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Indian pharma's growing clout - Views on News from Equitymaster
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  • Sep 23, 2009

    Indian pharma's growing clout

    According a report prepared by Ernst & Young, India's pharma market which is pegged at US$ 7 bn currently is likely to reach US$ 20 bn by 2015 and move into the world's top 10 markets. The report further states that MNCs with patented drugs could account for US$ 8 bn in the domestic pharma market which works out to be nearly 8-10% of the total market. The reasons that have been cited for the same are the introduction of the product patent law and the fact that the population in the highest income class is expected to grow to 25 m in 2015 from 10 m at present. The latter especially is expected to drive the affordability of high value patented drugs. Further clinical trial research is also gaining significant prominence in the country due to its cost advantage as costs are typically 40-60% lower than in the developed countries and around 20% lower than those in the other emerging economies.

    Having said that, while the product patent law has been a major landmark in the domestic pharma market there are still various anomalies in the same. As a result of this, MNC pharma companies are not launching products in the domestic market at a fast pace as was originally envisaged. Besides, since the prices of certain drugs are under the purview of the DPCO, MNC pharma companies will have to negotiate for the prices of their patented drugs even if the highest income class is able to afford the same. Thus, while the potential for the domestic pharma market to grow is immense, it remains to be seen how it will pan out by 2015.

    India's GDP to grow 6%
    India's GDP growth in FY10 has been a matter of contention with the main point of discussion being whether India will be able to register a growth of 6%. Just when the country was beginning to get its act together after a relatively tepid growth in FY09, deficient monsoons this season turned the tables and many were compelled to re-look at the assumptions that were made for India's growth this fiscal. While the CMIE and the UNCTAD are of the opinion that the growth this fiscal will be a tad below 6%, the government and the RBI are confident that India will be able to log in a growth of 6% plus. The Asian Development Bank (ADB) seems to concur with the latter and has raised India's FY10 growth forecast to 6% on higher public spending, stronger factory output and improved business confidence. However, this comes with a caveat and that the fiscal deficit is rising.

    Further, the ADB expects Indian economy to grow by 7% from the previously estimated 6.5% in FY11 on hopes of better rainfall and a rebound in exports. The ADB is of the opinion that India's growing fiscal deficit (6.2% of GDP in FY09), following a public expenditure-led growth strategy, poses a risk to the economy and could crowd out private investment. While the Indian government aims to bring down this deficit to 5.5% in FY11 and further to 4% in FY12, it will be a challenging task indeed!



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