India's rising medical devices imports hurt small and medium units

China accounts for about one-fifth of FY22 numbers; 41% surge overall

India’s medical devices imports surged 41 per cent to touch Rs 63,200 crore in 2021-22, led by a 48 per cent year-on-year (YoY) jump in imports from China to Rs 13,538 crore, the commerce ministry data analysed by the Association of Indian Medical Device Industry (AiMeD) has showed.

Local industry players say this has led to several small and medium units to shut shop.

Rakesh Vaid of Usha Fabs, a garments exporter, had started making N95 masks in his Gurgaon factory during the peak of the Covid-19 pandemic. Vaid invested around Rs 5 crore to set up a manufacturing line, and he took care “to ensure production happened in a highly sanitised environment free from pathogens”. His unit closed down sometime back, and Vaid does not even have buyers for the plant and machinery. “There is no demand to buy machinery that makes N95 masks. Second, we cannot compete with China both in the domestic as well as exports market,” Vaid told Business Standard.

The local industry cannot compete with cheaper Chinese imports, he said, adding that there was no quality regulation for these consumable and disposable products in India. “It is not mandatory to have an ISI mark, so practically, anything can be sold in the market,” he said.

Units making masks, PPE kits, thermometers, and gloves mushroomed during the pandemic as demand went through the roof. Rajiv Nath, forum coordinator, AiMeD, an umbrella organisation of domestic medical device makers, said that from 1,200 units, the numbers had gone up to 1,800 during the peak of the pandemic. 

“Slowly, units started to shut down and imports from China kept on rising. Now, it is estimated that there are around 1,500 such units, and more are on the verge of closing down,” Nath, who is also the managing director of Hindustan Syringes and Medical Devices (HMD), said.

Capacity utilisations had dropped by the October-December quarter of 2021-22. From the peak utilisation levels of 100 per cent, by November 2021, around 33 per cent, or one-third of India’s medical devices making capacity, was lying idle. As such, India imports nearly 80 per cent of its medical devices requirements.

India imported medical devices worth Rs 4,418 crore from China in 2017-18, whereas its imports from the US was worth Rs 7,692 crore then. Slowly but steadily, China’s exports to India grew, jumping by 75 per cent in 2020-21, the pandemic-hit year, when it overtook the US. In 2021-22, Chinese imports grew on a high base of the previous year, touching Rs 13,538 crore.

Imports of higher value goods are rising too. In 2016-17, consumables accounted for 41 per cent of India’s medical devices imports. Now, electronics and equipment account for 64 per cent of all medical device imports. It has grown sharply from a 35 per cent share in 2016-17.

Nath says the NITI Aayog and the Department of Pharmaceuticals recognise that Indian manufacturers have a 12-15 per cent disability factor in manufacturing medical devices in India. “Unless that is neutralised, one cannot have a reduction in imports, as was in the case of consumer electronics, including mobile phones and even in the toy industry,” he said.

At present, the duty on Chinese imports ranges from zero to 25 per cent, but the bulk of the items are in the 7.5 per cent category.

The industry feels banning imports from China may not be easy. “The government cannot really ban imports as the local industry will also suffer as we are dependent on China for components. We have 80 per cent local content. If imports are stopped, then our production will come to a halt. Our dependence on China is low; even then we would need to import some components,” said an electronics medical device maker.

The reason Chinese imports rose is that several traders realised that it was cheaper to import finished products rather than critical raw material.

“We need melt-blown fabric for making masks. We don’t have self-sufficiency for this critical component. When there is a shortage and high demand in the market, the imports increase. When these importers realise that if they import the finished product (mask) from China, it is much cheaper than importing the raw material and making it here, then such imports typically increase,” a Tamil Nadu based mask-maker admitted.