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India can ramp up export of medical devices amid customer diversification away from China

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medical devices

Summary ;

If India has to protect its economy from any major supply chain shock, it has to build its internal capacities and reduce dependence on any country.

The world’s massive dependence on China for manufacturing is dangerous. Industry reports suggest that close to $4 trillion of manufacturing happens in China, approximately 30% of global manufacturing.

medical devices

medical devices

Any policy change or crisis in China can cause massive chaos in every major supply chain. If India has to protect its economy from any major supply chain shock, it has to build its internal capacities and reduce dependence on any country. This development can give a huge impetus to exports, as many countries now are looking to diversify their risks by a strategy called China plus one.

One of the most significant sectors that need urgent attention is the medical devices sector. India’s huge dependency on medical devices can make the country extremely vulnerable to supply chain shocks, as was seen during the peak of the Covid-19 pandemic.

A recent newspaper article highlighted that imports of medtech and medical devices jumped up 75% from China during the pandemic. The India Brand Equity Foundation (IBEF) estimates that India has a 75%-80% import dependency on medical devices. To encourage investments in manufacturing medical devices, in May last year, the Government announced incentivisation plans of US$ 4.9 billion for five years, and these funds are to be offered to manufacturers only if they invest in setups to manufacture key medical devices.

The pandemic has brought back the importance of developing the medical devices market. Today, India is among the top 20 markets for medical devices worldwide.

The country’s medical devices market stood at US$ 11 billion in 2020 and is projected to reach US$ 65 billion in 2024. The medical devices industry in India is a blend of large multinationals and small and mid-sized companies.

Apart from the private efforts, the Government of India (GOI) has also commenced various initiatives to strengthen the sector, emphasizing research and development (R&D) and 100% FDI for medical devices to boost the market. Currently, the FDI inflow in the medical and surgical appliances sector stood at US$ 2.23 billion. However, more proactive efforts are required to overtake China in this area to ensure that India transitions from a net importer to an exporter of medical devices. The Government has to announce a series of initiatives to ensure that there is no cheap influx of imports, which can harm the domestic industry. Our policies must be in favour of domestic medical device makers to ensure that India is complete ‘Atma Nirbhar’ or self-reliant.

Anti-China sentiment a good opportunity for export of Indian medical devices

Chinese supply disruptions have been an opportunity for many markets to prosper globally and bridge the quality issues that existed previously. This only adds to India becoming a possible alternative for the devices as well as medical drugs. Reports show that Indian API exporters have garnered good realizations on their exports during H1 FY21. In addition, reports also indicate that the constant growth will lead to a 7-8 percent on-year growth. It also means that the market of Indian medical devices is also wide open for export opportunities.

A significant rise in the demand for drugs in bigger markets such as the US and Europe also proves that there is a massive opportunity for the Indian market to prosper as far as the requirements for medical devices are concerned. Hence, the requirements for pharma products, equipment, and bulk drugs will also bring serious revenue to our country.

Way Ahead and What To Expect?

Over the past few years, India has truly branched out and established itself as a superpower in the medical world by strengthening its research & development ecosystem while providing export opportunities. With constant growth and innovation, one can take this sector to the top despite the pandemic. As per IBEF, India and Russia have set the bilateral trade target at US$ 30 billion by 2025, and the medical technology sector in India is projected to reach US$ 50 billion by 2025. Meanwhile, government initiatives such as the ‘Production Linked Incentives (PLI) Scheme for Medical Devices 2020’ will also further the export opportunities soon.

Similar to the SEZ export zones to facilitate the growth of the software services industry, a similar policy can be planned for the medical device manufacturing industry. For example, the medical devices industry is highly capital intensive and requires high investments. To address this issue, the Government of Andhra Pradesh has taken the lead in establishing the Andhra Pradesh MedTech Zone (APMTZ), which will house all capital-intensive scientific facilities and laboratories then be leased to manufacturers in Vishakhapatnam. Similar facilities are required across the country.

The road ahead is full of opportunities. If India can innovate rapidly with quality medical devices products with conducive policies to encourage growth, a similar or greater success that was seen in the software services space can be seen in this space too!



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