In this article, You will read the Drugs and Pharmaceuticals industry – for UPSC IAS.

Drugs and Pharmaceuticals industry

  • The pharmaceutical industry is one of the oldest in India. The Indian pharmaceutical .industry is at the top of the chart amongst India’s science-based industries with wide-ranging capabilities in the complex field of drug manufacture and technology.
  • India is known as pharmacy capital of the world.
  • The growth of drugs and pharmaceutical industry in India is a post independent phenomenon. Before independence, bulks of drugs were imported and only processing and formulations were done in the country.
  • Today India produces over 95% of its own bulk requirement, in addition to a number of drugs that are exported. India is self sufficient in formulations.
  • India has emerged as major exporter of drugs to the 3rd world countries.
  • There are around 250 major and thousands of Small Scale Industries are operating in India.
  • The pharmaceutical industry in India is among the most highly organized sectors. This industry plays an important role in promoting and sustaining development in the field of global medicine. Due to the presence of low-cost manufacturing facilities, educated and skilled manpower, and cheap labour force among others, the industry is set to scale new heights in the fields of production, development, manufacturing, and research.
  • According to KPMG, the “organized” sector of India’s pharmaceutical industry consists of 250 and 300 companies, which account for 70% of the products of the market, with the top ten firms representing 30%. However, the total sector is estimated at nearly 20,000 businesses, some of which are extremely small. Approximately 75% of India’s demand for manufacturing for medicines is met by local manufactures.
drugs and pharmaceutical industry growth in india
  • Currently, India’s largest selling drug products are antibiotics, but the fastest-growing are diabetes, cardiovascular, and central nervous system treatments.
  • The industry has mainly emerged in six regions of the country:
    • Mumbai, Ahmadabad, Pune region – 60% of the total production of drugs and pharmaceutical industry in India comes from this region. Apart from this Surat, Vadodara, Bharuch, and Pimpri are also major production centers.
    • Hugli Industrial region – Calcutta and Hugli are the main centers of production in this region.
    • Chennai, Coimbatore, Bangalore region.
    • Hyderabad and Secundrabad region
    • Delhi region
    • Indore-Gwalior region
  • Besides these, there are some scattered regions such as Kanpur, Lucknow, Rishikesh, and Bhubaneswar.
Public Sector
  • Indian drugs and Pharmaceutical Ltd (IDPL):
    • Indian Drugs and Pharmaceuticals Limited (IDPL) a premier undertaking was incorporated on 5 April 1961. It has five plants located at Rishikesh for the manufacture of synthetic drugs, at Chennai for surgical instruments, at Gurgaon for formulations, and at Muzaffarpur for drugs and chemical intermediates.
    • Besides, IDPL has three subsidiary companies set up in association with the state governments. These are Rajasthan Drugs and Pharmaceuticals (RDPL), Jaipur, Uttar Pradesh Drugs and Pharmaceuticals Ltd. (UPDPL), Lucknow and Orissa Drugs and Chemicals Ltd. (ODCL), Bhubaneswar.
  • Hindustan Antibiotics Limited (HAL): Hindustan Antibiotics Limited (HAL) was incorporated on 1 March 1954 with French collaboration (Max GB). It is engaged in manufacturing Penicillin, Streptomycin, Amoxicillin, Hamycin, Gentamycin, and Aureofungen, besides formulations.
    • It has three subsidiary companies set up in collaboration with the state governments which are:
      • Maharashtra Antibiotics and Pharmaceutical Limited (MAPL), Nagpur
      • Karnataka Antibiotics and Pharmaceuticals Limited (KAPL), Bangalore
      • State Drugs and Pharmaceuticals Limited (MSDPL), Imphal
  • Smith Stanistreet Pharmaceuticals Ltd. (SSPL): It is based in Kolkata and is involved in Pharmaceuticals formulations.
  • Bengal chemicals and pharmaceuticals Ltd (BCPL): It was established in 1981. It has units at Maniktala (West Bengal), Panihati(West Bengal), Kanpur, Mumbai.
  • Bengal Immunity Ltd: This facility is involved in the production of Anti-malarial drugs and vaccines.
  • Apart from the above many other units were established in collaboration with the state government.
Private Sector
  • The 1970 patent act of India provided for process patents for pharma & agrochemical products. This enabled the growth of a strong local generic drug industry, which produced the same drugs as the MNCs at relatively low prices, (manufactures such as Cipla, Ranbaxy manufactured drugs esp. HIV/AIDS at much lower prices). The demand for these drugs grew in countries that could not afford to buy these drugs from MNC’s.
  • Indian parliament passed the Patent (Amendment) Bill 2005. It introduced a product patent regime for food, chemicals, and pharmaceuticals, in accordance with the obligation under the TRIPS Agreement of the WTO.
  • India govt. accepted TRIPS & product Patent because the Indian pharma industry is going global & TRIPS helps R&D also because TRIPS is a part of the larger WTO Package. Thus India Pharmaceutical industry has become globally competitive.

