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SMEs plays vital role in the growth of Indian pharma industry

IBEF:  September 10, 2013

New Delhi: The pharmaceutical sector of India is heavily reliant on the small and medium enterprises (SMEs), as they form a critical part of the supply chain for the larger players. There are more than 24,000 registered units in the Indian pharma sector, which meet around 70 per cent of the country’s needs.

Small and medium scale units have played a crucial role in the growth story of the Indian pharmaceutical industry and form an integral part of the sector, according to India Micro, Small and Medium Enterprise Report 2013.

SMEs contribute 35-40 per cent to the Indian pharmaceutical industry in terms of production, with a turnover of about Rs 35,000 crore.

The Indian pharmaceutical industry is highly fragmented and estimated to have 9,456 units in the SME segment, which account for around 87 per cent of production by volume and 40 per cent by value, highlighted the report.

Pharmaceuticals product exports from India grew to US$ 14.6 billion in 2012-13 from US$ 6.23 billion in 2006-07, registering a compound annual growth rate (CAGR) of around 15.2 per cent.

The Ministry of Commerce has set a target for Indian pharma sector exports to reach US$ 25 billion by 2014 at an annual growth rate of 25 per cent.

The SME sector is at the forefront in terms of number of units and employment generation. They also support 48 per cent of the country’s pharma exports, as per the report.

Strengths of pharma industry

SMEs are mainly focusing on manufacturing and niche marketing. Contract Research and Manufacturing (CRAMs) and Biopharma have emerged as areas of high relevance to the MSME sector. It is recognised that these units can effectively address the two critical public expectations viz. cost effective and affordable medicines within the given framework of excellent manufacturing processes, technology, regulatory compliance, distribution system and prices.

On the export front, pharmaceutical SMEs in India have become preferred partners for the supply of active pharmaceutical ingredients (APIs) and finished dosages for Indian as well as foreign pharmaceutical firms, highlighted the report.

Government policy support

The Government of India provides tax deduction to promote research and development (R&D).

“SMEs can play a strong role in the R&D area. The sector has been asking for various kinds of fiscal incentives and tax sops in order to stimulate investments in innovations and R&D beyond the current tax deduction,” said Mr Gaurav Khungar, KPMG.

The tax reduction demands of SMEs are to the tune of 150 per cent on R&D spend. The Government of India has initiated multiple reforms such as the cluster development programme, technology upgradation fund, credit link capital scheme, amongst others, which have rendered success.

“There’s a pressing need for the state governments, local governments to join hands with the central government and work towards increasing the presence of MSME’s in the ecosystem,” said Mr Madhav Lal, Secretary, Ministry of Micro, Small and Medium Enterprises, Government of India.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.