India’s Pharma Sector
By Dhurjati Mukherjee
Way back in 2020, McKinsey Global Institute estimated that by 2020 India needs to create at least 90 million new non-farm jobs to accommodate fresh migrants into the labour force as also workers who move from agriculture to non-agricultural jobs. If the manufacturing sector is boosted up in a big way this would help revive the economy further but would make the job creation challenge substantially bigger. The traditional view that high-profile software industry can fill up the gap may not be fully correct. One may mention here the case of the pharma sector which has grown by leaps and bounds in the country.
India has emerged as the largest maker of antibiotics, anti-malarial, anti-TB, Paracetamol etc. There is a need for rapid expansion of the pharma sector, both for domestic production and exports. In this connection, there is a vital necessity for creating 50 large pharma parks with pre-approved environment clearances. Also, investment in creating global standards strain for developing active pharmaceutical ingredients (APIs) has to be considered. Poor quality strains have affected the sector, and the companies have to be quality-conscious. Added to all this, strengthening R&D at all levels is necessary to support firms and expand the patent portfolio.
India’s pharmaceutical industry has gained international recognition as the “Pharmacy of the World,” particularly for its imperative role in supplying vaccines, essential medicines, and medical supplies during the COVID-19 pandemic and beyond. During the pandemic, the country demonstrated its ability to be a consistent and reliable pharma supplier to the world even during times of crisis.
The sector has showcased its innovative capabilities and established itself as a crucial global pharmaceutical value chain member. With the help of various schemes and reforms, India’s pharmaceutical exports increased by 8.36 per cent from $2.13 billion in July 2023 to $2.31 billion in July 2024.
Collaboration between public and private research institutions and increased funding and government support are essential for driving further growth and innovation. Further, initiatives such as the Production Linked Incentive Schemes (PLI) and the Bulk Drug Park, in alignment with the “Make in India” campaign, foster an environment conducive to investment, innovation, and business development in the pharmaceutical sector. Through the PLI scheme, the government hopes to increase investment and production in the Indian pharmaceutical sector. The scheme is expected to generate incremental sales of Rs. 2,94,000 crore (US$ 37.09 billion) in six years, starting from 2022-23 to 2027-28.
Meanwhile, the government has implemented several initiatives to over $130 billion in 2024 and is projected to reach $300 billion by 2030. Growth in the Indian pharmaceutical industry is being driven by metropolitan cities, Tier-I cities, and rural markets, each accounting for approximately 30 per cent of the market share.
It is heartening to note that the domestic pharma industry may not be significantly impacted by potential US retaliatory tariffs as most exports to the US include low-cost, price inelastic generics that are in constant demand. Indian pharma exports to the US, valued nearly $10 billion, mainly include oral formulations and it is understood that any additional cost burden due to tariffs would likely be shared between consumers, healthcare providers and domestic companies. Thus, Indian pharmaceutical companies will be able to retain their dominant market share in the US in self-generic drugs, a government-backed trade body stated. The US accounts for nearly a third of India’s pharma export, mainly cheaper versions of popular drugs with sales jumping 16 per cent to about $9 billion last fiscal.
India has been a major supplier to the US, providing over 45 per cent of its generic medicines, driven by an ageing population and demand for cost-effective healthcare. As the Indian pharmaceutical industry has been playing a vital role in ensuring affordable and quality-assured medicines, not only in the US but in many western countries, the demand has been constantly increasing.
In most of these countries around 48 to 52 per cent of generic medicines are being purchased. Though reciprocal tariffs have been suggested, most experts believe that Indian generics are in great demand because of the cost factor and this is expected to continue in the coming days, irrespective of tariffs. Some analysts have stated that the effect will be more on innovators than generics as the latter are low in value. If tariffs are imposed, some of these will be passed on or absorbed by the seller.
India has the highest number of United States Food and Drug Administration (USFDA) compliant companies with plants outside of the USA. About 8 out of 20 global generic companies are from India and over 55 per cent of the exports from the country are to the highly regulated markets. In fact, the country is the biggest vaccine exporter, about 65-70 per cent of the World Health Organisation (WHO) vaccine requirements, being sourced from India.
India’s share of pharmaceuticals and drugs in the global market is a little over 5.71 per cent. Formulations and Biologics constituted the major portion of India’s exports with a share of 72.54 per cent followed by drug intermediates and bulk drugs. In FY25 (until June 2024), the exports of drugs and pharmaceuticals stood at US$ 7.20 billion, which may exceed $15 billion this fiscal.
Pharmaceutical exports of India extend to both developed and developing countries and with enhanced research and development efforts, the industry is poised to usher in a new era of drug manufacturing and testing. It ranks third in the world in production of drug and pharmaceuticals by volume and exports to approximately 200 countries and territories. The top five destinations for these exports are the USA, Belgium, South Africa, the UK, and Brazil. With a 10-12 per cent growth rate, India’s pharmaceutical sector is expected to reach $100 billion by 2025, fuelled by its robust domestic manufacturing base. India majorly exports drug formulations and these products contribute to about 75 per cent of the total pharmaceutical exports out of India.
Also, India’s biotechnology sector increased 13-fold over the past decade, from $10 billion in 2014 to over $130 billion in 2024. It is projected to reach $300 billion by 2030. Growth in the Indian pharmaceutical industry is being driven by metropolitan cities, Tier I cities, and rural markets, each accounting for approximately 30 per cent of the market share.
It goes without saying that India needs to focus on the pharma sector and ensure its unstinted growth in the coming years. Though definite initiatives have been taken by the government, more help, if necessary, may be extended while diversifying export destinations in the coming years. — INFA