Gujarat - A Re-emerging Pharma Destination

Gujarat has been the flag bearer of India’s pharmaceutical industry since the establishment of the country’s second oldest drug company, the Alembic Chemical Works Company Limited in Vadodara in 1907. Gujarat’s strategic location on the western coast, coupled with dynamic entrepreneurial talent and favourable policies from the State Government has led it to become one of the premiere industrial hubs for investors looking to invest in India.

Gujarat currently has 33 percent of the aggregate share of the pharmaceutical industry in India[1] and the State also accounts for at least 28 percent of the pharmaceutical exports from India[2]. Moreover, with the advent of the Goods and Service Tax (GST) coupled with the upcoming expiry of tax holidays granted by some northern states of India, the pharmaceutical industry is witnessing a jurisdictional shift, with some of the largest pharmaceutical companies looking to relocate or establish their manufacturing plants in Gujarat.

In this blog, we discuss some of the Central and State Governments’ key policy initiatives fueling the re-emergence of Gujarat as the preferred pharma destination for domestic and international investors.

Key Policy Initiatives


The Indian Government’s “Make in India” initiative, launched in 2014, is a major national initiative designed to boost foreign investment in the manufacturing sector, foster innovation and build world-class infrastructure. Further, in 2016, as part of the Modi Government’s plans to further facilitate ease of doing business in India and attract further Foreign Direct Investment (FDI) in the Pharma sector, the FDI Policy was liberalised to permit up to 74 percent investment in brownfield pharmaceuticals under the automatic route. One hundred percent foreign investment in greenfield pharmaceuticals continued to be permitted through the automatic route.

In 2018, the process for obtaining government approval for FDI (including for FDI beyond 74 percent in brownfield pharmaceuticals) was also streamlined and the relevant applications directly routed to the concerned ministry for consideration and approval via the Foreign Investment Facilitation Portal, making the process more efficient. It must be noted that investment in manufacturing of medical devices up to 100 percent is under the automatic route and no such distinction between greenfield/brownfield is applicable thereto.

In addition to favourable policy measures to promote FDI, there have been attractive policy reforms such as the introduction of “Pharma Vision 2020” – a Union Government initiative, aimed at making India a global leader in end-to-end drug manufacturing. This has augmented investor trust in the Indian pharmaceutical ecosystem by focusing on increasing the ease of doing business within India, backed by providing modern and state-of-art industrial infrastructure such as smart cities, industrial corridors and upgrading the existing industrial clusters.

Further, in the Union Budget 2018-19, the Modi Government announced the implementation of the National Health Protection Scheme, the world’s largest Government-funded healthcare programme, which is expected to benefit 100 million poor families in the country by providing cover of up to Rs 5 lakh (US$ 7,723.2) per family per year, for secondary and tertiary-care hospitalisation, thereby increasing the allocation of funds to the Ministry of Health and Family Welfare by 13.1% aggregating to Rs 61,398 crore. This reflects the eagerness of the Indian Government to improve and expand a self-sufficient pharmaceutical and healthcare industry within India incentivising pharmaceutical companies to garner the benefits of increased Government initiatives.

From a legislative perspective, under the primary legislation of the Drugs and Cosmetics Act, 1940, read with the Drugs and Cosmetics Rules, 1945, which governs the import, manufacture and distribution of drugs in India, the legislature has also framed rules and regulations to govern specific aspects of the industry. This includes regulation of medical devices, prices of essential notified drugs, narcotic and psychotropic drugs and substances, and the promotion and regulation of R&D in the industry to develop new drugs and undertake clinical trials. The aim is to establish a legislative framework suitable for the dynamic nature of this sector.


Apart from being an investor-friendly pharma destination in terms of sector specific regulatory initiatives and implementation thereof, the Gujarat Government has, as part of their globally renowned investor summit, the Vibrant Gujarat Global Summit, always encouraged and provided opportunities for investors and promoted schemes that incentivise investments in Gujarat.

The State Government has also facilitated four dedicated pharmaceutical Special Economic Zones (SEZ) providing tax and infrastructure benefits to enterprises located within such SEZs[3] to provide a further boost to exports in the sector. Additionally, the Gujarat Industrial Development Corporation has also allotted dedicated industrial parks ensuring access to necessary infrastructure facilities and cost effectiveness for investors with the aim of spurring growth in the pharmaceutical sector.

To unearth the high-growth potential of medical devices in terms of domestic manufacturing and global exports, Central Government has also sanctioned the setting up of Medical Device Parks across India, including one in Sanand (Gujarat) to reduce costs, timelines and provide industry-specific high-end infrastructure. Setting up a medical devices park in Gujarat is very relevant due to the existence of the largest number of Indian medical device manufacturing companies in Gujarat and the fact that 40 percent of India’s pharma machinery is manufactured here. Further, the State Government provides impetus to micro, small and medium pharmaceutical enterprises by granting a subsidy of 50 percent of the capital costs for installing an Enterprise Resource Planning (ERP) system, for obtaining International Standards Organisation (ISO) certification, and for obtaining the World Health Organisation’s Good Manufacturing Processes (WHO GMP) certification, for testing the required equipment and machinery[4], thereby reducing establishment and operational costs for the establishment or expansion of enterprises in the State.

