China's Grip on Drug Ingredients Remains

Despite ambitious government plans through the Production Linked Incentive (PLI) scheme, India's pharmaceutical industry remains heavily dependent on China for vital drug ingredients. Over 70% of these critical materials, including essential Active Pharmaceutical Ingredients (APIs), are still imported from China, with some items showing 100% reliance. While the PLI scheme has attracted significant investment and capacity building, import figures for key components like 6-APA and penicillin salts are climbing, highlighting a persistent gap between policy goals and actual reduction of Chinese supply. This ongoing reliance creates substantial vulnerabilities for India's supply chain and exposes it to geopolitical risks.

Import Figures Show Growing Reliance

India is known globally as the 'pharmacy of the world,' but this status relies heavily on imported raw materials from China. Despite government efforts, imports of key ingredients like 6-APA, a vital penicillin precursor, reached 96% from China in FY25. Penicillin and its salts saw dependence on China climb to about 93% in the same period. While the PLI scheme has generated significant sales (Rs 2.72 lakh crore) and saved an estimated Rs 2,192.04 crore in imports, these achievements are undermined by the rising dependence on specific critical inputs. This situation highlights a vulnerability in the supply chain for India's large pharmaceutical market, which has a market cap of approximately ₹18.02 lakh crore.

China's Global API Dominance

China holds significant sway in the global Active Pharmaceutical Ingredient (API) market, producing about 20% of global output and supplying over 180 countries. Key drug types, including many analgesics, antipyretics, and antibiotics, heavily depend on Chinese manufacturing. This market control stems from China's vast production capacity and cost advantages, making its production 35-40% cheaper than competitors. Consequently, India, despite being a major producer of finished medicines, relies on China for 70-80% of its API imports, with even higher dependence for certain antibiotics. The PLI scheme has seen Rs 4,814.1 crore invested, with 38 projects commissioned to create substantial domestic capacity. However, by December 2025, China's share of India's bulk drug imports remained above 70%. This persistent dominance highlights the strategic risk, especially amid geopolitical tensions like the India-China border dispute and broader trade conflicts.

Challenges to Self-Sufficiency

The goal of India's pharmaceutical self-reliance, even with PLI schemes, faces major challenges. China's strong position in Key Starting Materials (KSMs) and intermediates, the basic components for APIs, gives it control over the upstream supply chain. Despite efforts, India still imports advanced intermediates and relies on Chinese inputs for 70-90% of critical antibiotics. While the PLI scheme has attracted investment, only about 12% of its total budget had been disbursed by September 2025. Progress is slowed by hurdles like environmental approvals and delays in subsidy payments. China's industrial policies and state support allow it to produce at costs lower than India's new domestic API sector can match without extensive support. The risk of geopolitical leverage is also significant; China could potentially use its API control during political disputes, leading to medicine shortages. Historical data shows a steady rise in India's API imports, with China's share growing to about 73% in H1 FY2026 from 68% in FY2019, confirming that dependence continues despite government measures.

Looking Ahead: Continued Effort Needed

Analysts expect the PLI scheme's full effect on reducing API imports will take several years. Pharmaceutical companies are pushing for expanded PLI incentives, particularly for APIs, to boost self-reliance amid global supply chain uncertainties. They argue that greater incentives are needed to increase production, drive innovation in complex drugs and biosimilars, and enhance the security of India's drug supply. While government efforts have saved an estimated Rs 1,362 crore in imports by March 2025, the deep reliance on China for many APIs means that ongoing strategic focus and investment are vital for achieving self-sufficiency and reducing future supply risks.