Contrary to the perception that the pharmaceutical sector is insulated from the current economic slowdown, Indian drug industry’s export earnings growth is expected to fall by 10 percentage points in 2008-09.
An analysis by the Pharmaceutical Export Promotion Council (Pharmexcil), the autonomous export promotion body that functions under the commerce ministry, estimates pharmaceutical exports for 2008-09 at $8.25 billion, lower than the earlier estimate of $8.97 billion. This would result in export growth of 13.89 per cent as against the earlier estimate of 23.87 per cent.
“We have conducted a statistical analysis to establish the impact of the current financial conditions on pharmaceutical exports. Based on the analysis, it is estimated that in the absence of the financial crisis, pharmaceutical exports would have grown 31.14 per cent (in rupee terms) and 23.87 per cent (in dollar terms) by the end of 2008-09. However, the estimates have been revised and exports are now expected to grow 23.87 per cent (in rupee terms) and 13.89 per cent (in dollar terms) this year,” said PV Appaji, executive director, Pharmexcil.
Cash crunch is the major reason for this. “The banking system has tightened credit to a large extent,” said Smitesh Shah, vice-chairman, Pharmexcil. “Loan sanctions are being withdrawn, several developing countries may not be able to support their healthcare programmes. Exports are becoming risky as payments are getting deferred,” he added.
| EXPORTS OF PHARMACEUTICALS AND FINE CHEMICALS FROM INDIA | |||||
| Mar-04 | Mar 05 | Mar 06 | Mar07 | Mar 08 | |
| Drugs & fine chemicals | 2,655.51 | 3,312.99 | 3,97281 | 4,994.52 | 5939.75 |
| Growth rate | 24.76 | 19.92 | 25.72 | 18.93 | |
| INDUSTRY DEMANDS | ||
| * Relief package given to the exporters in July 2007 should continue | ||
| * Profits from SEZ units should be eligible for income tax exemption | ||
| * No penal interest for outstanding export credit beyond 360 days | ||
| * ECGC coverage at competitive price to exporters for all Countries | ||
| * Permission to avail ECB for rupee expenditure for expansion and modernisation |
The export cycle — import of raw materials and export of medicines — is getting affected because of liquidity constraints.
According to the latest official data available, Indian pharmaceutical exports were Rs 29,139.54 crore ($7.24 billion) in 2007-08, a growth of 8.34 per cent (in rupee terms) and 21.91 per cent (in dollar terms) compared with 2006-07. The compound annual growth rate (CAGR) was 17.84 per cent (in rupee terms) and 22.22 per cent (in dollar terms) between 2002-03 and 2007-08.
Meanwhile, the Indian Drugs Manufacturers Association, an industry body representing domestic drug-makers, has approached Commerce Minister Kamal Nath with a series of proposals to help drug exporters tide over the financial crisis.