FDI equity inflow into pharma sector registers growth of 45% in FY 23 to cross $2 billion mark

The Foreign Direct Investment (FDI) equity inflow into the pharmaceutical industry has registered a growth of 45.4 per cent in the fiscal year ended March, 2023, as compared to the inflow in the previous fiscal year. The foreign equity investment has crossed $2 billion during the fiscal year, according to official data.

The FDI investment into the drugs and pharmaceuticals sector during the financial year 2022-23 was $2.05 billion, as compared to $1.41 billion reported in the previous fiscal year. The growth comes after a decline of five per cent registered in the fiscal year 2021-22 as compared to the $1.49 billion foreign equity infusion in the year 2020-21, according to data from the Union ministry of commerce and industry.

The cumulative FDI inflow from April 2000 to March, 2023, stood at $21.46 billion, holding the eight position among the sectors attracting highest FDI equity inflow in the country, which is led by the services sector at $631.98 billion. The FDI inflow into the sector has reported a significant growth while the overall FDI equity inflow to the country reported a 22 per cent decline during the fiscal year 2022-23.

The FDI equity infusion during the last quarter of the financial year, ending March, 2023, reported a growth of 14 per cent at $240 million as compared to the $210 million registered during the same period of previous fiscal year.

The hospital and diagnostic centres sector has reported a growth of 16.2 per cent during the fiscal year 2022-23, at $810 million fund infusion, as compared to $697 million inflow reported in 2021-22. The cumulative FDI equity inflow into the sector stood at $8.73 billion from April, 2022 to the end of March, 2023, growing from $7.92 billion reported at the end of March, 2022.

The medical and surgical appliances sector has seen the FDI equity inflow into the sector almost doubling during the fiscal year 2023. The foreign investment into the sector stood at $397 million during the fiscal year, as compared to $208 million in the 12 months of previous fiscal year. The cumulative foreign investment flow from April, 2000 to March, 2023 stood at $2.80 billion, while till March, 2022, it was $2.19 billion, according to the data.

The Economic Survey 2022-23, released on January 31, 2023 ahead of the Union Budget 2023, has said that the FDI inflows into the pharmaceutical sector have increased four-fold over five years until September 2022, to US$ 699 million, supported by investor-friendly policies and a positive outlook for the industry.

According to the Department of Pharmaceuticals, the government has further approved two FDI equity infusion proposals valued at a total of around Rs. 1,477 crore during the month of January, 2023, continuing the growth momentum. By the end of January, the Department has three more proposals pending for consideration.

Foreign investments in pharmaceuticals in greenfield projects are allowed up to 100 per cent under the automatic route and for brownfield pharmaceutical projects, foreign investment beyond 74 per cent to up to 100 per cent, government approval is required.

After the abolition of Foreign Investment Promotion Board (FIPB) in May 2017, the Department of Pharmaceutical (DoP) has been assigned the role to consider the foreign investment proposals under the government approval route.

Apart from this, the department considers all FDI proposals of pharmaceutical sector and medical devices sector, according to an announcement in April 17, 2020, wherein investors/ultimate beneficiaries of the proposals are from the countries sharing land border with India.

An online portal, namely, “FDI linked Compliance Monitoring Portal” has been developed by the department to monitor progress of FDI inflows received by the Indian companies in the pharmaceutical sector and ensure compliances of FDI linked performance conditions as required under the extant FDI Policy.

Ranked as third worldwide for production by volume and 14th by value, the Indian pharmaceutical industry occupies 60 per cent of the world’s vaccines and 20 per cent of generic medicines globally. It has the highest number of US Food and Drug Administration compliant pharma plants outside of the USA and is home to more than 3,000 pharma companies with a network of over 10,500 manufacturing facilities.

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