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FDI IN PHARMACEUTICAL INDUSTRY IN INDIA
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FDI IN PHARMACEUTICAL INDUSTRY IN INDIA

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    FDI IN PHARMACEUTICAL INDUSTRY IN INDIA FDI IN PHARMACEUTICAL INDUSTRY IN INDIA Presentation Transcript

    • PRESENTED BY: Swarna J, 13PMM458, 1 st Semester, Dept. Of Pharma. Management, NIPER.
    • INTRODUCTION  World is perceived as a global village Globalization is the integration of economies of world through uninhibited trade and financial flows, as also through mutual exchange of technology and knowledge.  Globalization implies opening up of the economy to Foreign Investment by providing facilities to foreign companies to invest in different fields of economic activity.  Globalisation has made markets highly competitive and there is remarkable growth of new service products 
    • OBJECTIVES:  Expansion Strategy : Companies start investing because they want to make their product world available.  New Source of demand : In many situations growth is restricted in the home country because of intense competition or due to unfavorable market conditions.  Low cost production : In many countries the cost of production is low because of raw materials, availability of man power etc.  Economies of scale : if a large scale of a production is done than the ratio of wastage comes down and the cost reduces
    • CLASSIFICATION Wholly Owned Subsidiary Direct Investment (FDI) Joint Venture Acquisition Foreign Investment Portfolio Investment (FPI) Investment By FIIs Investment In GDRs,ADRs.
    • FDI AND FII Foreign Direct Investment (FDI):  FDI is a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country.  According to the IMF , FDI is the category of international investment that reflects the objective of a resident entity in one economy obtaining a „lasting interest‟ and control in an enterprise resident in another economy. Foreign Institutional Investment (FII):  FII denotes all those investors or investment companies that are not located within the territory of the country in which they are investing.  “SEBI‟s definition of FIIs presently includes foreign pension funds, mutual funds, charitable/endowment/university funds etc. as well as asset management companies and other money managers operating on their behalf.”
    • TYPES OF FDI: Green field investment Brown field investment Joint Venture
    • FDI POLICY Objective - Encourage FDI, to promote industrial & socio-economic development; supplement domestic capital/ technology.  Foreign investment in India is regulated by Government of India‟s FDI policy   The FDI guidelines administered by the Ministry of Commerce and Industry.  Department of Industrial Policy & Promotion („DIPP‟), Foreign Investment Promotion Board („FIPB‟) and Secretariat of Industrial Assistance („SIA‟) regulate the FDI Policy.  Foreign Investment Implementation Authority (FIIA) facilitates quick translation of FDI approvals into implementation.  FDI allowed 100% investment in green field and brown field investment in 2013 policy.
    • FDI POLICY 2013:
    • Routes of entry: Investing in India Automatic Route General Rule No prior permission required Inform Reserve Bank within 30 days of inflow/issue of shares Prior Permission (FIPB) By Exception Prior Government Approval needed. Decision generally within 4-6 weeks
    • FDI PROHIBITED SECTORS       Atomic Energy Lottery business Gambling & Betting Chit fund and Nidhi company Trading in Transferable Development Rights Real Estate business or construction of Farm Houses  Sectors not opened for private sector investments
    • TREND IN FDI INFLOW: 50000 46847 Financial Year Wise FDI In Flow 146% 41874 From 37745 40000 34847 2000-2012 34835 1.4 1.2 1 30000 0.8 22826 20000 52% 40% 10000 0 -10000 1.6 48% 8961 61305035 6051 4322 4029 0 0.6 53% 0.4 34% 20% 0.2 0 -18% -14% -8% -8% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -01 -02 -03 -04 -05 -06 -07 -08 -09 -10 -11 -12 FDI In Flow 4029 6130 5035 4322 6051 8961 2282 3483 4187 3774 3484 4684 % INCREASE 0 52% -18% -14% 40% 48% 146% 53% 20% -8% -8% 34% -0.2 -0.4
    • REGULATING AUTHORITES OF GOVT FOR FDI .  FIPB - The foreign investment promotion board (FIPB) is a government body that offers a single window clearance for proposals on foreign direct investment (FDI) in India that are not allowed access through the automatic route.  CCI - Competition commission of India is a body of the government of India responsible for enforcing the competition act, 2002 throughout India and to prevent activities that have an adverse effect on competition in India
    •     Pharmaceutical industry accounts for about 6% of total FDI into the country. The Industry has received almost Rs 14,107 crore investment from 36 countries through FDI between April 2011 to Nov. 2011 with most of the fund infusion directed to healthcare and biotech ventures Almost 82 per cent of the FDI in Pharmaceutical sector was from five countries - Mauritius, Singapore, USA, UAE and Canada. The increase in FDI Inflows to Drugs and Pharmaceuticals industry in India has helped in the expansion, growth, and development of the industry.. This in turn has led to the improvement in the quality of the products from the drugs and Pharmaceuticals.
