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Industry calls for policy intervention as geopolitical tensions drive down Indian pharma exports to Africa
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Shardul Nautiyal, Mumbai
April 17 , 2024
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Pharmaceutical exports in Africa have taken a significant hit due to the depreciation of local currencies, driven by geopolitical tensions, particularly in the Red Sea region.
According to Sandeep Modi, joint secretary, Federation of Pharmaceutical and Allied Products Merchant Exporters (FPME), the impact on exports has been substantial, with a reported decline of up to 50 per cent. Modi emphasized that the adverse effects are not limited to sales figures but also extend to cash flow within the industry.
The FPME has called for policy interventions to address the situation, especially as India's pharmaceutical exports to Africa experienced a 5% decrease in the fiscal year 2023. Concerns have also been raised regarding the negative repercussions on Micro, Small, and Medium Enterprises (MSMEs) operating in the pharmaceutical sector, exacerbated by soaring sea and air freight rates linked to vulnerabilities in the Red Sea region.
The surge in freight rates, exceeding 100%, has dealt significant blows to MSMEs, particularly impacting their exports to key markets in the Middle East, Latin America, and Africa. This surge is attributed to shipping lines redirecting their routes to avoid the Suez Canal, following disruptions caused by the Israel-Hamas conflict.
According to a report by the Union commerce ministry, Africa accounted for 18% of the total USD 19.9 billion exports of finished pharmaceutical products (excluding active pharmaceutical ingredients) in FY23. The Union commerce ministry's report further reveals that while exports to certain African countries such as South Africa, Kenya, and Tanzania have increased, significant declines have been recorded in others, including Nigeria, Ethiopia, and Uganda.
To address currency volatility and promote bilateral trade, the Reserve Bank of India (RBI) has allowed 20 banks operating in India to open 92 Special Rupee Vostro Accounts (SRVAs) with partner banks from 22 countries. Despite efforts to stabilize the Indian rupee, reports suggest only marginal strengthening against the US Dollar in the coming months, with the RBI utilizing foreign exchange reserves to manage volatility.
Uday Bhaskar, director general (DG) of the Pharmaceuticals Export Promotion Council of India (Pharmexcil), highlighted Africa as a critical market with significant growth potential. He emphasized the need to diversify export focus beyond traditional markets like the USA and Europe, citing Latin America and Africa as regions where Indian pharmaceuticals have established a strong reputation for supplying essential drugs at affordable prices. Bhaskar also mentioned about the ongoing capacity-building programmes across India towards effective implementation of revised Schedule M rules to achieve quality and compliance aligned with global regulatory standards in Good Manufacturing Practices (GMP).
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