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FDI equity inflow into pharma sector reports decline of 82% in first quarter

Gireesh Babu, New Delhi
Monday, September 18, 2023, 08:00 Hrs  [IST]

The Foreign Direct Investment (FDI) equity inflow into the pharmaceutical sector has reported a decline of 82 per cent in the first three months of the current fiscal year, as compared to the same period of previous year.

The decline comes after a significant growth of 45 per cent reported for the 12 month ended March, 2023, according to official data.

The FDI investments into the drugs and pharmaceuticals sector during the first quarter ended June, 2023, stood at $90 million, as compared to $497 million reported during Aril to June, 2022, which was almost a three-fold growth from the $130 million FDI equity inflow reported during April to June, 2021.

The equity inflow in April to June, 2023 quarter was also a decline of 62.5 per cent compared to the $240 million inflow reported in the sequential quarter of January to March, 2023.

The cumulative FDI inflow from April 2000 to June, 2023, stood at $21.55 billion, remaining in the eight position among the sectors attracting highest FDI equity inflow in the country, which is led by the services sector at $105.4 billion.

Services sector accounted to over 16.3 per cent of the total FDI equity inflow in US Dollar terms, followed by computers and software & hardware (14.85%), trading (6.20%), telecommunications (6.08%), automobile industry (5.44%), construction (infrastructure) activities (4.72%), construction development (4.08%), and drugs and pharmaceuticals (3.34%), between April, 2000 to June, 2023.

It may be noted that the sector has reported a growth of 45.4 per cent in 2022-23, at $2.05 billion as compared to $1.41 billion registered during the previous fiscal year.

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.

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.


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