The Indian rupee is under great stress as overseas investors are paring their exposure to Asia’s third largest economy amid international uncertainty and mounting worries over the domestic economy. The rupee has depreciated to over 19 per cent just a matter of three months, and is further expected to depreciate. This depreciation has caused much concern in overall industrial growth and pharma is no exception to the same. While it may seem that majority of the pharma exporting companies will benefit by this by their forex earnings, their forex gain would become negligible if they are importing their API/s or even intermediates. The biggest beneficiaries are those who are making shipments in the current month and probably in the next month wherein the raw materials are already in place. Besides, companies manufacturing their own API could also be the biggest beneficiaries. The majority of the small medium enterprises (SMEs) will find it extremely difficult to honour their loan commitments, especially because their costing is based entirely on imported raw materials without duty. The companies supplying to domestic market would also be affected because of higher cost of inputs and there is no export earnings. The rupee depreciation has happened at the wrong time for the pharma industry considering that the drug price control order (DPCO) has come down heavily in price reduction exercise for nearly 350 essential drugs. The impact of this depreciation would be known very clearly by October 2013. However, it is very evident that the pharma industry would be affected by higher input cost on account of depreciating rupee. Besides, pharma is the only industry heavily controlled by price control. It does not give any flexibility to increase the retail price. The overall production and consequently employment opportunities will take a very severe beating.
– TS Jaishankar, Managing Director, Quest Life Sciences
