Foreign companies are attracted to india because of low labor costs

The spice trade between India and Europe was the main catalyst for the Age of Discovery. The inscription shown, is a Sanskrit invocation of Lord Shiva. The combination of protectionistimport-substitutionFabian socialismand social democratic -inspired policies governed India for sometime after the end of British rule. The economy was then characterised by extensive regulation, protectionismpublic ownership of large monopolies, pervasive corruption and slow growth.

Foreign companies are attracted to india because of low labor costs

Consequently, they have attracted many drug companies around the world.

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Similarly, the pharmaceutical industry in these two countries has also experienced rapid advancements in recent years.

The technical capabilities, production skills, and regulatory knowledge of the local companies have accordingly been greatly improved and reached acceptable levels for global companies. However, despite a number of similarities between China and India, there are still a larger number of differences between these two countries in the areas related to pharmaceutical manufacturing.

We recently conducted an indepth study and analysis on the pharmaceutical manufacturing industries in both China and India. Our study focused on the growth and development history of major pharma companies in each country.

The study revealed some interesting results, such as similarities and differences regarding their capabilities, capacities, market sizes, cost structures, strengths, and shortcomings. The research also indicated future development potentials, as well as the strategies of multinational companies in these two countries.

This article summarizes our results.

Foreign companies are attracted to india because of low labor costs

Both countries are located in Asia with similar sized populations, and both belong to the group of emerging markets with fast-growing economies. Both countries also have low wages for most workers in many industries. There are, however, also significant differences between these two countries. For example, generally speaking, China has a better general industrial infrastructure than India because the Chinese government has put enormous efforts and investments in this during the past two decades.


The logistic service in China also is better developed and less expensive than in India. These advantages have made China attractive to foreign companies looking for a country where doing business is relatively easy. However, India has its advantages, too. It has a better infrastructure in information technology IT than China, which is significant since IT skills play an important role in data management, bioinformatics, and clinical trials.

The business philosophy and operating culture in most Indian companies are closer to Western traditions than their Chinese counterparts. This makes Indian companies easier to negotiate and reach business deals with their Western partners. Analyzing further, to some extent, China has a better education system in biology, molecular biology, and other life science—related fields, resulting in, generally speaking, a better biotech industry in China than in India.

However, India has paid attention to promoting its pharmaceutical industry a lot earlier than China. This has directly resulted in a stronger pharmaceutical industry in India than in China. For example, India currently has a substantial number of key players whose capabilities are strong enough to compete full-scale in the international market; whereas so far none of the Chinese drug companies has reached the same level or even come anywhere close.

That fact makes China more attractive than India to pharma companies when they source bulk materials or outsource long-term, large-scale manufacturing projects. This development model is commonly called reverse-engineering.

To a large extent, this development pattern has resulted in the shortage of APIs in India. The rest are imported from other countries, mostly from China.

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Compared with its Indian counterpart, in the global pharmaceutical manufacturing industry, China has been well recognized as the world largest API producer. For example, among the total of 2, or so APIs in the global market, China can make close to 1, of them.

Foreign companies are attracted to india because of low labor costs

As a comparison, the Indian pharma industry is currently able to make about APIs. They are mostly engaged in only low-tech manufacturing. Currently, the most popular Chinese-made APIs are still those for the medications of bacterial infections. As a comparison, the APIs in the therapeutic areas of oncology, cardiology, diabetes, and tropical diseases are the main products of most Indian pharma companies.

APIs are also the largest class of products among all Chinesemade pharma-related products marketed overseas. China currently has about 1, API makers that market their products in the international market.

Currently, there are about Chinese API manufacturers that have various numbers of APIs registered with the international regulatory agencies; and about 30 of them have API production facilities that are cGMP-certified by the regulated countries.

Although a large number of Chinese companies also produce dosage forms, only a handful of them are currently able to market a limited number of their finished products in the regulated markets. To a large extent, this has determined the low-end position of the Chinese-made pharma products in the international market and the long value chain of global pharmaceutical supply.

Collectively, the Chinese pharma industry is able to produce more than 60 dosage forms with a total of about 5, medicines. Among all dosage forms, the powder for injection is the largest group, followed by oral solids.

As a comparison, India is currently able to make almost all types of dosage forms with a total of more than 60, medicines. A large number of Indian companies has even gained the formulation and manufacturing capabilities for difficult-to-make forms, including injectables and soft gels.

Attracted by their capabilities in formulation, a number of major pharma companies have collaborated with Indian companies on codevelopment of generic drugs or licensed the sales rights to them.

Considerations On Cost Disease | Slate Star Codex

Currently, an increasing number of Chinese pharma companies are aggressively improving their production facilities and aim to get them certified by the regulated countries. Compared with their Chinese counterparts, a larger number of Indian pharma companies possess large manufacturing facilities that have already been certified by the regulated countries.I.

Tyler Cowen writes about cost disease.I’d previously heard the term used to refer only to a specific theory of why costs are increasing, involving labor becoming more efficient in some areas than others. As protectionist barriers crumble in emerging markets around the world, multinational companies are rushing in to find new opportunities for growth.

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Compensation costs in India’s organized manufacturing sector were 91 cents per hour for all employees in ; this amounted to interest in the global marketplace because of its low cost of labor and large population. Because of India’s economic prominence, and in light of BLS’s history of providing.

Nov 06,  · In an attempt to build India’s industrial base nationwide, Modi is pushing the Make in India campaign, designed to attract foreign investment by highlighting the ongoing changes. Jul 23,  · With its large pool of workers who earned much lower wages than their American counterparts, China attracted manufacturers seeking to reduce costs, bolster profitability and keep prices low.

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