By Jake Chasan and Will ConteThere is an irony about India’s position in global pharmaceuticals: the country supplies forty percent of the United States’ generic medications, earning its reputation as the “pharmacy of the world.” Yet beneath this veneer of dominance lies an uncomfortable truth: seventy percent of the active pharmaceutical ingredients (APIs) and key starting materials (KSMs) that flow into Indian manufacturing facilities originate in China. India has been, in essence, a sophisticated assembler rather than a true manufacturer, a middleman handling the final steps of a value chain controlled from Beijing.That calculus is now shifting, driven by a combination of pandemic-induced awakening, geopolitical realism, and unusually assertive industrial policy. The Production Linked Incentive (PLI) schemes launched by the Department of Pharmaceuticals represent the most ambitious attempt in a generation to restructure India’s pharmaceutical supply chain from the ground up.
The numbers are striking. Under the PLI scheme for bulk drugs alone, manufacturers have invested Rs 4,763 crore in greenfield projects over three and a half years, exceeding the six-year commitment of Rs 4,329 crore. Production capacity now exists for twenty-six key starting materials and drug intermediates that were previously almost entirely imported. The broader pharmaceutical PLI scheme has drawn cumulative investment of Rs 40,890 crore, vastly surpassing the Rs 17,275 crore originally targeted. Some 726 APIs and intermediates are now being manufactured domestically, including 191 produced in India for the first time. The import substitution is quantifiable: Rs 1,807 crore in avoided imports under the bulk drugs scheme through September 2025, with cumulative domestic sales reaching Rs 26,123 crore across both programs.What makes this moment genuinely different from previous self-reliance campaigns is the infrastructure accompanying the incentives. Three bulk drug parks are under development in Andhra Pradesh, Gujarat, and Himachal Pradesh, each supported by up to Rs 1,000 crore in central funding for common infrastructure, effluent treatment plants, solvent recovery systems, warehouses, and utilities. State governments are layering additional subsidies: capital assistance, GST reimbursements, concessional land. The aim is to compress the cost structure that has historically made domestic API production uncompetitive against Chinese facilities operating with fully amortized capital and generous state support.The strategic logic is sound. COVID-19 exposed pharmaceutical supply chains as fragile in ways that proved impossible to ignore. When China’s Hubei province locked down in early 2020, Indian drug manufacturers faced immediate shortages of critical intermediates. The lesson was brutally simple: dependence on a single source for essential inputs is not merely an economic risk but a public health vulnerability. American and European policymakers have drawn identical conclusions, with the U.S. BIOSECURE Act targeting Chinese contract manufacturers and the EU Critical Medicines Alliance funding supply chain resilience initiatives across member states.India’s opportunity lies precisely in this global reordering. Western pharmaceutical companies and governments are actively seeking alternatives to Chinese suppliers, not out of geopolitical spite, but from rational diversification. India possesses the technical workforce, the regulatory familiarity with developed markets, and now the industrial policy framework to capture this demand. The excipients market tells a parallel story: Asia-Pacific is projected to be the fastest-growing region through 2034, with Indian manufacturers increasingly positioned to serve both domestic formulation and export demand.Challenges remain substantial. Land acquisition, environmental clearances, and subsidy disbursement delays have slowed progress at several facilities. Not all targeted intermediates have achieved import substitution, particularly in fermentation-based products where Chinese scale advantages remain formidable. The global cost gap will not close through incentives alone; it requires sustained investment in process technology, workforce development, and the kind of operational discipline that distinguishes pharmaceutical manufacturing from commodity chemical production.But the trajectory is unmistakable. India’s pharmaceutical sector, valued at approximately $67 billion in 2025, is projected to reach $174 billion by 2033. More importantly, an increasing share of that value will be captured domestically rather than remitted to Chinese suppliers of basic inputs. The country that has long dispensed the world’s medicines is finally building the capacity to manufacture them, from the first molecular building blocks to the finished tablets and vials.This is not merely an economic story. It is a strategic repositioning with implications for global health security. In a world where supply chains have become instruments of statecraft, India’s pharmaceutical self-reliance is not nationalism dressed in industrial policy. It is prudence.
