How India Can Attract More Foreign Direct Investment, Create Jobs and Increase GDP: The Benefits of Respecting the Intellectual Property Rights of Foreign Pharmaceutical Producers

Abstract

This study examines the economic impact of India’s current approach to intellectual property (IP) rights, as it affects pharmaceutical products and foreign direct investment (FDI). We review the literature on the economic effects of FDI and found that across most developing nations, FDI has strong, positive effects on a country’s growth, productivity and incomes. Next, we focus on the impact of IP rights and enforcement and pharmaceutical firms. Using the Ginarte-Park (G-P) index of nations with regard to IP rights and enforcement, we found a strong relationship between how much FDI a nation attracts and the strength of its IP regime, and an even stronger relationship for pharmaceutical FDI. Next, we analyzed the history of improvements in IP rights in India and found that flows of pharmaceutical FDI to India were highly responsive to those improvements and to setbacks in those improvements. Next, we estimated the impact of improvements in IP rights and enforcement in India. We found that if India adopted an IP regime comparable to China, annual FDI flows in pharmaceuticals to India could increase by as much as 33 percent; and if it adopted a system of IP rights and enforcement comparable to the United States, those FDI flows could rise by as much as an estimated 83 percent per-year.We also examine the links between these FDI flows and the RD and this increased access to new pharmaceutical treatments could raise the average life expectancy of working-age Indians by four weeks. We estimate the long-term economic benefits of a four week increase in life expectancy at roughly $32 billion. Similarly, if India adopted an IP regime comparable to the United States, the increased access to new pharmaceuticals would extend the average life expectancy of working-age Indians by an estimated 10 weeks, with long-term benefits totaling some $80 billion. Finally, we found that greater access to new pharmaceuticals could lower costs for other forms of medical treatment, lower government subsidies for medical care, and lower income losses from illnesses. We find that those savings could range from $5.2 billion per-year to $19.2 billion per-year.