Import Substitution and/or Export Orientation: the Case of Indian Pharmaceutical Industry

Abstract

This article is devoted to Indian experience of catch-up development strategy implementation in the pharmaceutical industry. Economic development in various countries is sometimes based upon import substitution system. But for the officially supported programs, production sectors used to demonstrate low competitiveness (or worse). On the other hand, alternative industrial strategies (export-orientation) tend to be resulting considerable performance and promotion on the global market. So, the following issues have attracted our attention: 1) effects of catch-up development policy enforcement in Indian pharmaceutical industry (from 1947 up to now); 2) identification of competitive differentiators in Indian pharmaceutical industry. The research showed that Indian pharmaceutics success had been determined by combination of external and internal factors: a wide range of import substitution and export-oriented tools and activities (internal factors); forfeiture of patent rights of leading medical products on the international market that had encouraged some Indian medicine manufacturers to advance; essential need to control increasing drug expenditures in the USA and regulations established by Hatch-Waxman Act in 1984 (external factors). Those factors facilitated Indian generics expansion and brought Indian companies to leading positions on the American generic market. Top-priority industries can yield huge dividends eventually provided that state-backed policy is pursued. The other article worth mentioning is that effect of the import substitution activity is time limited. Export-oriented policy is recognized as more productive and profitable in the long run.