Empirical Economics Letters, 21 (Special Issue 3): (December 2022) ISSN 1681 8997 https://doi.org/10.5281/zenodo.7767445 Efficiency and Flow of Foreign Capital in Indian Pharmaceutical Sector Uma Chinchane Presidency University, Bengaluru Email: umacpes@gmail.com V Gajapathy Presidency University, Bengaluru Email: vgajapathy@presidencyuniversity.in Abstract: The Pharmaceutical industry, a life line for human beings, contributes to the community development. Indian Pharmaceutical industry is one of the most – high tech and capital intensive industries in the world. Increased infrastructure, Insurance coverages, launch of potential products, rise in prevalence and treatment of chronic diseases have contributed to this growth of Indian Pharmaceutical sector. The study is conducted to evaluate the influence of efficiency of the selected Pharmaceutical firms and assessing the relationship between the efficiency and flow of foreign funds. Efficiency of the firms was computed using the Data Envelopment Analysis and further the efficiency results were regressed with Foreign direct investment (FDI) to find the influence of efficiency in attracting FDI. This study leaves with results where the current day as well as lag efficiency has influenced the inflow of FDI. Keywords: Efficiency Analysis, Input – Output Analysis, Foreign Direct Investment JEL Classification Number: D24, D57, F2 1. Introduction Foreign Investments in India Started only after the decision of Globalization and New Economic Reforms was taken during the 1991. The Economic reforms brought in a lot of significant shifts in the economy. The country started opening its markets for foreign investors to invest in India, and this led to increase in the inflow of funds in India, resulting in growth of the Economy. Yet, the country had allowed only few selective sectors to receive foreign investments. Recent economic reforms like, make in India, invest in India etc., focused on attracting the foreign capital, providing opportunity to Manufacture in India, and collaborating with Indian Companies for doing business. The Government opened the markets for foreign investments in almost all the major sector except for atomic energy, real estate, lottery, chit funds, gambling and the other. The foreign direct investments in India till 1991, was merely US$2 billion, and rose to the record level of US$ 806 billion as on September 2021. The total flow of FDI in the year