Indian Import Duty Cuts Not Big Win for Drug Multinationals

Leading drug companies operating in India, including multinational firms, have welcomed a reduction in import duties from 20% to 15% in the country's latest budget. However, many have been left wondering if other budget changes will offset any significant improvement in operating conditions for the industry.

The cuts amount to a reduction in India's corporate tax rate to roughly 33%, although other measures, including changes to the deprecation rate, will offset much of this improvement. Local companies claim that as the industry is not currently capital-intensive, measures reducing import duties on nine items of drug industry equipment to 5% will affect relatively few firms, or at least those who do not already have such machinery.

Further, local companies have noted that budget tax breaks on R&D will only last for a further two years, and will be unlikely to provide anything other than a short-term boost to discovery work, in which timeframes are clearly longer than many more traditional business activities in the Indian drug sector.