Trade performance and revealed comparative advantage of Indian pharmaceutical industry in new IPR regime

Abstract

Purpose – The purpose of this paper is to examine the trade performance, revealed comparative advantage and trade specialisation indices of Indian pharmaceutical in the post-modified Indian Patent Act. Design/methodology/approach – The main data sources for this paper are United Nations Conference on Trade and Development, PROWESS of Centre for Monitoring Indian Economy, Government of India reports and Reserve Bank of India databases. Revealed comparative advantage index (RCAI) and trade specialisation coefficient (TSC) have been calculated in the study. Findings – India is ranked third in regard of TCS, far behind Ireland and Israel. While Ireland has moved up the value chain faster after 1995, Israel has moved up swiftly after 2000 through global production network and supply chain. The Indian pharmaceutical industry, on the other hand, has largely capitalised on its low-cost production of generic drugs and a large domestic market. The RCAI also supports the results of TSC. India is positioned at 11th place, far behind Ireland, which stands tall at the top with distantly followed by Israel, Switzerland, Belgium, the UK, etc. Practical implications – The study shows the policy implications for future sustainable development of the industry as the new IPR regime has given opportunities as well as threats to both domestic pharmaceutical companies as well as the multinational corporations. The Indian pharmaceutical industry can be a good learning experience for other developing countries hopeful to enter the global market for generic drugs. Originality/value – There are no major studies providing detailed analyses of India’s comparative advantage vis-à-vis other leading exporters of pharmaceutical products in the world. This study endeavours to fill this gap. It also attempts to capture recent trends in exports and imports during the global recession period.