India Remains Heavily Reliant On China For Key Drug Ingredients Despite Gains In Pharma

India has consolidated its position as one of the world's leading suppliers of generic medicines and vaccines, but a new report by NITI Aayog has highlighted a continuing vulnerability at the heart of the country's pharma sector — its overwhelming dependence on China for critical active pharmaceutical ingredients (APIs).

The latest edition of Trade Watch Quarterly, released by the government’s top think tank’s Vice-Chairman Ashok Kumar Lahiri, shows that while India has strengthened its capabilities in several specialised chemical intermediates and antibiotics, domestic drug manufacturers continue to rely heavily on imported pharmaceutical raw materials, particularly from China.

The report comes at a time when India is seeking to position itself as a global pharmaceutical manufacturing hub and reduce supply chain risks exposed during recent global disruptions.

According to the report, India imported APIs worth USD7.4 billion in 2025. The top five product categories alone accounted for USD6.2 billion, representing nearly 84% of total API imports. China remained the dominant supplier across all major categories, with its share ranging from 65% to as high as 86%.

“The top five supplying countries accounted for over four-fifths of imports across the leading API categories, with China serving as the principal source,” the report said.

Nitrogen heterocyclic compounds emerged as the largest import category, accounting for USD2.3 billion or nearly one-third of total API imports. Antibiotics followed closely with imports worth USD1.9 billion, contributing over a quarter of the country's API import basket. Amino compounds accounted for 11.5%, while oxygenated carboxylic acids and heterocyclic compounds containing oxygen contributed about 7% each.

“Together, the top two categories constituted nearly 58% of India’s API import basket, indicating concentration in a narrow range of pharmaceutical inputs,” the report said.

The extent of China's dominance becomes particularly evident in specific product segments. China supplied 76.4% of India's imports of nitrogen heterocyclic compounds and 86.1% of antibiotics. Even in other major API categories, Chinese suppliers maintained market shares exceeding 65%.

"This dominance reflects China’s established scale advantages, integrated chemical manufacturing ecosystem, and cost competitiveness in bulk pharmaceutical ingredients," NITI Aayog said.

The report noted that APIs sourced from China are estimated to be 35% to 40% cheaper than those produced domestically. This cost advantage has made it difficult for Indian manufacturers to compete, affecting the commercial viability of local API production and contributing to the closure of several domestic facilities over the years.

The findings underscore a persistent challenge for policymakers despite a series of government interventions, including production-linked incentive schemes and the development of bulk drug parks aimed at promoting domestic manufacturing of APIs, drug intermediates and key starting materials.

Global demand for pharmaceuticals and APIs is estimated at around USD 1.3 trillion in 2025, while India's exports of pharmaceutical and API products reached USD 35.8 billion. The country continues to play a crucial role in global healthcare supply chains through its large-scale production of affordable generic medicines, vaccines and essential therapeutics.

However, the report notes that India's export success remains concentrated largely in formulations and generic medicines. At the same time, the global pharmaceutical industry is increasingly moving towards high-value segments such as biologics, immunological products and advanced therapeutics, where India's presence remains relatively limited.

“Although the sector’s growing participation in global value chains is evident from rising domestic value addition,” the report said, “strengthening domestic capabilities in critical APIs, key starting materials, and biotechnology inputs remains essential to improving supply chain resilience and reducing import dependence.”

India's pharmaceutical industry contributes more than 1.7% to the country's gross domestic product and accounts for 7.2% of manufacturing gross value added, while supporting nearly 2.7 million livelihoods. The report identifies Telangana, Gujarat and Maharashtra as the principal engines of pharmaceutical growth, driven by strong manufacturing ecosystems, cluster-based development and globally competitive firms.

Releasing the report, Lahiri emphasised that future growth would depend not only on export expansion but also on building domestic capabilities.

“As global trade undergoes structural shifts, India’s ability to diversify its export base while strengthening domestic capabilities in key sectors will be critical to sustaining growth and enhancing resilience."

“The pharmaceutical sector illustrates both India’s strengths and future opportunities. While India has emerged as a leading supplier of generic medicines to the world, the next phase of growth will depend on moving towards innovation-driven segments, strengthening domestic production of critical inputs, and improving access to global markets.”