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Behind India’s global export success in generic medicines lies an entrenched reliance on China for critical bulk drugs and intermediates
This is the 187th in the ‘China Chronicles’ series.
India’s identity as the pharmacy of the developing world is well deserved. India has one of the largest pharmaceutical industries in the world, and according to the latest official sources, it is the third largest producer of medicines in terms of volume, and 14th in terms of value. Process patents, cheap skilled labour, and public policy combined to make the country produce almost one-fifth of the world’s generic medicines by volume, serving most of the low- and lower-middle-income countries. Behind these is a parallel development of a long shift over decades in the chemical feedstock that makes this export machine possible.
The following analysis draws on a 24-year series of UN Comtrade data across relevant Harmonised System (HS) categories, compiled from the Trade Map platform, tracking India’s trade flows since the start of the 21st century. It follows two key HS chapters: HS 29, covering organic chemicals, which in India’s case offers a reasonable proxy for active pharmaceutical ingredients (APIs) and intermediate drugs; and HS 30, covering finished pharmaceutical products.
While India’s capacity to produce APIs and intermediate drugs has increased tremendously, data indicate that the enhanced production has predominantly been exported rather than used to wean the Indian pharmaceutical industry away from dependence on China for APIs (often called bulk drugs) and intermediate drugs. Indian industry seems to still use the cost advantage that China offers, while ramping up production and exports of higher-value organic chemicals to other countries, including China.
By analysing trends in these two series together, this article traces how India’s growing export presence in finished medicines has evolved alongside, and been shaped by, its import dependence on China for APIs and intermediate drugs. While India’s capacity to produce APIs and intermediate drugs has increased tremendously, data indicate that the enhanced production has predominantly been exported rather than used to wean the Indian pharmaceutical industry away from dependence on China for APIs (often called bulk drugs) and intermediate drugs. Indian industry seems to still use the cost advantage that China offers, while ramping up production and exports of higher-value organic chemicals to other countries, including China.
Source: Data from Trade Map, compiled and analysed by the author
The pattern that emerges from 2001 to 2024 is one of twin take-offs. India’s finished pharmaceutical product exports to the world (Graph 1) rose from a little over US$1.0 billion in 2001 to about US$23.3 billion in 2024, in current prices, a significant increase. Over the same period, API and intermediate drug imports into India climbed from roughly US$1.8 billion to almost US$26.0 billion, a near fifteen-fold increase (Graph 2). Both HS 29 imports and HS 30 exports move together very closely, and while numbers do not prove causality, they are hard to ignore.
Source: Data from Trade Map, compiled and analysed by the author
The correlation in recent years is part of a longer structural story that has been reconstructed in detail by various experts. Sudip Chaudhuri observes that in the first decades post-Independence, India tried to build API capacity through public sector firms such as Hindustan Antibiotics and Indian Drugs and Pharmaceuticals Ltd (IDPL). The Hathi Committee in 1975 and the Drug Policy 1978 treated APIs as a strategic, low-margin backbone for a competitive formulations industry, and argued for a strong public sector presence in bulk drugs. That vision was never fully realised, leaving the field open for large-scale import dependence.
By 1990–91, India imported less than US$1 million worth of bulk drugs from China, and China accounted for under 1 percent of bulk-drug imports. By the mid-1990s, its share had jumped above 20 percent, and Chaudhuri finds that China climbed to roughly two-thirds of India’s API and intermediate drug imports by 2020. The Department of Pharmaceuticals’ annual reports have acknowledged India’s heavy dependence on China for critical bulk drugs, with around 70 percent of such imports sourced from there.
Graph 3 tracks this development, following the broader category of organic chemicals, to show how China’s significance grew as the primary provider of India’s API supplies, starting from 2001, the earliest year for which comparable data are available. By 2010, China’s contribution to India’s imports of organic chemicals doubled to one-third, and by 2020, it was in the mid-forties. It eased only slightly by 2024, remaining above 40 percent. In absolute terms, imports from China grew from about US$0.29 billion in 2001 to more than US$11.1 billion in 2024, a near forty-fold increase, turning China from one of several important suppliers into a backbone of India’s organic chemical imports, and by implication, India’s pharmaceutical manufacturing.
Source: Data from Trade Map, compiled and analysed by the author. Selected high-value partners.
