Syllabus: Effect of policies and politics of developed and developing countries on India’s interests
Context and Trigger
- In September 2025, U.S. announced 100% tariff on branded, patented pharma imports from October 1.
- Tariff aimed at boosting U.S. domestic manufacturing, disrupting global pharmaceutical supply chains.
- India’s pharma industry faced uncertainty despite reputation as the “pharmacy of the world”.
India–U.S. Pharma Linkages
- India’s pharma exports to the U.S. reached nearly $9 billion in FY25, growing 14.29% year-on-year.
- India’s pharmaceutical sector valued at $50 billion, contributing about 1.72% of GDP.
- Generics dominate exports, offering resilience against tariffs targeting branded drugs.
Global Pharmaceutical Trade Landscape
- Global pharma exports exceeded $850 billion in 2024, driven by ageing populations and chronic diseases.
- Germany, Switzerland, and the U.S. were leading exporters during 2023–24.
- The U.S. imported $212.67 billion worth of pharmaceuticals in 2024.
- EU medicinal exports reached €313.4 billion in 2024, reflecting resilience amid geopolitical tensions.
- India ranked third globally by export volume, exporting $30.47 billion in FY25.
Generics Strength and Supply Chain Risks
- Generics constitute 70% of exports to the U.S. and Europe.
- India supplies 40% of U.S. generics, saving U.S. payers $219 billion in 2022.
- India imports $5 billion APIs annually, with China holding a 72% share.
- API dependence exposes India to inflationary pressures and supply chain vulnerabilities.
Economic Impact and Market Risks
- Sector growth of 10%–12% CAGR adds 0.5%–1% annually to GDP growth.
- Escalation of tariffs to generics could reduce exports by 10%–15%.
- GDP growth could decline by 0.2%–0.3% in FY26.
- Firms with over 30% U.S. exposure face rerouting costs and regulatory hurdles.
Domestic Policy Response
- GST rationalisation (September 22, 2025) reduced drug rates from 12% to 5%.
- Thirty-six essential medicines placed under nil GST, saving consumers $1.2 billion annually.
- Medical device GST reduced from 18% to 5%, easing $5 billion imports.
Eastern Partnerships and Diversification
- India signed six MoUs with Trinidad and Tobago in July 2025, including pharma cooperation.
- Singapore API pact and Serum Institute dengue collaboration expanded emerging market presence.
- Eastern alliances could offset 20%–25% of U.S. tariff risks.
Growth Outlook and Social Impact
- India’s pharma market targeted to reach $130 billion by 2030.
- PMBJP opened 16,912 Jan Aushadhi Kendras by June 2025, improving medicine affordability.
- Generics, 80% cheaper, support 20 million treatments annually, reinforcing domestic resilience.
