How Gujarat Became the Pharma Hub of India

7 Mar 2022  Read 3079 Views

The Covid19 pandemic added some new words to our everyday vocabulary, ‘vaccine’  and ‘jabbed’ being the relevant ones. Team Covishield or Covaxin? Which one are you?

It will interest you to know that both of these vaccines are MADE IN INDIA. Today, India is the largest producer of vaccines worldwide, accounting for more than 60% of the total vaccines, as of 2021 end. The ideas behind the pharma sector date back to the apothecaries of the middle ages. A naturally progressive industry, pharma has drawn together some great ideas and innovations.

Gujarat is known as the Pharmaceutical Hub of India. But how did Gujarat gain this reputation? Let’s find out.

The Birth and Rise of Pharma in Gujarat

Don’t we all take pride in being an Indian? Well, there are sufficient reasons for it.

India is not only self-reliant but is also a net exporter of pharmaceutical products. About 95% of the API(Active Pharmaceutical Ingredient) and formulations are produced locally. Indian Pharma Exports stood at US$17.58 billion in FY21.

India has one of the largest global markets of chemicals used in the making of drugs, and is ranked sixth in the world and fourth in Asia in terms of the global sale of chemicals.

Since the establishment of the country’s second-oldest drug company, the Alembic Chemical Works Company Limited in Vadodara in 1907, Gujarat has been the flag bearer of the country's pharma industry.

Let’s rewind back to the 1900s. During the period of 1940s and 50s, companies like The Gujarat Pharmaceutical and Chemical Works, Sarabhai Chemicals, Atul Products Ltd, Allied and Cadila Laboratories were established. The establishment of LM College of Pharmacy in 1947 was an important landmark in the industry's history.

Did you know Ahmedabad, the main commercial city of Gujarat, is nicknamed “the Manchester of India”

The pharmaceutical industry grew rapidly after Gujarat emerged as an independent state from the Bombay State on 1st May, 1960. The number of manufacturers in Gujarat grew from 117 in 1962 to more than 900 in 1985 with a major share in the country's pharmaceutical production. The establishment of Cadmach; a pharmaceutical machinery manufacturing unit in 1967, was another development that impacted the pharmaceutical sector during this period.

When Millennials were born, the Pharma industry was on boom

During the 1990s and 2000s, Companies in Gujarat saw a leap in production and exports with a strong focus on regulated markets as they geared up for Globalization. During the last decade, Gujarat's pharma companies like Zydus Cadila, Sun Pharma, Dishman, and Torrent  have been expanding their global footprint through mergers & acquisitions, with international companies and setting up subsidiaries & marketing offices overseas.

Here are the numbers we are talking about!

 

Why Gujarat and not some other state?

Necessity is the mother of invention!  Since 1900, Gujarat has faced scarcity of food and water almost 30 times.

  • Climate and geography favoured Gujarat:

Poor rainfall made it hard to pay bills and scratch out a living by farming. So other industries were built for people to earn their ROTI, KAPDA, MAKAN, and owing to its border with Pakistan and a long coastline of 1,600 kilometres- the climate and geography of Gujarat has always pushed it towards being a commercial state. The state has historically been one of India’s most prosperous, as a result of lucrative trading relationships.

To top off these advantages, Gujarat's legacy is maintained by Gujarati workers, who are renowned for their dynamism and spirit of entrepreneurship. (Ambani and Adani being the prime examples $$$)

  • Development of Infrastructure:

The "Gujarat model" allowed pharma companies to thrive. The roads through and around major cities are excellent.

The state has moved to a surplus in electricity generation, from a deficit in 2002, despite the energy demands of a developing economy.
The state's 18,000+ villages are connected to the grid. Water supply is abundant throughout. The emphasis on basic infrastructure - a hallmark of the Gujarat model - extends to making land easily available for commercial development.

  • State policies favoured the Investors:
    Investors and researchers saw an efficient and competent state administration that was richer, cleanly run, and enjoyed faster GDP growth. These aspects of the state translated to improved quality of life for the investors, researchers and their kin.

  • Reduced Regulations:
    State legislation also reduced the number of regulations industries had to comply within Gujarat. With a vision of increasing the ease of doing business in the pharmaceutical industry within the state, Gujarat FDCA (Food and Drug Control Administration) made conscious efforts in the year 2017.

