Prolonged crisis in Ukraine could affect Indian pharma cos: FICCI

Ukraine is India's second largest trading partner in Commonwealth of Independent States after Russia

While recent developments in Ukraine have had no immediate impact on the businesses of leading Indian pharmaceutical companies based in Ukraine, a quick survey conducted by FICCI among representatives of leading Indian pharmaceutical companies, however, showed that if the situation continues, it could indeed have an impact on the country’s exchange rate, which, in turn, would make the landed cost of Indian pharmaceuticals higher.

Ukraine is India’s second largest trading partner in the Commonwealth of Independent States (CIS) after Russia. In 2012-13, India’s total trade with Ukraine was $ 3.18 billion, of which our exports were  $ 519 million and imports were $ 2.65 billion.The FICCI statement claimed that exports of pharmaceuticals from India in 2012-13 was $ 154 billion which is about 30 per cent of our total exports to Ukraine.

The troubled region of Crimea has traditionally accounted for just about 5-6 per cent of the sales of the leading Indian pharmaceutical companies, and is not a large market. However, there have been reasons for concern over a likely impact on the pharmaceutical companies, largely due to a recent devaluation of the local currency (Hryvnia) against the US dollar.

“From an exchange rate of 1 US dollar = 8.20 Hryvnia in mid-December, the exchange rate in the beginning of March was 1 US dollar = 9.86 Hryvnia, a devaluation of 20 per cent.  As on date the exchange rate stands at 9.05 Hryvnia to one US dollar,” the FICCI statement here explained.

Though the industry has staved off immediate fallout of the crisis in Ukraine, it is worried that if the trend continues, the price of imported products in Ukraine will become expensive. The higher landed cost will ultimately affect the end consumer. While it is still early to say whether the recent turn of events would impact pharmaceutical sales in the medium to long term, industry is taking comfort from the absence of any threat in the short run and is hoping for a revival of the economy once the present crisis is over, the chamber statement said.

Among leading Indian companies, Dr Reddy’s Laboratories, exports to the country, as well as companies like Glenmark and Ranbaxy too export to the region including Russia and other CIS countries.