ECONOMICS ASSIGNMENT

ANIKA
MARY VARKEY
PGDM 15|ASB
ROLL NO: 18

India's Pharma Industry may

touch $55 bn by 2020
India's pharma sector is likely to grow over three-fold to hit $55
billion in the next five years, even as the exports from the
sector may slow down to grow at a CAGR of 7.98% owing to
stricter regulations in markets such as the US, Russia and Africa
as per a report. Indian pharmaceutical industry is expected to
touch $55 billion by 2020 as against the current size of $18
billion but the exports may slow down to grow at a CAGR of
7.98% in value terms due to tightening of regulatory
mechanism in top exports markets of US, Russia and Africa.
Consolidation of pharmacy players is leading to an increase in
pricing pressures for generic companies existing in the US
market, which is expected to result in a decline in the year-onyear growth of pharmaceutical exports from India over the next
five years. Pharmaceutical exports to the US are rising due to
the increasing demand for high quality generic drugs in the
market. However, the growth rate for exports of pharmaceutical
products from India to the US is declining, due to increasing US
Food and Drug Administration (FDA) scrutiny on the quality of
2

pharma products coming from drug manufacturing plants

located in India.
the current pharmaceutical industry business model is both
economically unsustainable and operationally incapable of
acting quickly enough to produce the types of innovative
treatments demanded by global markets. In order to make the
most of these future growth opportunities, the industry must
fundamentally change the way it operates.
Some of the major changes anticipates for the industry are:

Health care will shift in focus from treatment to

prevention.

Pharmaceutical companies will provide total health care

packages.

The current linear phase research & development process

will give way to in-life testing and live licensing, in collaboration
with regulators and health care providers.

The traditional blockbuster sales model will disappear.

The supply chain function will become revenue generating

as it becomes integral to the health care package and enables
access to new channels.

More sophisticated direct-to-consumer distribution

channels will diminish the role of wholesalers.
There are 20,000 laboratories in India's pharmaceutical industry
and the scale of the pharmaceutical market amounts to Euro 5.3
billion. The leading 250 pharmaceutical companies control 70% of
the market with market leader holding nearly 7% of the market
3

share. It is an extremely fragmented market with severe price

competition and government price control.

Around 70% of the country's demand for bulk drugs, drug

intermediates, pharmaceutical formulations, chemicals, tablets,
capsules, orals and injections is met by home production. There
are about 250 large units and about 8000 Small Scale Units,
which form the core of the pharmaceutical industry in India
(including 5 Central Public Sector Units).
Over 20,000 registered pharmaceutical manufacturers exist in the
country. The domestic pharmaceuticals industry output is
expected to exceed Rs260 billion in the financial year 2002, which
accounts for merely 1.3% of the global pharmaceutical sector. Of
this, bulk drugs will account for Rs 54 bn (21%) and formulations,
the remaining Rs 210 bn (79%). In financial year 2001, imports
were Rs 20 bn while exports were Rs87 bn.
More than 85% of the formulations produced in the country are
sold in the domestic market. Over 60% of India's bulk drug
production is exported and Import of bulk drugs have slowed
down in the recent years.
Expenditure on R & D by the Indian pharmaceutical companies is
around 1.9% of the industry's turnover. This is very low when
compared to the investment on R & D by foreign research-based
pharma companies. They spend 10 - 16% of the turnover on R &
D. However, now that India has entered into the Patent protection
area, many companies are spending relatively more on R & D.
The Pharmaceutical and Biotechnology Industry is eligible for
weight deduction for R&D expense up to 150%.

India has the advantage of the cost, as the cost of labor, the cost
of inventory is much lower than other places. The multinational
companies, investing in research and development in India may
save upto 30% to 50% of the expenses incurred. The cost of
hiring a research chemist in the US is five times higher than its
Indian counterpart. The manufacturing cost of pharmaceutical
products in India is nearly half of the cost incurred in US. The cost
of performing clinical trials in India is one tenth of the cost
incurred in US. The cost of performing research in India is one
eighth of the cost incurred in US

How course in macroeconomics

will benefit the students?
The study of macroeconomics takes into account many of the
factors that determine not just the current financial state of a
nation or region but its prospective future.
As the world trends toward a global economy in which
corporations establish international presences and countries
finance each other based on the promise of shared profit, it is
essential to have a clear view of a country's economic situation
.
Macroeconomics is the study of BIG(macro) issues .
It describes how the economy(that is so complex) as a whole
functions and how the level of national income and
employment is determined on the basis of demand and
supply.
5

It helps to achieve the goal of economic growth, a higher GDP

level, and higher level of employment. It analyses the forces
which determine economic growth of a country and explains
how to reach the highest state of economic growth and sustain
it.
It helps to solve economic problems like poverty,
unemployment, inflation, deflation by mean of formulating
proper policies .
With a detailed knowledge of the functioning of an economy , it
has helped macro-economist to formulate correct economic
policies .
Macroeconomics has evolved over the time and
macroeconomic theory has saved us from the dangers of
application of microeconomic theory to the problems that
require us to look broader view over economy .
Macroeconomics study is very essential to know the situation of
the economy of any country. It is necessary to study different
sectors of the economy of the country. It is necessary to study
different sectors of the economy of the country. With this study
only, the economic situation of a country can be known. It is
easier to know the sectoral variable through the study of
macroeconomics. For example, by generalization of the study of
characteristics and behavior patterns of an individual unit,
nothing can be learnt about the characteristics and behavior of
the aggregates nor it can be studied. Another way to see the
importance of macroeconomics is to look at its use in collecting
statistics regarding the business cycle of a given country. This
involves a periodic review of the rate of demand for finished
6

goods and services. Such a review normally occurs on a

quarterly basis and is an important component of the GDP. This
part of macroeconomics is really crucial because when the
demand for goods and services increases within a business
cycle, it is also reflected in the GDP level which also usually
increases as a result.
So in short(at national level) if you have fair idea of
macroeconomics ,you should be able to understand some of
things like great depression of 2008 , Fiscal policies, how tax
rates are determined , Inflation , Unemployment , Minimum
wage , Income inequality etc.