India is already the third largest drug producer in the world and has the lowest manufacturing cost in the world. One out of every three pills consumed in the United States is produced in India, and one out of every four pills consumed in the UK is produced in India.
However, India's $42 billion pharmaceutical industry heavily relies on China's raw material pharmaceutical ingredients (APIs), which are chemicals that confer therapeutic effects on drugs.
According to a government report, India imports approximately 68% of its APIs from China. This is because they are cheaper than domestically produced ones.
However, according to estimates from the Foreign Trade Organization (a government affiliated organization), the dependence on China's raw materials is approximately 85%. Another independent study conducted in 2021 pointed out that nearly 70% of India's raw materials are imported from China, while the dependence of "certain life-saving antibiotics" on China is about 90%. The survey shows that the drugs with the highest dependence on Chinese raw materials include penicillin, cephalosporins, and azithromycin.
This situation may be starting to change.
According to a government plan launched two years ago, 35 APIs were produced in 32 factories in India in March. According to estimates by Moody's Indian rating agency ICRA Limited, this is expected to reduce the country's dependence on China by 35% by around 2030.
India's Production Linked Incentive Plan (PLI) was first launched in mid-2020 during a tense military relationship with China, aiming to incentivize companies in all industries and increase domestic manufacturing by $520 billion by 2025.
For the pharmaceutical industry, the plan provides over $2 billion in incentives to Indian and foreign private companies to start producing 53 bulk drugs, with India heavily reliant on China.
Some of India's largest pharmaceutical companies are participating in the plan. They include Sun Pharmaceutical Industry, Aurobindo Pharmaceutical, and Dr Reddy Lab, Lupin, and Cipla.
According to Deepak Jotwani, Vice President of ICRA Limited, in the first phase of the plan, a total of 34 products were approved and allocated to 49 participants.
Jotwani estimates that "by 2029, the first phase will reduce imports from China by approximately 25-35%.
The government hopes to increase the current pharmaceutical industry of approximately $42 billion to $65 billion by 2024. Its goal is to double this number to $120- $130 billion by 2030.
