FDI equity inflow into pharma sector crosses FY 22 figures in first nine months

New Delhi, February 27, 2023 :

The Foreign Direct Investment (FDI) equity inflow into the pharmaceutical industry has registered a strong growth in the third quarter of the current fiscal year, crossing one billion dollar fund infusion into the sector in a single quarter. This has also resulted in the total fund inflow for the three quarters of the current fiscal year surpassing the total foreign investments seen in the whole financial year of 2021-22.

The fund infusion by foreign investors into the sector for the period from April to December, 2022 stood at $1.82 billion as compared to the whole year figure of $1.41 billion in 2021-22. The three month figure is also higher than the total foreign fund infusion into the sector during the fiscal year 2020-21, which was at $1.49 billion.

The FDI infusion during the three months from October to December, 2022 registered a growth of 73 per cent from the $647 million investment in the same period of the previous fiscal year.

The cumulative FDI inflow into the drugs and pharmaceutical segment from April 2000 to December, 2022 is $21.22 billion, according to the figures from the ministry of commerce and industry. Out of the total FDI equity inflow of $625.15 billion, this accounts to around 3.39 per cent and comes as eighth in line of high investment sector, after service sector, computer software and hardware, telecommunications, trading, automobile industry, construction activities and construction development sectors.

The Economic Survey 2022-23, released on January 31, 2023 ahead of the Union Budget 2023, has said that the FDI inflows into the pharmaceutical sector have increased four-fold over five years until September 2022, to US$ 699 million, supported by investor-friendly policies and a positive outlook for the industry.

According to the Department of Pharmaceuticals, the government has further approved two FDI equity infusion proposals valued at a total of around Rs. 1,477 crore during the month of January, 2023, continuing the growth momentum. By the end of January, the Department has three more proposals pending for consideration.

While the foreign equity inflow into pharma has reported strong growth, the hospital and diagnostic centres sector has reported a decline in terms of quarterly investments, compared to the last six quarters from June, 2021.

The FDI equity inflow into the sector was $95.2 million, with a 44 per cent decline as compared to $171.4 million in the same period of last year. This comes after the sector registered a high of $310 million in the previous quarter, shows data.

The cumulative FDI equity inflow into the sector from April, 2000 to December, 2022 stood at $8.5 billion, growing from $7.73 billion reported from April, 2022 to December, 2021.

The medical and surgical appliances has also registered a decline of 26.7 per cent in FDI equity inflow at $20.6 million during the October to December, 2022 quarter, as compared to $28.11 million fund inflow reported in the same period of previous year. The cumulative FDI equity infusion into the sector stood at $2.76 billion from April, 2000 to December, 2022.

Foreign investments in pharmaceuticals in greenfield projects are allowed up to 100 per cent under the automatic route and for brownfield pharmaceutical projects, foreign investment beyond 74 per cent to up to 100 per cent, government approval is required.
 
After the abolition of Foreign Investment Promotion Board (FIPB) in May 2017, the Department of Pharmaceutical (DoP) has been assigned the role to consider the foreign investment proposals under the government approval route.

Apart from this, the Department considers all FDI proposals of pharmaceutical sector and medical devices sector, according to an announcement in April 17, 2020, wherein investors/ultimate beneficiaries of the proposals are from the countries sharing land border with India.

An online portal, namely, “FDI linked Compliance Monitoring Portal” has been developed by the department to monitor progress of FDI inflows received by the Indian companies in the pharmaceutical sector and ensure compliances of FDI linked performance conditions as required under the extant FDI Policy.

Ranked as third worldwide for production by volume and 14th by value, the Indian pharmaceutical industry occupies 60 per cent of the world's vaccines and 20 per cent of generic medicines globally. It has the highest number of US Food and Drug Administration compliant pharma plants outside of the USA and is home to more than 3,000 pharma companies with a network of over 10,500 manufacturing facilities.

India is the source of 60,000 generic brands across 60 therapeutic categories and manufactures more than 500 different active pharmaceutical ingredients (APIs). The Government of India has approved incentives worth Rs 21,940 crore ($3 billion) to improve the capabilities and capacity of the industry. The pharma market in the country is expected to reach $65 billion by 2024 and $130 billion by 2030, with an expected growth rate of 11-12 per cent between 2020 to 2030, according to the government data. PharmaBiz