 
"Anti-China sentiment has also provided a bigger opportunity to attract fund flow. To encourage companies exiting China, the government intends to offer a red-carpet treatment, and is already working on simplifying entry process and ensuring ease of doing business in India. Mergers and acquisition in Indian brownfield pharma continue to be an attractive proposition for foreign investors looking to enter India," ENTOD Pharmaceuticals Executive Director Nikkhil K Masurkar said. 
 
"With many global players deciding to move operations out of China, and India emerging a strong alternative contender, investment in the pharma sector is likely to gain further momentum. Despite invocation of offshore guarantees given by Indian companies, pressure from overseas lenders, and takeover attempts by deep pocketed foreigners amid plummeting stock and asset prices, India continues to attract FDI," he added. 
 
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India is the largest supplier of generic medicines, with a 20 per cent share in the global supply. Price competitiveness and good quality have enabled Indian medicines producers to be dominant players in the world market, thereby making the country the "Pharmacy of the world", the Survey said. 
 
"Although a prominent player in formulations, the country is significantly dependent on the import of bulk drugs that are used in the formulation of medicine. In certain cases, import dependence varies between 80-100 per cent," it said, adding that the issue of import dependence for critical bulk drugs was examined by a High-Level Committee and a composite set of actions to incentivise bulk drug production have been initiated.  

The Indian government has taken several initiatives to address the requirements of the pharmaceutical and medical devices industry. Various initiatives such as 'Scheme for Promotion of Bulk Drug Parks' that envisages creation of world class infrastructure facilities in order to make Indian bulk drug industry a global leader was approved on March 20, 2020. Besides, production linked incentive (PLI) scheme for bulk drugs has also been approved for promotion of domestic manufacturing of 53 critical APIs in the country with a budget of Rs 6,940 crore for the next eight years, the Survey said.

In addition, PLI scheme for pharmaceuticals was approved by the government on March 24, 2021, with a total financial outlay of Rs 15,000 crore. Three categories (biopharmaceuticals, API/KSM/drug intermediates, and drugs not covered under Category 1 and Category 2) of pharmaceutical goods will be incentivised under the scheme based on their incremental sales for 6 years. Similarly, PLI scheme for promoting domestic manufacturing of medical devices was also approved on March 20, 2020. The total financial outlay of the scheme is Rs 3,420 crore, it added.

Indian Pharmaceutical Alliance Secretary General Sudarshan Jain said, "The Indian pharmaceutical industry is of strategic importance for the country providing access to affordable quality medicines across the world. The pharmaceutical industry is science-based and knowledge-driven with scientific developments evolving at a rapid pace. The primary thrust for the Indian pharmaceutical industry going forward should be to move up the value chain by scaling up R&D and innovation to meet the unmet needs of patients across the world." 
 
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