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 thepharmacy of the world.
India has one of the lowest manufacturing costs in the world.
India's $42 billion pharmaceutical sector is heavily dependent on China for key active pharmaceutical ingredients.
According to a government report, India imports most of its APIs from China as it is a cheaper option than manufacturing them domestically.
According to an estimate by the Trade Promotion Council, the percentage of dependence on China is 85%. India's dependence on China for certain life-saving antibiotics is around 90 percent, according to an independent study carried out in 2021. penicillin, cephalosporins and azithromycin are some drugs that are highly dependent on Chinese penicillin, according to a report.
That may be changing.
35 APIs will be produced at 32 plants across India in March under a government scheme launched two years ago. According to an estimate by ICRA, this will reduce dependence on China by up to 35% by the end of the decade.
When military tensions with China were at a high, the production linked incentive scheme was launched. The goal of the program is to increase domestic manufacturing by $520 billion by the year 2025.
The government has earmarked over $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. Sun Pharmaceutical Industries, Dr. Reddy's Laboratories, and Lupin are included.
In the first phase of the scheme, a total of 34 products were approved and distributed to 49 players.
The first phase will result in a reduction in imports from China.
The pharmaceutical sector is currently valued at $42 billion, but the government wants it to be $65 billion by 2024. The goal is to double that to between 120 billion and 130 billion by the year 2030.
India has emerged as a key player in the fight against the Pandemic.
According to the government, India has supplied to about 100 countries across Southeast Asia, South America, Europe, Africa and the Middle East as of May 9.
Under the Covax platform, India has been exporting vaccines.
The country had to temporarily stop exporting in April 2021. It resumed exports in October of that year.
According to the government, over 80% of the antiretroviral drugs used to combat AIDS are also supplied by Indian pharmaceutical firms.
India was not always dependent on China for its essential ingredients.
Reducing import dependence is important for reducing disruptions in India’s pharma supply chain.
In 1991, India imported only 1% of its intellectual property from China.
In the 1990s, China's drug park infrastructure became subsidized power and water, as well as effluent treatment plants. The cost of production in China fell so much that Indian companies left the market.
It will be a long time before local production becomes large enough to satisfy the demand of India's pharmaceutical producers, according to a senior research fellow at the Institute of South Asian Studies at the National University of Singapore.
India will need to import a lot from China. Reducing dependence on imports is important for India's pharma supply chain.
Mayur Sirdesai is the founder of Mumbai-based Somerset Indus Capital Partners, which operates a private equity fund in health care.
He said that they would probably do better with low volume, and that a lot of other chemical processes would have to be moved to India to cut costs.
Pavan Choudhary, chairman and secretary general of the Medical Technology Association of India, said that political considerations were behind the decision to reduce dependence on China.
The outsourcing of business operations to countries with low labor costs is now called blind offshoring.
India was reflecting on recent attempts by a number of countries to move away from China. India imports over a billion dollars of medical equipment from China, including magnetic resonance machines and other types of sophisticated scans, according to an influential voice in shaping policy in the pharmaceutical industry.
He said it would take longer to reduce dependence on China for medical equipment.
He said that there was more technological complexity in medical devices than in the pharmaceutical industry.
He said it would take a little longer to cut this dependence.
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