New industrial policy abolished licenses, de-reserved all segments. FDI up to 74% and price control exemption for plants producing new drugs through in-house R&D was introduced. The policy paid rich dividends as a large number of pharma companies in the medium to the small sectors in Mumbai, Pune, Ahmedabad, Hyderabad, etc. emerged. These industries had the following attributes:

  • Many are export-oriented
  • Attracted investment from NRIs
  • Various players like Dr. Reddy’s have established R&D
  • They are able to produce new drugs cheaply and compete with MNCs.
  • They have a large market in developing nations.

Pharma industry is poised for rapid growth in the next few decades and is regarded as a sunrise industry.

drugs and pharmaceutical industry in india map

Location factors of Pharmaceutical Industries in India

  • Market: The Indian domestic market is a huge market. Initiatives to promote generic medicines in India have further strengthened. In global markets, Africa for long has been an important market for India’s Generic Drug Industry. The setting up of Pharma industries on the west coast reduces the cost of transportation to African and European nations.
  • Govt policy: Opening up of the FDI up to 100% in pharma has attracted a lot of investments from foreign countries. The Indian Patents Act, 1970, and its strong protection of IP rights have helped the industries sustain by loyalties. The Supreme Court verdicts on Evergreening (Sec 3(d)) (Novartis v. Union of India.) and Compulsory licensing (Sec 84) (Bayer Pharma vs UoI) has strengthened the confidence of Indian Pharma industries against the foreign conglomerates. The focus on Biotechnology in the last 25 years has grown leaps and bounds. There has been focus on R&D, for which the government is providing tax incentives, e.g. incentives for R&D facilities for the plants like Ranbaxy in Mumbai
  • Infrastructure: Availability of power, transport, and communication plays a major role in the location of the pharmaceutical industry in India, for example, most of the facilities of production are located in the western coast owning to infrastructure and market factors.
  • Labour skills: Availability of skilled labour plays major role in the location of the pharmaceutical industry. The decentralization of the pharmaceutical industry in various parts of country has been accounted for due to this factor only.
  • Raw Materials: Proximity to petrochemical hubs that form the raw materials. Example: Jamnagar, Gujarat; Bombay high, Maharashtra.
  • Capital Availability: The western part of India has traditionally been the hub of trade and Capital led to the flourishing pharmaceutical industry there.

Problems of Pharmaceutical Industries in India

  • Technology: Indian pharmaceutical sector lags in the R&D aspect for developing new medicines- far behind other WTO countries. There has only been limited focus on research and innovation.
  • Raw materials are deficient: Despite being a leading supplier of high-quality medicines to several countries, Indian pharmaceutical industry is highly dependent on China for raw materials. These raw materials are called the Active Pharmaceutical Ingredients (API), also known as bulk drugs. Indian drug-makers import around 70% of their total bulk drug requirements from China.
  • Competition (globalization): There is stiff competition from firms in countries like China, Israel and Japan. Hostile and negative lobbying by the big players who frequently accuse Indian firms of violating patent laws. Immediately following the 2005 implementation of the TRIPS agreement, the sector saw a surge in the number of patents grants. However, with the weakening of the Intellectual Property environment, there was significant waning.
  • Adulteration, piracy: There has been a mushroom growth of duplicate manufacturers in India which is a cause of concern for Pharmaceutical Industries in India.
  • The USTR of USA has kept India in priority watch list in its special 30 report, which is also hurting Indian pharmaceutical industry.

Prospects of the pharmaceutical industry in India

  • India has one of the lowest manufacturing costs in the world – lower than that of the U.S. and almost half of the cost in Europe.
  • The availability of skilled labour plays a major role in the flourishing of the pharmaceutical industry in India. The decentralization of the pharmaceutical industry in various parts of the country has been accounted for due to this factor only.
  • The traditional system of medicine is being promoted by the government which provides brighter aspects for the pharmaceutical industry in India.
  • There is huge demand of life-saving drugs both locally and globally which provides an opportunity for the pharmaceutical industry in India. In 2020, India is expected to be amongst the top three pharmaceutical markets in terms of incremental growth
  • India enjoys an important position in the global pharmaceuticals sector, as India is the largest provider of generic drugs globally.
  • The promotion of R&D labs and Biotech parks by the government is also providing scope for a more competitive pharmaceutical industry in India.
  • Contract Research: A Contract Research Organisation, also called Clinical Research Organization (CRO) is a service organization that provides support to the pharmaceutical and biotechnology industries in the form of outsourced pharmaceutical research services (for both drugs and medical devices). Indian pharmaceutical companies in collaboration with international companies are getting actively engaged in Contract Research operations.


  • The New patent regime launched in 2005 has also led to the return of pharmaceutical multinationals, many of which have left India during the 1970s. Now they are back and looking at India not only for their traditional strengths in contract manufacturing but also as a highly attractive location for research and development, particularly in the conduct of clinical trials and other services.
  • At the same time, Indian companies are becoming global players and some of them are out-competing established brands.
  • Healthcare consciousness is increasing. What is needed is the dispensation of industry and lowering the cost of manufacturing.
  • The promotion of educational institutions in the field of the pharmaceutical industry like NIPER (National Institute of Pharmaceutical Education and Research) can go a long way in establishing India as a key global player in the international Pharmaceutical market.
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Thanks alot