India, globally recognized as the "Pharmacy of the World" for its vast production of affordable generic medicines, is embarking on a significant strategic overhaul to fortify its pharmaceutical supply chain and reduce critical import dependencies. The nation’s Department of Pharmaceuticals is revamping its Production-Linked Incentive (PLI) scheme for bulk drugs, shifting towards a more comprehensive "nurturing approach" that extends beyond mere production subsidies to encompass robust support for research and development (R&D), infrastructure enhancement, and targeted financing. This evolution is crucial for a pharmaceutical industry that, despite its impressive $60 billion valuation, remains vulnerable due to its reliance on external sources for key starting materials (KSMs), drug intermediates, and active pharmaceutical ingredients (APIs).
The existing import reliance presents a multifaceted challenge, exposing India’s vital healthcare sector to geopolitical risks, supply chain disruptions, and price volatility. The strategic imperative to bolster domestic manufacturing was starkly highlighted during the COVID-19 pandemic, when global lockdowns and trade restrictions severely impacted the availability of crucial inputs, particularly from China, the world’s dominant API producer. Recognizing this vulnerability, India launched its initial PLI scheme for bulk drugs in 2021, aiming to incentivize local production of 41 critical KSMs, drug intermediates, and APIs. This initial intervention yielded tangible successes, facilitating the domestic production of vital compounds like penicillin G, potassium clavulanate, para-aminophenol (used in paracetamol), and 6-aminopenicillanic acid (a penicillin precursor) after a considerable hiatus. By March 2026, the scheme had catalyzed the creation of domestic manufacturing capacity for 29 KSMs and APIs, generating cumulative sales of ₹3,270 crore, including ₹521 crore in exports, thereby avoiding imports worth ₹2,749 crore.
However, the scale of India’s import dependence necessitates a broader and more sophisticated policy framework. According to Manoj Joshi, the Department of Pharmaceuticals secretary, while the first PLI scheme successfully kickstarted production in specific areas, there is an urgent need to further stimulate the domestic manufacturing of a wider array of bulk drugs, APIs, KSMs, and intermediates. India’s bulk drugs and advanced intermediates market is estimated at a substantial $20 billion by the Journal of Pharmaceutical Sciences, underscoring the vast potential for import substitution and export growth. In the fiscal year 2024-25, India imported approximately 200 categories of APIs, bulk drugs, and drug intermediates valued at about $4.35 billion. A staggering 73.7% of these imports originated from China, with the European Union serving as the second-largest supplier, accounting for $593.13 million, or 13.64% of the total, as stated by Minister of State for Chemicals and Fertilizers Anupriya Patel in a parliamentary reply. This heavy concentration on a few external suppliers, particularly China, underscores the urgency of diversification and indigenization.
The revamped PLI scheme, as articulated by Secretary Joshi, signifies a strategic pivot from purely production-centric incentives to an ecosystem-based "nurturing approach." This new framework is designed to provide comprehensive support to pharmaceutical companies, including grants for technology development, robust infrastructure support, and access to crucial financing. The intent is to foster an environment where Indian firms can collaborate with national public and private laboratories to refine complex manufacturing processes, such as fermentation or enzymatic methods. This collaborative effort is critical for developing cost-effective and efficient production techniques that can effectively compete with the economies of scale and established efficiencies of Chinese manufacturers. The policy modifications also aim to bridge existing gaps in manufacturing and innovation platforms that previously compelled drug developers to rely on cheaper overseas imports. Furthermore, the Department of Pharmaceuticals is actively engaging with state administrations to explore additional support mechanisms, such as lowering utility expenses for manufacturing facilities and augmenting local R&D initiatives, thereby creating a more attractive operational environment for domestic players.
The list of critical bulk drugs for which India remains heavily reliant on imports is extensive and includes vital medications like penicillin G and amoxicillin for broad-spectrum antibiotics, azithromycin for respiratory and skin infections, and rifampicin for tuberculosis treatment. The country also depends significantly on overseas suppliers for atorvastatin, a widely used API in cholesterol-lowering medications, and metformin, the primary raw material for common type-2 diabetes medication. Achieving self-reliance in these categories is not merely an economic goal but a national security imperative, ensuring uninterrupted access to essential medicines for its vast population.
Industry leaders have largely welcomed the proposed revamp, viewing it as a timely and necessary step towards strengthening India’s pharmaceutical manufacturing ecosystem. Gopal Agrawal, Chief Executive Officer of Anupam Rasayan India Ltd, a custom manufacturer of specialty chemicals, emphasized that a more innovation-driven framework, underpinned by stronger R&D and incubation infrastructure, is essential for accelerating the domestic development of complex APIs and intermediates. Such a shift is poised to not only reduce import dependence but also enhance India’s global competitiveness, positioning the country as a preferred destination for advanced pharmaceutical manufacturing and innovation. Viranchi Shah, National President of the Indian Drugs Manufacturers Association (IDMA), representing 1,200 member companies, echoed this sentiment, lauding the original PLI scheme as a landmark initiative and affirming its role as a key pillar of the "Atmanirbhar Bharat" (Self-Reliant India) mission. He highlighted the successful production of compounds like TIOC (used in erythromycin-based antibiotics) as clear evidence of the policy’s effectiveness in reinforcing India’s position as a reliable global pharmaceutical manufacturing hub.
This strategic recalibration aligns with a broader global trend where nations are actively seeking to de-risk and localize critical supply chains in the wake of recent global disruptions. Countries like the United States and member states of the European Union are investing heavily in reshoring manufacturing capabilities for essential goods, including pharmaceuticals. India’s revamped PLI framework, with its holistic focus on R&D, infrastructure, and financing, positions it not just as a participant but as a potential leader in this global shift towards resilient and diversified supply chains. The success of this evolved policy will hinge on effective implementation, robust coordination between central and state governments, and a sustained commitment to fostering an innovation-driven ecosystem.
With approximately 1,500 API manufacturing facilities operated by 700 companies, largely concentrated in pharmaceutical clusters like Hyderabad (Telangana), Ankleshwar and Vadodara (Gujarat), and Aurangabad (Maharashtra), India already possesses a formidable industrial base. The "nurturing approach" is designed to unlock the full potential of these existing capabilities while catalyzing new investments in advanced technologies and processes. Once the revised guidelines are approved and fresh applications are invited, the initiative is expected to usher in a new era of confidence for companies to invest significantly in research, build cutting-edge manufacturing capabilities, and propel India closer to achieving genuine self-reliance in bulk drugs. This transformational journey holds the promise of not only securing the nation’s pharmaceutical future but also enhancing its global stature as an indispensable hub for both manufacturing and innovation, contributing significantly to economic growth, job creation, and technological sovereignty.
