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Why pharma has emerged as magnet for global investors?

The aftermath of the COVID-19 pandemic and the US-China trade tensions have created a huge opportunity for India.

February 07, 2021 / 08:08 AM IST
During the last financial year, India attracted $5.64 billion in FDI from Mauritius, according to the data by the Department for Promotion of Industry and Internal Trade (DPIIT)

During the last financial year, India attracted $5.64 billion in FDI from Mauritius, according to the data by the Department for Promotion of Industry and Internal Trade (DPIIT)

Fueled by myriad opportunities created by COVID-19, the pharma sector is well poised to become the new favourite pick for foreign direct investment (FDI) in India. A constant need for medicines and medical devices has always kept the drug industry on its toes. In recent times, the industry has been luring investors and raging towards becoming the most preferred investment destination for FDI.

The constant flow of FDIs has played a significant role in developing the Indian pharma sector and the government's efforts to shore up investments by allowing 100 percent FDI in greenfield or new projects and a fast-track mechanism to clear applications has made it more desirable for global investors.

For brownfield pharma or existing companies, up to 74 percent FDI is allowed under the automatic route and an approval is required beyond that.

Industry experts feel that the pharma sector has the potential to grow at a considerable CAGR, which is why the FDI investments have now started flowing in abundance.

Another reason for foreign investors' interest in the sector is India's focus on exports, which means that being connected with the growing Indian pharmaceutical market can bring more profits for them in the long run.

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The coronavirus pandemic has further propelled the growth of the pharma sector, as the developed world looks to shift its manufacturing base from China to other countries and India is emerging as a preferred alternative.

The aftermath of the COVID-19 pandemic and the US-China trade tensions have created a huge opportunity for India. India is bound to benefit from investments that may be pulled out of China and it is working on simplifying the entry process and ensuring ease of doing business.

Not just that, the Indian pharma companies have managed to get more than 300 NADA approvals, which in itself is a big win for the industry and has also helped it gain traction with foreign investors. That said, India holds a great volume in the United States generics market, which makes the Indian pharma sector more visible to the investors.

China may have had an upper hand in active pharmaceutical ingredients (API) imports due to low-cost utilities and greater government support, India is focused on reducing this dependence by increasing domestic production. With lower labour costs and global investors looking to move from Chinese API sources, India has huge potential to ramp step up its game in API manufacturing.

India is also considered to be a leading medical-device maker in the world and has the fourth largest device market in Asia, making it a potential investment hub. With multiple Indian companies in the run for vaccine success, the pharma sector is the hotbed for foreign investments.

The industry is not just growing but has already achieved a benchmark by becoming the hub of FDI, with several foreign investors more than willing to park their funds in the Indian pharma firms.

(Vishal Yadav is the CEO and Founder at FDI India.)

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Vishal Yadav
first published: Feb 7, 2021 08:08 am

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