Pharma exports to US fall by 40 %; India is losing share to China, South Korea

India’s pharma exports to US is severely hit by increasing competition from other emerging markets like China, Israel and Korea, said a study conducted by Federation of Indian Chambers of Commerce and Industry –an umbrella association representing Indian businesses.

Pharmaceutical export business remains the worst hit among all the industries due to the economic down turn in US. Indian exports of pharmaceutical products to the US fell almost 40 per cent in the five months between October last year and the end of February.

Exports of pharmaceutical products from India have been facing steady competition in the US market from its Asian peers such as China and South Korea as well from Israel. In fact Indian pharma companies are increasingly losing their relative share to firms from these emerging economies.

“In pharmaceuticals, exports from China, Israel and South Korea [to the US] moved up by 27 to 41 per cent as compared with a significant decline of 37 per cent in India’s exports to the US,” FICCI research stated.

The fall in export of pharmaceutical products has cast an aspersion on the prospect of pharma industry growth and its resilience to withstand the rigours of downturn pressures. 

India’s pharmaceuticals industry was often touted as a sector that could weather the global financial crisis.

Among the other possible reasons for the sharp decline in pharma exports are the US import ban imposed on Ranbaxy last year. The US Food and Drug Administration had slapped a ban on imports Ranbaxy’s products made in one of its manufacturing facilities at Paonta Sahib after the the regulating agency found a number of violations in Good Manufacturing Practice. Ranbaxy is one of the leading exporters of pharmaceutical products to US from India.

Liquidity problems including the fluctuating dollar have also contributed to drop in export revenues, according to  Indian pharmaceuticals groups.

However, pharmaceutical industry is optmistical of the export prospects in the coming years as they see rising pressure to reduce health costs, worldwide. In that scenario, they hope that that producers of cheaper generic drugs would perform well.

The Indian Drug Manufacturers’ Association (IDMA) said overall exports fell 1 per cent over the past fiscal year. IDMA, which represents thousands of small and medium scale companies in India had forecast 16 per cent growth for the year. However, exports were Rs307bn (£4.1bn) in 2008-09, down from Rs311bn the previous year. Imports rose 21 per cent to Rs67bn in the past fiscal year.

The IDMA is sticking to a bullish forecast for 2009-10. “Even in such turbulent times, we are expecting a growth rate of 16 per cent,” said R.S. Joshi of the IDMA’s Gujarat chapter.

The gems and jewellery sector,which has been expanding smooth for the last 20 years is the the second-worst performer, according to FICCI study.

In an earlier industry survey, FICCI had forecast a drop in India’s exports in the first half of year 2009 due to aggressive pricing by Chinese exporters, coupled with lack of credit flow and cancellation of orders.

India is facing a tough challenge from all across the market to ‘meet the China price’. A number of Indian exporters have already cut down their prices to an extent of 10-15 percent on an average or perhaps more to maintain their hold over the market, FICCI said.

Over 360 companies participated representing sectors like automotive, consumer durables, food and food processing, leather, marine products, gems and jewelery, textiles, IT and pharmaceuticals, participate in the survey.