The Dragon's Dose

How India's Pharmacy Leaned on China's Ingredients

One big thing: India, the world's medicine chest, churning out affordable drugs for millions globally, has a critical secret in its supply chain: a deep and growing reliance on China for the fundamental building blocks of those medicines – Active Pharmaceutical Ingredients (APIs).

Why it matters: This isn't just about trade figures. This dependency, decades in the making, means that a hiccup in China – be it a factory shutdown, a policy tweak, or a geopolitical storm – could trigger a fever pitch in India's pharmaceutical powerhouses, potentially squeezing global medicine supplies and impacting health security far beyond its borders.

The backstory: A slow brew, then a rapid infusion

Once upon a time, in the early 1990s, India's pharmaceutical kitchens were largely self-sufficient in their core ingredients. Imports of bulk drugs from China were almost negligible, less than 1% of the total. 1 But the winds of global trade were shifting.

• The turning point: As India opened its economy and its pharmaceutical industry began its ascent as a global generics leader, the allure of cost-effective raw materials became irresistible. Chinese API manufacturers, backed by scale, state support, and lower operational costs, emerged as formidable suppliers. 3

• The floodgates open: By the mid-1990s, the trickle of API imports from China had become a steady stream. By fiscal year 2013-14, China was already supplying nearly two-thirds (63.5%) of India's imported bulk drugs and intermediates by value. 5 The "economic considerations," as official documents repeatedly termed it, were just too compelling to ignore.

By the numbers: A five-year close-up of a deepening bond

The most recent five-year stretch, from fiscal year 2019-20 to 2023-24, tells a vivid story of this intensifying reliance, based on data from India's Directorate General of Commercial Intelligence and Statistics (DGCI&S) and Department of Pharmaceuticals (DoP).

• India's growing appetite: The total value of bulk drugs and intermediates India imported from all countries swelled from ₹24,172 crore (around $3.36 billion) in FY20 to ₹37,722 crore (around $4.58 billion) in FY24. 2

• China's bigger slice: During this same window, imports specifically from China didn't just grow; they galloped. The value of APIs and intermediates sourced from China shot up from ₹16,443 crore (approx. $2.29 billion) in FY20 to ₹27,055 crore (approx. $3.29 billion) in FY24. That's a staggering 64.5% leap in just five years. 2

• Dominance by value and volume:

  • China's share of India's total API import value climbed from an already high 68.02% in FY20 to a commanding 71.72% in FY24. 2

  • The story by quantity is even more dramatic. In FY20, India imported 220,875 metric tons of bulk drugs from China, making up 60.61% of its total API import volume. Fast forward to FY24, and that figure had surged to 344,053 metric tons, representing a massive 76% of all imported API volume. 2This widening gap between volume and value share suggests India is increasingly buying larger quantities of, perhaps, more competitively priced, high-volume APIs from its northern neighbor.

The human connection: What this means for your medicine cabinet

This isn't an abstract economic tale. This dependency has tangible, real-world implications.

• The everyday pill: Think about common medicines. For some widely used drugs, India's reliance on Chinese APIs is almost absolute. Historical analyses have shown that for critical APIs like Paracetamol, the building block for common pain and fever relievers, China's share has been upwards of 90%. For essential antibiotics like Penicillin G or Streptomycin, the dependence has, at times, been near 100%. 1 A disruption in the supply of these specific ingredients from China could, quite literally, mean a shortage of the medicines we often take for granted.

• The price of health: The primary reason Indian pharmaceutical companies turned to China was cost. This helped keep the prices of generic medicines low, benefiting millions in India and across the developing world. However, this deep reliance also means that any increase in API prices from China, due to their market dominance or other factors, can directly translate to higher medicine costs for consumers.

• National drug security: A strategic vulnerability: For a nation that prides itself on its pharmaceutical prowess, relying so heavily on a single country for the very soul of its medicines is a significant strategic concern. Government officials and policy documents have long flagged this as an issue of "drug security." 6 The COVID-19 pandemic served as a global wake-up call, exposing the fragility of concentrated supply chains for essential medical goods.

India's counter-narrative: The quest for 'Atmanirbhar' (self-reliance)

New Delhi hasn't been blind to these growing dependencies. The call for 'Atmanirbhar Bharat' – a self-reliant India – has found a particularly strong echo in the pharmaceutical sector.

• Incentivizing home-grown ingredients: The government launched Production Linked Incentive (PLI) schemes specifically targeting the domestic manufacturing of critical Key Starting Materials (KSMs), drug intermediates, and APIs. The idea is to offer financial carrots to Indian companies to produce these essential ingredients domestically, thereby reducing the import bill and enhancing supply chain resilience. 2 As of early 2024, dozens of projects had been greenlit under these schemes.

• A slow turn of a large ship: While these initiatives are a step in the right direction, the import data, even for FY24, shows that the ship of dependency is large and turns slowly. The sheer scale of China's API manufacturing, its established ecosystem, and its cost advantages built over decades present a formidable challenge to India's self-reliance ambitions. 4 The recent tempering in the growth rate of API imports from China (down to 5.89% in value in FY24 from nearly 20% in FY22 2) might be an early, hopeful sign, but the overall reliance remains undeniably high.

The next chapter:

The story of India's pharmaceutical raw material sourcing is still being written. China remains, for now, the indispensable supplier of the vital ingredients that power India's drug-making engine. The "economic considerations" that led to this reality are potent and persistent.

What to watch:

• The real-world impact of PLI schemes: Will these incentives genuinely shift a significant portion of API manufacturing back to India in the coming years? The import data for FY25 and beyond will be telling.

• Global API price dynamics: Any major fluctuations in API prices from China will directly impact Indian manufacturers and potentially consumers.

• Geopolitical undercurrents: The broader India-China relationship will always be a background factor influencing this critical trade dependency.

• Diversification efforts: Will Indian companies actively seek and develop alternative sourcing destinations for APIs beyond China, even if it means slightly higher costs?

India's journey to becoming a truly self-reliant pharmaceutical powerhouse involves not just manufacturing finished medicines, but also mastering the complex chemistry of producing its own ingredients. Until then, the "Made in India" label on many medicines will continue to have a quiet, but crucial, "ingredients sourced from China" footnote.