| Introduction: Briefly provide overview of pharmaceutical industry in India. Body: Write about significance of indigenization of the pharmaceutical industry for the health care and economy of India. Write about the features, issues and solutions associated with the PLI scheme. Conclusion: Briefly provide a way forward. |
India is known as pharmacy of the world. India is the world’s largest supplier of generic medications. It accounts for 20% of the worldwide supply by volume and supplying about 60% of the global vaccination demand.
However, Indian pharmaceutical industry is heavily dependent on imports. For example, 80% Active Pharmaceutical Ingredients (APIs) are imported from China.
Significance of indigenization of pharmaceutical industry in India.
- Significance for healthcare in India.
- India produces about 95% of its own bulk consumption. But it is highly dependent on imports. Any supply disruption from exporting country can create supply side constraints for healthcare supplies in India. Which the country has experienced during Covid-19.
- Indian population needs low priced medicines, as out of pocket expenditure is already very high. However, the prices of imports are out of India’s control which can create issues in case of price volatility of imports.
- To meet the growing demand of medicine with increase in population and rise of Non communicable diseases. India needs self-sufficiency.
- Significance for Indian Economy.
- Pharmaceutical sector is a sunrise sector where India can have comparative advantage. In the year 2019-2020, Pharmaceutical sector contributed approx. 1.5% to GDP and another 3% indirectly, it has potential to contribute much more.
- More than half of this industry’s turnover comes from exports. India supplies generic medication to the whole world, especially to Sub-Saharan countries. which earns significant FOREX for the economy. while good amount of FOREX is spent for raw materials imported.
- To induce and maintain investor confidence India needs self-sufficiency in pharmaceutical sector.
- Indigenized pharmaceutical sector will incentivize greater investment in R&D which further reduce prices of medicine and increase competitiveness of Indian products.
To address import dependence on API (Active pharmaceutical ingredients), DI (Drug Intermediates) and KSM (Key Starting material) government launched PLI (Production Linked Incentive) Scheme for pharmaceutical sector. Salient Features of the scheme.
- To enhance India’s manufacturing capabilities by increasing investment and production in the sector.
- To create global champions out of India who have the potential to grow in size, thereby penetrate the global value chains.
- Financial incentives for the incremental sales (over Base Year) of pharmaceutical goods and in-vitro diagnostic medical devices. The total quantum of the incentive for the scheme is Rs 15,000 crore.
However, the PLI scheme could achieve expected results. The scheme faced several inefficiencies which need to be addressed.
- Price competency: Chines imports are 20-30% cheaper than domestic produce. This can be addressed by leveraging technology but PLI scheme doesn’t have a technology component.
- Focus on new manufacturing units: This scheme insists on new manufacturing units. Whereas the existing units are having the idle capacity as they are facing huge competition from cheaper imports from China. Incentives should be provided to revive these existing facilities.
- Focus on Big Companies: The policy focuses on major players while three-fourths of API production is from MSMEs. The scheme is prone to carterlization and monopoly of major players. More focus should be provided on the growth of MSMEs in the sector.
- Lacks supplementary measures: The PLI scheme remains a standalone measure. Growth of pharmaceutical industry would require supplementary measures from Science and technology policy. Technology and innovation will form the backbone of indigenization.
For India to truly become Atmanirbhar and support the healthcare needs of 1.4 Bn people, along with the needs of the world, it needs to go beyond schemes and create a long-term strategy utilizing the expertise of public sector enterprises to ensure indigenization of pharmaceutical industry.
