Depreciating rupee to help Indian drug industry to achieve exponential growth in overseas sales

Indian pharma industry is set to defy recession by registering a 25% growth in exports during the current fiscal. As per projections made by Centre for Monitoring Indian Economy (CMIE) pharma exports from India is expected to touch the figure of Rs36,471 crore in 2008-09 against the exports of Rs29,140 crore in the previous year. Depreciation in Indian rupee and cost advantage will help the industry to post such an exponential growth in overseas sales. The forecast seems quite optimistic, as the industry posted just 8% growth in export in 2007-08 compared to Rs26,895 crore recorded in 2006-07. However, depreciation in Indian currency is going to help them in a big way to achieve the growth. In the first half of the current fiscal, rupee depreciated by whopping 6.6% against the dollar and the trend is likely to continue till the end of the fiscal. India's export of drugs and pharmaceuticals accounts for almost 40% of the sectors' aggregate sales.

"Global recession is not expected to impact Indian pharma sector due to its low cost manufacturing advantage. Indian companies are mostly into the manufacturing of generic drugs and offers drugs at a price much lower than the patent holder company. In fact, slowdown will prove to be a boon for Indian pharma companies, as foreign customers will look for cheaper products. However, growth of exports may slowdown in last two quarters," says Sarabjeet Kaur, vice president, research-pharmaceuticals, Angel Broking. "The first two quarters have been good for pharma sector and no significant impact of slowdown was visible.

However, last two quarters may not be same and the sector may see some slowdown in export," says Kamlesh Udani, executive director of JB Chemicals and Pharmaceuticals Ltd.

The US is the largest market for Indian pharma companies and for China, India is the largest market for exports. India exported drugs and pharmaceuticals worth Rs1,872 crore to the US and Rs564 crore to Germany in 2007-08. Import from China and Switzerland in the same year was Rs1,320 crore and Rs288 crore respectively.

Bucking the trend

Pharma exports are expected to be around Rs36,471 crore this fiscal against Rs29,140 crore in the previous year

Export accounts for almost 40% of the aggregate sales of the industry

Global recession is a boon for the sector, as foreign customers are looking for cheaper drugs

Sachin Kumar/ DNA-Daily News & Analysis Source: 3D Syndication