India wants to be ‘pharmacy of the world’

India has embarked on an ambitious plan to cut dependence on China for key raw materials as it seeks to become self-sufficient in its quest to be the “pharmacy of the world”.

Already the world’s third-largest manufacturer of medicines by volume, India has one of the lowest manufacturing costs globally.

About one in three pills consumed in the US and one in four in the UK are made in India.

However, India’s US$42 billion pharmaceutical sector is heavily dependent on China for key active pharmaceutical ingredients or API — chemicals that are responsible for the therapeutic effect of drugs.

According to a government report, India imports about 68 percent of its APIs from China as it’s a cheaper option than manufacturing them domestically.

However, an estimate by the Trade Promotion Council, a government supported organisation, puts the figure of API dependence on China at about 85 percent.

Another independent study carried out in 2021 points out that while India’s API imports from China are at nearly 70 percent, its dependence on China for “certain life-saving antibiotics” is around 90 percent.

Some drugs that are highly dependent on Chinese APIs include penicillin, cephalosporins and azithromycin, the report said.

That may be starting to change.

Under a government scheme launched two years ago, 35 APIs began to be produced at 32 plants across India in March.

This is expected to reduce dependence on China by up to 35 percent before the end of the decade, according to an estimate by ratings firm ICRA Limited, the Indian affiliate of Moody’s. The production-linked incentive scheme was first launched in mid-2020 when military tensions with China were at a high.

The PLI programme aims to incentivise companies across all sectors to boost domestic manufacturing by US$520 billion by 2025.

For the pharma sector, the government has earmarked over US$2 billion worth of incentives for both private Indian companies and foreign players to start producing 53 APIs that India relies heavily on China for.

Some of India’s biggest pharmaceutical companies are involved in the scheme.

They include Sun Pharmaceutical Industries, Aurobindo Pharma, Dr Reddy’s Laboratories, Lupin and Cipla.

A total of 34 products were approved in the first phase of the scheme — and distributed amongst 49 players, according to assistant vice president at ICRA Limited, Deepak Jotwani.

“The first phase will result in reduction in imports from China by about 25-35 percent by 2029,” Jotwani estimated. − CNBC.