    •  Indian drug industry has in the last few years seen half a dozen big takeovers by foreign companies.
    • FDI IN PHARMACEUTICAL INDUSTRY
    • FDI BY DIFFERENT COUNTRIES The largest source of FDI in Indian Pharmaceutical Industry in Mauritius. Many global investors in India route their FDI through Mauritius to take advantage of the India-Mauritius bilateral tax treaty
    • FDI IN DIFFERENT PHARMA COMPANIES:
    • Strength •Cost Effective •Strong Manufacturing Base •Availability of high quality skilled workforce •Excellent marketing and distribution network •Diverse ecosystem Weakness •Less investment in research and development •Lack of coordination industry and academia. •Negligible expenditure on healthcare in the country. •Manufacture of fake and low quality medicines SWOT ANALYSIS SWOT Opportunities •Increased export potential. •Marketing tie ups with multinational companies to their products in domestic market. •Immense scope to position India as a centre for international clinical trials. •Key player in global pharmaceutical R&D. •Export of generic drugs to developed markets. ANALYSIS Threats Product patent regime is major threat to domestic industry unless the industry takes up R&D initiative aggressively. •Drug price control order puts undue pressure on product prices, affecting the profitability of the pharmaceutical companies. •The new MRP based excise duty regime threatens the business of smaller pharmaceutical companies
    • ADVANTAGES AND DISADVANTAGES OF FDI: ADVANTAGES:           Economic development of a country Increase in competition will lead to the low price of the drugs Resource transfer, in terms of capital and technical knowledge FDI has the potential for job creation and employment Management expertise. Access to international markets World class infrastructure development Transfer of modern technology Help creating a talent pool through international training and development Meeting unmet needs of patients through innovative medicines Help imbibing the best practices of the world.
    • DISADVANTAGES  Inflation may increase.  Domestic firms may suffer if they are relatively uncompetitive  If there is a lot of FDI into one industry e.g. the automotive industry then a country can become too dependent on it and it may turn into a risk  Due to deeper pockets able to influence the government That is the real danger of the 100 per cent FDI and the selling/takeover of Indian companies
    • KEY DRIVERS & BARRIERS DRIVERS:       Domestic market size, prospects for future market growth, Cheaper operating cost Cheaper input and English-speaking skilled manpower cost Regulatory environment Pricing environment Legal, IPR and financial framework BARRIERS:   Poor healthcare coverage Country Attractiveness Index (CAI)
    • Measures taken by government:  Government has offered fiscal incentives to R&D units in Pharma sector  Steps have been taken to streamline procedures covering development of new drug molecules, clinical research etc.  A number of in-house R&D units holding recognition of DSIR have come up in the Pharma sector. These units are eligible for weighted tax deduction@200% for the R&D expenditure incurred.  Government has also come up with two new schemes specially targeted at drugs & pharmaceutical research. These are: 'The New Millennium Indian Technology Leadership Initiative' (NMITLI) and the 'Drugs and Pharmaceuticals Research Programme' (DPRP).
    • CONCLUSION The effects of globalization on Indian industry through FDI has proved to be positive as well as negative   The government of India must try to make economic policies with regard to Indian Industries globalization that are beneficial and not harmful  To attract more FDI in the pharmaceutical sector and effectively compete with other developing countries like China, India should primarily focus in creating a vibrant and large domestic pharmaceutical product and services market reflecting sustainable high inclusive growth.
    • "If there is one place on the face of this Earth where all the dreams of living men have found a home when man began the dream of existence, it is India". Romain Rolland, French philosopher