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While outsourcing of manufacturing services like product designing and testing for medical devices to India is growing, industry insiders feel that the country still has a long way to go when it came grab the opportunity in terms of medical devices manufacturing, where China still has the lead.
Leading design and engineering companies like Tata Elxsi feel that there is immense potential for medical device manufacturing services outsourcing. Vasant G Shah, vice president and head, medical electronics business unit, Tata Elxsi says that the firm has doubled its revenues from the segment to $ 5 million in 2013-14. This includes electronics, software and the product designing part of medical devices. The firm provides services like concept generation and validation, product development, verification and validation, and sustenance engineering for medical devices.
Shah, however, admits that from the manufacturing perspective China is attracting more investments than India. "India, however, has an edge over China when it comes to the design perspective," he points out adding that banking on the future growth potential of this segment, Tata Elxsi plans to take its headcount to about 1,000 engineers in this segment in around five years time from a current 250.
On the other hand, Rajiv Nath, secretary of the Association of Indian Medical Device Industry (AIMED) pointed out that the indigenous medical devices manufacturing industry has suffered owing to low customs duty on medical devices imports, which has led to the industry being import driven. The gross customs duty on medical devices have fallen in the last five years from 27 per cent to 10.77 per cent at the moment.
"The manufacturing services part is much smaller compared to actual manufacturing. While all major global majors are keen on the Indian market, not many have manufacturing units here," he claims. He further adds that India should encourage greenfield investments in this sector rather focussing on being a services provider. "The government should actively consider having riders like in case of foreign direct investments (FDI) in the sector, 60 per cent of the turnover should come from manufacturing activities. For companies that are focussing on design related work and trading, the FDI could be capped at 40 per cent," Nath said.
A Chennai-based manufacturer too pointed out that countries like China, Malaysia etc have laws that promote local manufacturing and discourage trading activities.
On the manufacturing services front, however, things are rosy for India at the moment. It is a cost effective destination for such services and as more and more multinational firms are looking at customising their products to suit country specific requirements, the segment is only likely grow in the coming years. For that matter, the global medical devices manufacturing services outsourcing market is likely to grow at around 12 per cent CAGR through 2013-2018. In India the growth rate is expected to be better.
