Cipla plans U.K. investment as Indian drugmakers await economic reforms

Narendra Modi

In the weeks since Narendra Modi won the Indian election, drugmakers and other manufacturers have looked expectantly to the new government's first budget. Now, with the budget nearing, manufacturers have opened up about what they want and politicians from the United Kingdom have flown in to unveil Cipla's £100 million ($172 million) investment in the former colonial power.

The Cipla investment is intended to boost sales of its respiratory, oncology and antiretroviral drugs in the U.K. Cipla timed the news to coincide with the arrival of Britain's finance minister and foreign secretary in India. The politicians hope to position the U.K. to benefit from the economic reforms Modi's government is expected to make, leading to deals and increased exports for British and Indian companies. Cipla's planned investment in its U.K. subsidiary is an early part of this process.

Indian drugmakers would welcome changes that support increased exports to the U.K., but also have more local concerns. The Economic Times visited a top Indian pharma hub in Baddi to talk to manufacturers, who put the end of tax exemptions and infrastructure shortcomings at the top of their lists of concerns. A tax-holiday scheme implemented in 2003 helped Baddi to expand quickly, with Abbott Laboratories ($ABT), Cipla, Cadila, Dr Reddy's and others helping to drive growth.

But with the tax holiday coming to an end, Baddi faces an uncertain future in which drugmakers could start to be deterred by its shortcomings, notably poor transport links. "Not getting connected by a rail network is the biggest deterrent. The truck lobby has a monopoly and road transport rates are higher than those of Chandigarh," an anonymous pharma executive told the ET. The executive and others hope the coming budget will include a rail link to ease their transport woes.

On a national level, the Associated Chambers of Commerce and Industry of India (Assocham) is preoccupied with making up lost ground to China in the bulk drug sector, Business Today reports. In a pre-budget report Assocham calls for the government to incentivize private companies to take on capacity established by state-owned corporations.

- read the ET feature
- here's Business Today's piece
- check out Reuters' coverage