Gujarat is also leading in terms of manufacturing and selling quality drugs from India by ensuring compliance with global health and safety requirements in domestically manufactured drugs. As per the Gujarat Food and Drug Control Administration (Gujarat FDCA), there has been a sustainable improvement in the quality compliance of drugs manufactured within the State, with the percentage of not-of-standard-quality drugs consistently falling and being the lowest in comparison to any other State.

The Gujarat FDCA is also making conscious efforts towards increasing the ease of doing business in the pharmaceutical industry within Gujarat. The Gujarat FDCA was the first state regulator to introduce the drug manufacturing licence application software in the country, which enables the regulator to efficiently process the approval and renewal applications received, in a transparent and timely manner. The Gujarat FDCA, in 2017, also reduced the stipulated timelines for the granting and renewal[5] of manufacturing licences to 60 days from the earlier prescribed timelines of 120 and 180 days respectively. Similarly, the timelines for granting and renewal of sale licences has also been reduced to 30 days[6] from the earlier prescribed timelines of 45 and 120 days respectively, thereby making the process quicker and more efficient for drug manufacturers in the State.

Deal Activity Involving Gujarat

Given the favourable regulatory and policy framework, the overall growth boosted by increasing consumer spending, demand for quality healthcare and the Indian Government’s efforts in raising availability and access to healthcare insurance, the pharma and healthcare sectors’ market size is expected to grow to US$100 billion by 2025. This, along with other commercial and geo-political factors, has also resulted in a steady flow of M&A/investments linked to the pharma and healthcare sector in Gujarat in the recent past, including:

  • A joint venture by Gujarat based Alembic Pharmaceuticals Limited with SPH SINE Pharmaceutical Laboratories Co Ltd & Adia (Shanghai) Pharma Co Ltd, China, to initially promote, sell and commercialise products manufactured by Alembic Pharmaceuticals Limited and subsequently to set up a manufacturing facility in China.
  • The acquisition by Bharat Biotech of Chiron Behring Vaccines Private Limited (one of the largest manufacturers of rabies vaccines in the world located in Gujarat) from GSK.
  • The acquisition and consolidation of shareholding in Kinedex Healthcare Private Limited (involved in the marketing and selling of pharmaceutical products) by Gujarat based Eris Lifesciences Limited.
  • The acquisition by Lambda Therapeutic Research Ltd (a Gujarat based Contract Research Organisation) of Novum Pharmaceutical Research Services, a US-based company (via a private deal), to expand Lambda’s presence in the Northern American market.
  • The acquisition by Zydus Wellness Limited (part of the Zydus Cadila Group in Gujarat) of Heinz India Private Limited including its popular brands Complan and Glucon D along with two large manufacturing facilities located in Aligarh and Sitarganj via a combination of debt and equity from Kraft Heinz.
  • The acquisition by Gujarat based Torrent Pharma Limited of the branded businesses of Unichem Laboratories Limited for India and Nepal, including its Sikkim manufacturing facility, on a going-concern basis by way of a slump sale to expand domestic presence.
  • Zydus Cadila Group’s acquisition of US-based pharma company, Sentynyl Therapeutics Inc., specialising in the marketing of the pain-management segment, to expand its presence in the US.

Furthermore, as part of the Vibrant Gujarat Global Summit, 2019, 13 new companies have proposed an investment of more than Rs. 1 billion in the pharma sector while 68 companies have proposed an investment ranging from Rs. 100 million to Rs. 990 million in Gujarat.[7]


With the prospect of over 300 new pharmaceutical manufacturing facilities proposed to be set up in Gujarat[8] after the implementation of GST, the State Government’s introduction of investor-friendly policy initiatives, along with the availability of requisite infrastructure, strong and direct linkages with allied industries (including chemicals; machinery; and equipment manufacturers), relatively cheaper land acquisition cost, strategic location and availability of skilled manpower, Gujarat is well poised to make a compelling case for pharma investors to look to Gujarat for their investments and expansion, and re-emerge as the preferred destination for pharma manufacturing in India and globally.

However, the Government and policy makers need to do more to improve the ease of doing business in Gujarat, including improving the regulatory framework and process of obtaining various licences and approvals, making the process of land acquisition quicker and more transparent, setting up of world-class academic institutions, providing incentives to investors setting up or expanding in the State, and promoting investments in R&D and innovation in the sector. These steps will further aid the re-emergence of Gujarat as a preferred Pharma destination.




[4]Scheme for financial assistance by way of Capital Subsidy and Credit linked Interest Subsidy to Micro, Small and Medium Enterprises., Resolution No: SSI-102014-924840-CH dated January 19,2015