Fdi and its impact on pharmaceutical industry in india


Published on

  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Fdi and its impact on pharmaceutical industry in india

  2. 2. CONTENT 1. Introduction to FDI 2. Importance of FDI 3. FDI in INDIA 4. Factors attracting FDI in India 5. Overview of Indian pharmaceutical industries 6. FDI in Indian pharmaceutical sector 7. Inflow of FDI in Indian pharmaceutical industries. 8. Conclusion 2
  3. 3. INTRODUCTION  A Foreign direct investment is an acquisition or construction of physical capital by a firm from one country in another (host) country.  Besides providing capital inflow, the FDI can offer foreign technology, managerial skills and improvement of the international competitiveness of domestic firms.  Foreign Direct Investment (FDI) is often seen as a major element in the host country’s industrial development and growth  India is one of many developing countries that have started an economic liberalization reform in the recent decade. Promotion of FDI forms an integral part of India’s new economic policies and the inflow of FDI has increased since it started to liberalize its economy in the beginning of the 1990s. 3
  4. 4. TYPES OF FDI Green field investment Brown field investment Joint Venture 4
  5. 5. IMPORTANCE OF FDI  FDI is often seen as a catalyst for a country’s development and economic growth.  Foreign direct investment allows company to accomplish several tasks:- 1. Integration into global economy. 2. Technology advancement. 3. Increased competition. 4. Improved human resources.  Reasons for the importance of FDI is not only the fact that the foreign investor finances the “hardware” such as investment in new plants and equipment, but FDI can be a major transfer of technology, knowledge and capital for the host industries. With FDI comes financial and managerial resources, access to larger markets, technical assistance and strategic assets, for instance; Brand name, which can give the host firms, domestic and international, comparative advantage. 5
  6. 6.  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 That is the real danger of the 100 per cent FDI and the selling/takeover of Indian companies DISADVANTAGES OF FDI 6
  7. 7. FDI IN INDIA  The policy initiative taken by the government of India in the 1990s helped to transform the country from a restrictive regime with regard to foreign direct investment to a liberal one. 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 Sectors attracting highest FDI inflow 7
  8. 8. Factors attracting FDI in India:- Apart from this, India’s huge market base and fast- developing spending habits of middle- class, favorable business environment, good administrative setup, attractive foreign policies, available, abundant skilled workforce, and attractive incentives for investors, have contributed to India becoming one of the preferred destinations for investors.  Furthermore, India has an advantage over other countries, including China, in terms of being an ideal destination for investments, mainly due to its vibrant democratic setup, a broad legal framework and independent judicial system. 8
  9. 9. THE INDIAN PHARMACEUTICAL INDUSTRY  India is one of the few developing countries with a large production base in pharmaceutical products. India’s trade in pharmaceutical products has increased a lot since the liberalization reforms and it has comparative advantages in trade with pharmaceutical products, both bulk drugs and formulations.  The Indian pharmaceutical industry ranks very high among developing countries, in terms of technology and quality, and is today in the front rank of India’s science based industries 9
  10. 10. FDI IN INDIAN PHARMACEUTICAL SECTOR  The inflow of FDI into India has increased a great deal in the last fifteen years. The pharmaceutical industry attracted 2.11 % of total FDI inflows during these years. In diagram we can see the industries that attract most FDI in India. The pharmaceutical industry was the 8th largest sector attracting FDI inflows  factors such as; skilled/ semi-skilled labor, well- developed local supply chains, well-functioning infrastructure and knowledge producing institutions are important for a firm to consider. Some of these factors are reasons why pharmaceutical multinationals have invested in India. 10
  11. 11.  India’s large population and wide disease pattern make the country attractive for pharmaceutical firms.  Relatively cheap manpower and skilled labor are other factors that attract foreign investors.  India has an exceptional advantage in pharmaceuticals due to its good human resources and highly skilled work force. English is widely spoken, which makes communication easy for foreign investors.  The production of pharmaceuticals is also relatively cheap in India and there is a strong production base in the country. 11
  12. 12. FDI Inflow in Indian Pharmaceutical Industry  100% foreign direct investment (FDI) is allowed under automatic route in the drugs and pharmaceuticals sector, including those involving use of recombinant technology.  Also, FDI up to 100% is permitted for brownfield investments in the pharmaceuticals sector, under the Government approval route. The drugs and pharmaceuticals industry attracted foreign direct investment to the tune of US$ 9.17 bn for the period between April 2000 and January 2012. 12
  13. 13. 48.4 90.7 52.3 60.7 341.4 116.3 216.1 72 213 513 3208 9170 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 Recently the government released a comprehensive FDI policy document effective from 1 April 2010, consolidating all prior policies and regulations on FDI which are contained in FEMA, RBI Regulations and press notes, press releases and clarifications, into one document. THIS LEAD TO SUDDEN INCREASE IN FDI INLOW IN INDIAN PHARMA SECTOR AFTER 2010 YEAR. 13
  14. 14. Conclusion Pharmaceutical industry plays a very crucial role in implementing the welfare state of the people. Economic growth of the industry along with the availability of generic goods and healthy competition is the need of the hour for India. After analyzing the impact of the FDI in the Indian pharmaceutical industry, it is established that India needs adequate FDI and its spillovers for the growth of the industry 14