India supplies generic medicines to over 200 countries, earning the title “Pharmacy of the World”—whilst importing 70-80% of essential pharmaceutical ingredients from China. This paradox means the world’s pharmacy depends fundamentally on Chinese chemistry for raw materials enabling its drug production that serves global markets. Between 2014 and 2023-24, bulk drug imports from China rose from 64% to 72% by value, according to Ministry of Commerce data. For essential antibiotics including penicillin, cephalosporins, and amoxicillin, dependence reaches 90-95%, leaving India highly exposed to supply chain shocks. China controls nearly 95% of India’s ibuprofen and paracetamol imports, whilst dependence for other commonly used Key Starting Materials approaches totality.
A Finshots report noted: “The world’s pharmacy still depends on China’s chemistry,” underlining the paradox of India’s global pharmaceutical dominance built upon Chinese inputs. When Chinese factories shut down during the COVID-19 pandemic, Indian manufacturers faced near-immediate supply chain disruptions and production halts, demonstrating vulnerability. Despite India’s strong export performance crossing $30.5 billion in FY2025, its domestic manufacturing base for these raw materials remains fragile, exposing it to price fluctuations and geopolitical uncertainties. Stephen Schondelmeyer, Director at PRIME Institute, University of Minnesota, explained: “About 70% of Active Pharmaceutical Ingredients attributed to India are actually sourced from China—tying U.S. and global generic drug supply chains indirectly to China through India.”
How Dependence Deepened Over Two Decades
India’s dependence on Chinese imports steadily deepened over the past decade through structural shifts beginning after market liberalization and China’s WTO accession in 2001. Between 2000 and 2007, Chinese API exports to India grew at nearly a 40% compound annual growth rate, eroding India’s once-strong manufacturing base. Domestic producers gradually exited due to stricter environmental norms and uncompetitive costs compared to China’s subsidized industry, which received heavy state support. Part of China’s industrial strength lies in its economies of scale, environmental cost advantages, and heavy state subsidies, allowing it to produce APIs at globally competitive rates. China supplies up to 80% of global generic APIs, making it difficult for Indian producers to reach cost parity without sustained state support.
While India spends about 8.4% of total pharma sales on research and development, global peers average closer to 11%, limiting India’s technological depth in process innovation. As a result, many Indian companies shifted manufacturing up the value chain—focusing on formulations and exports rather than raw materials—inadvertently cementing dependence on Chinese inputs. This strategic choice made economic sense individually for companies but created collective vulnerability at the national level when geopolitical tensions or pandemic disruptions interrupted supplies. The India Macro Indicators FY2026 report noted that when Chinese factories shut during COVID-19, Indian manufacturers faced near-immediate production halts, demonstrating how quickly vulnerability translates into crisis.
Government Response Through Production-Linked Incentives
To counter this dependence, the Government of India launched Production-Linked Incentive schemes promoting domestic API manufacturing with substantial financial commitments. The ₹6,940 crore PLI scheme for bulk drugs and the broader ₹15,000 crore PLI scheme for pharmaceuticals exceeded investment targets, attracting a combined ₹43,000-plus crore in actual investments by mid-2025. Through these schemes, India created new capacities for 26 critical raw materials, including ferrous fumarate and meropenem, in facilities across Gujarat and Himachal Pradesh. However, the impact on import reduction has so far been limited—import dependence rose from 64% to 71% by value between FY14 and FY23, showing how entrenched Chinese supply chains remain despite new investments.
A senior Department of Pharmaceuticals official remarked: “We are witnessing investment enthusiasm but not yet full-scale substitution.” Experts argue that India must complement its PLI framework with policies addressing energy costs, logistics efficiency, and regulatory bottlenecks to compete with China’s state-backed API ecosystem. The Promotion of Research and Innovation in Pharma MedTech plan, with ₹5,000 crore outlay, represents a vital first step, but true self-reliance requires multi-layered reforms, including renewable energy integration and ecosystem-level investments. DrugPatentWatch analysis observed: “Decoupling from China is not just about money or policy—it’s about rebuilding an entire industrial foundation disrupted two decades ago.”
Strategic Implications and Path Forward
India’s pharmaceutical sector stands at a crossroads where global leadership in finished drug exports coexists with critical vulnerability in raw material supplies. The sector serves over 200 countries whilst remaining tethered to Chinese raw material imports for nearly three-fourths of production needs, creating geopolitical and economic risks. This dependence isn’t evenly distributed—some drug categories show near-total reliance, whilst others maintain partial domestic capacity—but the overall trajectory shows deepening rather than reducing dependence.
China’s scale advantage, supplying 80% of global generic APIs, creates market dynamics where Indian producers struggle to compete without sustained state support matching Chinese subsidies. The PLI schemes attracted significant investment exceeding targets, but converting capacity additions into actual import substitution requires time, consistent policy support, and addressing cost competitiveness gaps. Industry experts see promise but caution against complacency—Dr. Sudip Chaudhuri, author of India’s Import Dependence on China in Pharmaceuticals, stated: “India’s pharma power is undeniable, but supply diversification and innovation capacity must form the next chapter of our story.”
If India can translate current policy momentum into production scale, it can transform vulnerability into strategic strength through domestic manufacturing capacity development. Reducing dependency on Chinese APIs won’t happen overnight—entrenched supply chains, cost competitiveness gaps, and technological deficits accumulated over two decades require sustained multi-year efforts addressing multiple constraints simultaneously. Concerted effort across policy, industry, and research could ensure that the “Pharmacy of the World” truly rests on an independent foundation rather than borrowed chemistry from a geopolitical rival. The stakes extend beyond economics—pharmaceutical supply security matters profoundly for public health, national security, and strategic autonomy during crises when supply chains fracture along geopolitical fault lines.
Success requires maintaining PLI scheme momentum through political transitions, addressing energy and logistics cost disadvantages, investing in process innovation research, and building complete value chains from Key Starting Materials through intermediates to finished APIs. Whether India successfully reduces its 70-80% import dependence depends on execution consistency, sustained financial support, and whether domestic manufacturers can achieve cost parity with subsidized Chinese producers dominating global markets. The COVID-19 pandemic demonstrated vulnerability costs—temporary Chinese factory shutdowns caused immediate Indian production halts, affecting global generic drug supplies serving millions of patients worldwide. Building pharmaceutical self-reliance isn’t nationalist posturing—it’s pragmatic risk management ensuring India’s pharmaceutical leadership rests on secure foundations rather than fragile dependence on single-source suppliers subject to geopolitical disruption.