On the export of pharmaceutical products, India’s impressive growth (Graph 1) was to a considerable extent attributable to the expanding exports to a single country, the United States (US). In 2001, the US took just about 12 percent of India’s exports. By 2024, that share was roughly 38 percent (Graph 4). Russia, Brazil and a cluster of middle-income economies featured strongly in the early 2000s, while over time the top export-destination list consolidated around the United States and a mix of developed and large emerging markets.
Source: Data from Trade Map, compiled and analysed by the author. Selected high-value partners.
Africa is an important part of this picture. If we look at five major African importers of Indian pharmaceutical products—South Africa, Nigeria, Kenya, Ghana, and Tanzania—India’s exports to these five countries grew from about US$120 million in 2001 to nearly US$1.93 billion in 2024. However, their combined share in India’s exports edges down from just over 11 percent to a little above 8 percent, because exports to richer markets, especially the United States, grow even faster. The result is a quietly significant African pillar in India’s formulation exports, coexisting with a dominant transatlantic customer.
Imports of organic chemicals from China (Graph 3) show that diplomatic or even military tensions have not impacted trade volumes. There is a dip in 2020, when imports into India fell from around US$20.5 billion in 2019 to about US$18.2 billion, and imports from China softened slightly as well. Yet imports rebounded in 2021 to new highs, and there is no evidence of a structural decoupling from Chinese inputs following border clashes.
The story becomes more complex once we bring policy and strategy into the frame. On the Indian side, there has been acknowledgement already—something that was reinforced by the pandemic crisis—that an export success built on concentrated API imports carries obvious drug security risks. The government’s response, which included Production-Linked Incentive (PLI) schemes for critical Key Starting Materials (KSMs), intermediates, APIs, and support for three bulk-drug parks, was an attempt to rebuild some upstream capacity without dismantling the export engine. However, a synthesis of official data suggested that from 2019–20 to 2023–24, bulk-drug and intermediate imports rose from about INR24,172 crore to INR37,722 crore, while imports from China increased from INR16,443 crore to over INR27,000 crore, pushing China’s value share above 70 percent. This confirms that policy is working against a tide of long-run cost advantages and scale economies in China, and perhaps the export ambitions of Indian manufacturers of higher value organic chemicals.
Source: Data from Trade Map, compiled and analysed by the author.
At the same time, importing APIs and intermediates from China is not a weakness alone. It has also allowed Indian firms to focus on process innovation, regulatory compliance, and market access in formulations. As one Financial Times analysis of US generic markets noted, many lower-cost finished drugs used in rich countries are manufactured in India, using APIs largely sourced from China. In parallel, as Graph 5 shows, India’s exports of organic chemicals, including APIs and intermediate drugs, grew from about US$1.6 billion to around US$21.0 billion between 2001 and 2024, while Indian pharmaceutical companies continued to rely on Chinese inputs.
Source: Data from Trade Map, compiled and analysed by the author
This is a case of complex interdependence: a triangular chain that ties imports of cheaper raw materials from China, Indian pharmaceutical manufacturing of both finished drugs and APIs, as well as rich-country health systems. At the same time, there is a looming risk of India being over-dependent on Chinese imports in specific categories like antibiotics (Graph 6), where 87 percent of all imports to India are from China. Despite the focus on PLI schemes and a considerable expansion in domestic manufacturing of organic chemicals in the country, analysis of trade data shows that India’s focus, at least in the short run, is to delay any substantial move away from China as the dominant supplier in sectors where Beijing has a cost-advantage, and expand its own exports to a broad set of countries from the North and the South. Interestingly, China has been a top-5 export destination for Indian organic chemicals for most part of the last two decades (Graph 7).
Despite the focus on PLI schemes and a considerable expansion in domestic manufacturing of organic chemicals in the country, analysis of trade data shows that India’s focus, at least in the short run, is to delay any substantial move away from China as the dominant supplier in sectors where Beijing has a cost-advantage, and expand its own exports to a broad set of countries from the North and the South.
Source: Data from Trade Map, compiled and analysed by the author. Selected high-value partners.
While there seems to be no immediate danger of generic medicines being included within the ambit of US tariffs, the risk of future restrictions by the US administration remains. As a pharmaceutical manufacturer highly dependent on single markets—on China for its raw materials, and on the US for finished products—India needs to find ways of strengthening domestic manufacturing in key sectors as well as diversifying both export and import markets.
Oommen C. Kurian is Senior Fellow and Head of the Health Initiative at the Observer Research Foundation.
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Oommen C. Kurian is Senior Fellow and Head of the Health Initiative at the Inclusive Growth and SDGs Programme, Observer Research Foundation. Trained in economics and ...
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