The FDI Cap in the Indian pharmaceutical sector has been extended up to 100%, through both the Greenfield and Brownfield strategies. This will certainly encourage foreign investors to invest in the vast and booming pharmaceutical sector of India in coming years. The most impressive factors motivating for making foreign direct investment in pharma sector of India, are described separately in the lower section.
The pharmaceuticals industry of India is huge and developed enough to accounts for about 2.5% of the global pharmaceutical industry by value, and around 10% by volume. By dint of progress at the CAGR of over 12%, the revenues generated by the Indian pharmaceutical industry are very hopefully expected to reach the level of US$ 45 billion by 2020, and thus making it the third largest pharmaceutical market in the whole world by then. Moreover, the generic drugs produced by Indian pharmaceutical industry account for about 20% of the global exports by volume, which makes India the largest provider of the generic medicines in the world over.
For making secure and very fertile fdi in indian pharmaceutical industry, route related provisions are as follows --- for Greenfield projects up to 100%, the route prescribed is the automatic route; while for Brownfield projects up to 100%, recommended is the governmental approval route. Under the Greenfield FDI, a parent company starts a new business/professional venture in the specified foreign country by constructing new plants/facilities from the ground up, appropriately suitable to the requirements. One the other hand, under the Brownfield FDI, a company buys or leases the relevant existing (operational) facilities, in order to begin a new production activity in the targeted country.
Advantages of Foreign Direct Investment in Pharma SectorThe advantages of foreign direct investment in pharma sector of India are legion, covering every significant aspect. These advantages or benefits are illustrated through the following significant favorable factors and points:
- By 2020, the healthcare sector of India is expected to reach the level of US$ 250 billion, only to augment immensely the demands of various pharmaceutical products in entire country.
- Pharmaceutical products including the OTC (Over-the-Counter) drugs are to be consumed in increased quantities in the growing number of hospitals, and developing rural areas, in future years. The market share of hospitals can go up to over 25% by 2020.
- India's status as being the largest exporter of pharmaceutical formulations in the whole world with 14% market share, is to grow higher in forthcoming years, with increasing export value.
- Due to vast and burgeoning population of India, the increase in its patient pool in next ten years is expected to be about 20%.
- The total cost of pharmaceutical production in India is considerably lower than that in USA, and is almost half of that in Europe.
- India has ample and cheaper availability of skilled workforce as well as high technical and managerial professionals.
- Steadily progressing economy of India will further increase the demand of various pharmaceutical products and medical devices in India.