IT Boom Over, Pharma Boom Begins

Two decades back the boom of IT software and services sector started in India. The software companies founded at that time grew manifold. The scenario facilitated the creation of several billion dollar enterprises. Today we have at least 4 to 5 software services giants. However, the growth has reached a kind of saturation point. Prominent causes for flat growth nowadays are the inclination towards automation and cloud computing.

Is there any other sector that can replicate or even outgrow the IT in coming years? A particular sector looks promising. We are speaking about the ‘Pharma’. Pharmaceuticals has the potential to be one of the highest growth segments not only in India but across the globe. The prime reasons for this are the rapid rise of population and the increase in health issues.

According to a report published in IBEF, Indian pharmaceuticals market ranks third in volume and 14th in the market value. The biggest importer according to 2014 data was the United States. India has become a favourite offshore location for the global pharma companies due to the availability of cheap and skilled workforce which was once the single biggest factor for the IT growth. Moreover, the Indian laws regarding patent protection have facilitated a conducive environment for the Pharma Companies to operate in India.

The IBEF report also says that the growth of the market is going to be 15% per annum till 2020. This rate outperforms the global growth rate of 5% per annum. Clearly, Indian pharma market is an outlier that is surpassing the global growth rate.

Do you wonder if the share prices of pharma companies are reflecting the growth of the industry as a whole? In reality, the answer is no. The flat performance of the shares of the large companies is due to the quality issues that were surrounding them for the past couple of years. However, shares of relatively smaller companies like Medicamen Biotech and Aurolab have shown 266% and 72% growth in the last six month.

Many overseas players have their offshore manufacturing units in India. The government has realized this and has allowed a hundred percent FDI in this sector. This move could be a huge boost for an aggressive growth of the sector.

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