India's Growing Dependence on Chinese Bulk Drug Imports Persists Despite Policy Efforts

This growing dependency comes amid efforts by the Indian government and the pharmaceutical industry to diversify sources and reduce reliance on China.

India's reliance on China for the import of bulk drugs, essential for pharmaceutical formulation, has been on the rise despite numerous policy initiatives aimed at reducing this dependency.

Government data reveals a substantial increase in both the value and volume of pharmaceutical imports from China over the past five years.

In the financial year 2024 (FY24), India imported 72% of its bulk drugs and intermediates from China, a notable increase from 66% in FY21.

This growing dependency comes amid efforts by the Indian government and the pharmaceutical industry to diversify sources and reduce reliance on China.

Economic Impact & Supply Chain Vulnerabilities

India's pharmaceutical imports reached nearly $8 billion in FY23, exhibiting a compounded annual growth rate (CAGR) of 8% from FY17 to FY23.

Bulk drugs account for nearly 60% of these imports. A report by Rubix Data Sciences highlights that while India's imports of other pharmaceutical products are diversified across various countries, bulk drug imports remain heavily reliant on China.

This dependency exposes the Indian pharmaceutical industry to significant risks. A prominent Indian pharmaceutical company, which is a major supplier of generic drugs to the United States, sources over 55% of its raw materials from China.

This heavy reliance on Chinese imports leaves the industry vulnerable to supply chain disruptions and price volatility.

Government Initiatives to Foster Self-Reliance

In 2020, the Department of Pharmaceuticals (DoP) launched the Performance-Linked Incentive (PLI) scheme to reduce dependence and promote self-reliance.

The scheme aims to encourage domestic manufacturing of critical key starting materials (KSMs), drug intermediates, and APIs.

The PLI scheme plans to set up greenfield plants in four segments: two based on fermentation and two on chemical synthesis. It also envisages the manufacturing of 41 bulk drugs with a total investment of INR 6,940 Cr from FY21 to FY30.

As of April 2024, 30 projects have been commissioned for bulk drugs with an actual investment of INR 3,715 Cr.

Despite these efforts, experts argue that cost competitiveness and availability of Chinese bulk drugs continue to make imports an attractive option for Indian pharmaceutical companies.

Moving forward, increasing domestic production capacity and enhancing the economic viability of local manufacturing will be critical to reducing India's dependence on Chinese imports.

To achieve true self-reliance in the pharmaceutical sector, India must not only ramp up domestic production but also address the economic factors that currently make imports more attractive.

Continued investment in domestic manufacturing infrastructure, coupled with supportive policies, will be crucial for India to mitigate the risks associated with heavy reliance on a single country for its pharmaceutical supply chain.

As India strives to strengthen its pharmaceutical industry, balancing cost-efficiency with strategic autonomy will be key to building a more resilient and self-sufficient sector.