The Wordsmith's Blog

Farmer Country to Pharma Country!

Posted on: July 27, 2009

India is predominantly known as an agricultural nation and with almost 20% of the GDP coming from agriculture it is hard to deny that fact; India ranks second in the world in farm output. Yes, the services industry has changed the landscape to a large extent, however agro-business remains the single largest dominating mode of employment for the vastly rural population of the country. Apart from the IT & Services industry, another sector raising its head and making itself heard is the pharmaceutical industry.

A FICCI study shows that the pharma sector has moved on from a virtually unknown existence in 1970s to a US$8.2 behemoth. Considered to be one of the fastest growing pharma markets in the world, the Indian pharma sector is expected to grow at a CAGR of almost 16% between 2008 and 2012. GlaxoSmithKline, Cipla and Ranbaxy are the forerunners of this boom along with other players like Aurobindo, Aventis, Dr Reddy’s, Lupin, Dabur, Nicholas Piramal and a host of other local and MNC players.

Along with re-defined business models and a concentrated shift from process improvements to drug discovery, an interesting feature of the Indian pharma success story is the number of JV’s and M&As taking place. It definitely works out to be a win-win situation for both MNC and local players. MNC’s derive the advantages of low cost, friendly government policies and a vast untapped and unorganized market, whereas the local companies get the advantages of stricter quality control and regulatory policies brought in by their MNC counterparts thus opening up overseas markets for their products.

As the Indian Information Technology sector has witnessed a massive change with outsourcing, so is the pharma sector facing a major shift in outlook. A direct impact of this shift is on the average workman. From working for a local management, he now answers to a mix of local and foreign management. The foreign management brings in seemingly professional policies, better quality measures, stricter auditing, and the picture seems to be rosy working for a big-shot MNC company. However, the average Indian worker used to working at his own pace now has to work with greater pressure because of the immensely competitive global market that his company now caters to. Indian companies have always worked on tight margins to earn their profits. With cost-saving a major benefit for MNCs, this trend is bound to continue, and hence the staff might feel the pinch being made to work harder hours while preserving profitable margins.

With a glut of foreign players entering the booming Indian market to catch a share of the pie, small and medium scale local players are losing out. Most SME’s usually enter JVs or sell their majority stake to become sleeping partners once they know they’ll be consumed by the bigger fish. The government has taken steps to ensure these players do not fizzle out by setting up a SME Growth Fund in 2005.

Currently, with M&As and JVs happening on the global pharma scene, it looks like the Indian market is playing a wait and watch game and might soon follow the global trend. One certain thing is that this might be just the beginning of a big revolution and it would be a good time to invest in the pharma sector. With the government too taking essential steps to harness this boom, things are looking bright for the pharma industry.

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1 Response to "Farmer Country to Pharma Country!"

thanks !! very helpful post!

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