A seven-year trend analysis of Indian pharma formulation exports to semi-regulated markets by India Ratings and Research (Ind-Ra) says weak economic and political conditions in Africa and currency volatility in Latin America (LATAM) are likely to weigh on the consumption of pharma formulations. In FY17, semi-regulated markets made up 44.9 per cent of India’s pharma exports.
Most Indian exporters are now forced to rationalise their presence among semi-regulated markets as well, avoiding markets where risks outweigh opportunities. According to the Ind-Ra report, which includes finished formulations and excludes bulk drugs and intermediates, these companies are now placing high importance on margins and cash flow security over volumes, given the present challenging currency environment.
There are some positives midst this gloom. Exports to other Asian peers were on a stable footing (up 13.9 per cent YoY), driven by a stable demand. Exports to Middle East rebounded (33.4 per cent yoy) in FY17 on the back of improving economic conditions, political stability in non Gulf Cooperation Council Middle Eastern countries and increasing mandatory insurance in Gulf Cooperation Council (GCC) countries. However, the Ind-Ra report warns of regional challenges. Exports to Asian markets are on a low base and these are price sensitive markets. Similarly, the affluence of the GCC nations, with the ability to pay, is offset by the dependence on oil exports.
Though the CIS market is showing some recovery, Indian exporters remain cautious even about Russia, the largest export market for India among CIS countries. The Ind-Ra report points out that Russia could present a high value opportunity as there is a higher ability to purchase without aid programmes, in contrast to countries like Africa, which are dependent on internationally funded initiatives by agencies such as WHO. Indian companies are key suppliers to these programmes but funding for these initiatives is drying up, adding to the uncertainty. Though the Ind-Ra report believes that despite the export underperformance, the long-term fundamentals of semi-regulated markets remain intact, exporters will need to track these variables very closely and be flexible enough to change course and strategy.
With exports key to the very survival of the Indian pharma sector, companies are tracking every trend and regulation that will impact their overseas performance. Which is why Express Pharma’s first Pharma CXO Summit will focus on track and trace systems, a regulatory requirement for exports to most markets. Scheduled for November 9-10, in Goa, the Summit will help exporters discuss ways to expand their exports in a sustainable manner. While political and economic headwinds are unpredictable at best and volatile at worst, it is important to future proof systems and processes so that they are responsive to such trends. We hope that the Pharma CXO Summit will be a strong step in this direction. For more details, see our website: http://www.expressbpd.com/pharma/cxo-summit-2017
Viveka Roychowdhury
Editor