The Indian pharmaceutical industry is very largely fragmented and is estimated to have 9,456 units in the SME segment which is around 87 percent in production by volume and 40 percent by value, as per the reports.
SMEs likely to play a significant role in the pharmaceutical growth rate of the nation’s pharmaceutical sector as their contribution counts to 35-40 percent of the industry. Their production, with a turnover of about Rs 35,000 crore has been phenomenal.
Small and medium scale units have played important role in the growth rate of the Indian pharmaceutical industry and have become an integral part of this sector in India.
In India, exports of pharmaceuticals products have increased from USD 6.23 billion in 2006-07 to USD 8.7 billion in 2012-13. A compiled annual growth rate of 21.25 percent has been seen.The Ministry of Commerce has targeted Indian pharmaceutical sector. The exports reached USD 25 billion in 2014 at a growth rate of 25 percent annually.
The SME sector is at the forefront and is continually performing excellently to remain at the top. This growth rate is in terms of a number of units and employment generation and many other factors. The SMEs also support 48 percent of the nations pharmaceutical exports, as per the studies in this sector.
The nations pharmaceutical sector derives its strength from the SME sector, as it forms an important part of the supply chain for the bigger players.
The registered units in this sector are more than 24000, which meet around 70 percent of the countrys needs. It is clearly evident that the micro, small and medium enterprises (MSMEs) are operating in the national pharmaceutical sector. This sector has been characterized and defined as the backbone of the Indian economy.
At a greater level this sector functions in the local market, and particularly in the manufacturing department which relates to medicines for the purpose of mass consumption and therefore has a very big market.
Survival of these units at a great extent would rely on the functionality as to how well and quickly these organizations are able to adapt to the changing business environment and scenario.
In India, Small and medium-sized enterprises are particularly aiming at manufacturing and the niche marketing sector.
Contract Research and Manufacturing (CRAMs) and Biopharma.
These have emerged as areas of high importance to the MSME sector.
It has been recognized that the MSME units can effectively meet the public expectation, which includes cost-effective and affordable medicines of the given framework of a high-quality manufacturing process, technology, regulatory compliance, distribution system and the prices.
SMEs role in the pharmaceutical exports
The pharmaceutical SMEs in India have been lowly focused in the field exports as compared to large national organizations.
However, in todays time, they have become preferred partners in order to supply active pharmaceutical ingredients (APIs) and complete dosages for national as well as international pharmaceutical firms as per the reports.
MSMEs are often not given priority because of several reasons. Like insufficient finance, poor infrastructure, inefficient backup plans.
As a consequence of this, many of these enterprises, today are facing a crisis situation and even find it difficult to sustain.
Strict regulations, insufficient financing options, absolutely no global exposure, degraded public image and increasing competition from other low-cost countries are also some of the other obstacles that this sector comes across and faces. The strong players usually evolve out of this crisis and build a credible position for themselves in the industry.
There has been the issue of inefficient development institutions and financial institutions. Considering the funding, bankers seem to have lost their focus due to globalization and the norms like the Non-Performing Assets (NPA).
There will also be a huge void of young entrepreneurs who are entering this sector.
The desire of focus also results in losing skilled manpower to the IT sector and non-specific marketing.
Meanwhile, there is a requirement for building up and sharing of the common facilities like the treatment plants and the testing facilities
One of the biggest obstacles in the developing economies in terms of export is the High Product Registration fee.
The industry representatives mostly suggest that the pharmaceutical policy on export should make available the transaction subsidy for a registration fee.
The industry recognizes, the issues faced by the SMEs. However, the industry believes that they have to suffice themselves quite enough, without waiting for any kind of external assistance. The Government initiatives can be a big and trustable supportive.
In spite of the tough competition by multiple local and national level organizations, there are still a lot of opportunities to develop and earn huge profits.
Presently, the government has been providing a tax deduction to promote Research &Development, but this is insufficient as per the industry experts.
SMEs have the capacity and capability, to play a strong role in the R&D segment. Various fiscal incentives and tax sops have been imposed on this sector. Thus in order to stimulate investments in innovations, R&D is important.
The demand for tax reduction by the SME sector is 150 percent on R&D spend, as the recent percent is insufficient to stimulate investments in this area.
The Government of India has initiated several reforms such as the cluster development programme, the technology upgradation fund, and many others, which have brought in success.
There is an extreme need for the state governments and local governments to join with the Central government and work with the aim of increasing the presence of MSMEs in the ecosystem.
Indian Pharmaceutical sector has evolved and developed from being just an importer of drugs to being internationally competitive. They have been producing around 22% of international generic drugs and out of the entire production, 40% is exported.
Extensive research has made indigenization possible has been possible. Also, foreign collaboration, government funds and policies like the Patents Act are functioning efficiently and contributing to the Indian pharmaceutical sector