 FDCA also reduced the stipulated timelines for the renewal and granting of manufacturing licenses to 60 days from the earlier prescribed timelines of 180 & 120 days respectively.
Also, the timelines for granting and renewal of sale licenses has also been reduced to 30 days from the previous prescribed timelines of 45 & 120 days, respectively, thereby making the whole process quicker and more efficient for manufacturers of drugs in Gujarat.

  • Easy transport and Storage:

Dahej (dowry in Hindi) is a crime, but Dahej (A city in Gujarat) has made a huge contribution to Gujarat’s journey of becoming the Pharma hub. 

Dahej, India’s first specialized chemical port is a gateway to industrial prosperity and business development in India. Dahej provides a dynamic storage terminal for cargo handling and storing liquid and gaseous chemicals, petrochemicals, and petroleum products. 

Its strategic location to industrial intensive cities of Vapi, Vadodara, Bharuch, Ankleshwar and Surat in Gujarat cuts down on vital cargo delivery time and transport costs.

NAMO (Narendra Modi) From Gujarat to India!

Narendra Modi who is the former chief minister of Gujarat, became the Prime Minister of India in 2014 and launched “Make in India”. Further, in 2016, the FDI Policy was liberalized to permit from 49 to 74 percent investment in brownfield pharmaceuticals under the automatic route. FDI in greenfield pharmaceuticals continued to be permitted through the automatic route at one hundred percent.

The process for obtaining government approval for Foreign Direct Investment was streamlined in 2018, and the relevant applications routed directly to the concerned ministry for approval and consideration via the Foreign Investment Facilitation Portal, making the process more efficient. 

In addition to favourable policy measures to promote Foreign direct investment, the introduction of  “Pharma Vision 2020” was a Union Government initiative, aimed at making India a global leader in end-to-end drug manufacturing. It has been an attractive policy reform, but…

There’s a long way to go.

Healthy investments make you wealthy

Before anyone asks me in the comment section, being a common man (Woman in this case), how will all of this help me except for “ Mera desh badal raha hai, aage badh raha hai”? 

There is no second opinion about the fact that pharma is an ever-growing industry. A bet in this industry is only gonna multiply your wealth in the future.

However, one thing you need to understand about this industry is the fact that it is hyper-competitive. To succeed in the industry, you have to be an unfathomable giant, and if not, courageous enough to tackle those incumbents with innovative products!

Guess what, after days of study and deliberation, our research team has found out one such small-cap company with a global presence, state-of-the-art products, innovative management & outstanding growth, which is still available at a very reasonable valuation right now.

This stock could prove to be a very good bet on the up-and-coming pharma sector. Subscribe to Recipe by Finology & grab the stock in the 'Recommendations' section.

Parting Words

Given the favourable regulatory and policy framework, the overall growth was boosted by increasing demand for quality healthcare consumer spending, and the Indian Government’s efforts in raising availability and access to healthcare insurance. 

This, along with other commercial and geopolitical factors, has also resulted in a steady flow of mergers & acquisitions/investments linked to the pharma and healthcare sector in Gujarat.

India plans to set up a nearly Rs. 1 lakh crore (US$ 1.3 billion) fund to boost companies to manufacture pharmaceutical ingredients domestically by the year 2023.

The market size is expected to increase to US$100 billion by 2025. 

With the increasing investments in Research and Development (R&D) sector, the introduction of new products and entering into new pacts, pharmaceutical companies based in Gujarat have an opportunity to establish a strong presence in domestic as well as international markets. The effectiveness in attracting and marketing itself to the world is the state’s biggest strength, along with the security of having an industry-friendly policy that attracts companies to come and set up their base in Gujarat. And, this is what makes the state stand out as a pharmaceutical hub of the country.

My friend, the pharmaceutical sector has been a key player in Indian history, whether it be the “Sanjeevani booti” which is mentioned in the Ramayana which takes us back to the “Ayurveda era”, or whether it be “Covishield” and “Covaxin” the Indian manufactured vaccines for the covid-19 pandemic. Indians are surely reaching new heights in terms of good health and wealth (wealth, if you invest in our recommended stocks).

About the Author: Deb P Samaddar | 233 Post(s)

Deb is a keen learner and eager to learn about the finance world. With an increased proclivity towards tech and language, he aims to capitalise on his interests as a content writer at Finology.

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