India’s drugmakers have a global repute, and they supply nearly half of all generic medicines sold at retail pharmacy outlets in the US. As soon as a new drug lost patent protection, they hit the market with acceptable-quality bioequivalent generic alternatives. However, this dexterity is not yet matched in the “bulk drugs” segment. A third of active pharmaceutical ingredients that go into formulations manufactured in the country are still being imported.
In 2024-25, India imported 200 categories of APIs, bulk drugs, and drug intermediates worth $4.35 billion. China accounted for nearly 74% of these imports. The continued reliance on the neighbour is for a clutch of APIs such as nitrogen heterocyclic compounds, amino mixtures, oxygenated carboxylic acids, heterocyclic-oxygen combinations, and certain antibiotics.
Despite the production-linked incentive (PLI) scheme for bulk drugs launched in March 2020 catalysing investments totalling over Rs 4,800 crore, China still supplies 66-86% of the API categories that India imports. To be sure, China’s share in overall API imports by India has risen from 68% in 2020-21.
It is a curious situation: according to government data, India is already a net exporter of APIs with outward shipments touching Rs 41,500 crore in 2025-26, against imports worth Rs 39,215 crore (including supplies of Rs 29,000 crore from China). Domestic API capacity caters to nearly 70% of the demand. Yet, reliance on China persists and even continues to rise at least in nominal terms. The rapid growth of the country’s export-intensive drug industry could be one reason for this, but the stickiness of product-specific dependence on China needs to be fixed, experts feel.
Cost Divide
Chinese API producers have a substantial cost advantage in comparison to Indian firms. Estimates show APIs sourced from China are typically 35-40% cheaper than those produced domestically, aided by large-scale production facilities. Favourable climatic conditions that lower energy requirements during certain stages of production, government-support through subsidised utilities and industrial infrastructure also make Chinese products cheaper. Over the years, the pricing edge has eroded the commercial viability of several domestic API units, discouraging investments in fermentation-based manufacturing.
“Although China’s share in India’s API imports has moderated marginally since 2010, dependence remains significant… It would take time to scale up domestic capacity,” stated a NITI Aayog report.
Bhavin Mehta, vice chairman of Pharmexcil, said that the current sourcing pattern reflects decades of evolution in global pharma supply chains. “China developed significant scale, manufacturing efficiencies and upstream chemical capabilities, making it a competitive sourcing destination for specific products,” he said.
Explaining why India continues to import products such as oxygenated carboxylic acids and antibiotic inputs from China despite being a major exporter of these APIs, Mehta said that the supply chain for many APIs involves multiple stages, intermediates and raw materials that are sourced globally. “The objective is not to replace imports overnight, but to gradually build a more balanced and resilient ecosystem while maintaining the competitiveness of Indian pharma exports. Recent policy measures and industry investments are already encouraging greater domestic production and supply-chain diversification,” he said.
Beyond Incentives
In an interaction with FE recently, Department of Pharmaceuticals (DoP) Secretary Manoj Joshi had said the government’s strategy was not confined to incentives alone under the PLI scheme but also to strengthen the domestic manufacturing ecosystem. “The PLI scheme has made a beginning, but much more needs to be done. Whether assistance is provided through PLI or another mechanism, government support will continue because this is a priority area for us,” he had stated.
Analysts too believe that the transition will require more time and effort from the industry and the government. Krishnanath Munde, associate director at India Ratings & Research, said the bulk drugs PLI scheme is aimed at reducing dependence on China rather than achieving complete self-sufficiency.
“Indian pharma still struggles with weak infrastructure, lack of scale, and capability gaps and hence, import dependency on Chinese APIs is likely to persist due to their cost competitiveness,” he said, adding that companies are increasingly mitigating supply risks through 4-6 months of inventory, multiple sourcing arrangements, cost optimisation and selective price pass-throughs.
Within the overall API import basket, the top five supplying countries account for four-fifths of supplies. Apart from China, other key suppliers are Italy, Germany, the US, Austria and Singapore. According to Niti Aayog, India’s API imports were even higher at $7.4 billion in 2025, with the top five product categories accounting for $6.2 billion.
Through 38 commissioned projects covering 28 products under the PLI scheme, 56,8000-tonne tmanufacturing capacity was set up by the end of 2025.