India’s success story in pharma is marred
by excessive dependence on imported API
Budget 2025 offers a critical opportunity to address these challenges and propel the sector forward. Incentives for R&D, such as higher tax deductions or rebates, could stimulate innovation, while a National Pharma & Biotech Innovation Fund could support startups and foster academic-industry collaboration
India’s pharmaceutical and biotechnology sectors have undergone significant evolution before and after Covid-19. In the pre-Covid period, India emerged as the global hub for generic medicines, contributing 20 per cent of global exports, thanks to its cost advantages, skilled workforce, and robust manufacturing infrastructure. The biotechnology segment, focused on biosimilars, vaccines, and diagnostics, saw steady growth driven by institutions like the National Institute of Biotechnology and partnerships with global players. However, the sector faced challenges, including low R&D spending (0.2-0.3 per cent of GDP) and heavy dependence on imported Active Pharmaceutical Ingredients (APIs), particularly from China.
Post-Covid-19, India’s role as the “pharmacy of the world” gained prominence through rapid supply of vaccines and therapeutics, supported by initiatives like “Vaccine Maitri,” which bolstered India’s global health diplomacy. Policies such as Production Linked Incentive (PLI) schemes aimed at reducing API import dependency and promoting self-reliance under the “Atmanirbhar Bharat” vision further strengthened the sector. Additionally, there was an innovation surge with increased adoption of digital health tools and advancements in biotechnology, including startups working on genomics, personalised medicine, and CRISPR technologies.
Despite this progress, the sector faces constraints that hinder its full potential. API dependence remains a significant challenge, with India still relying heavily on imports, especially from China, raising concerns about supply chain vulnerabilities. R&D spending in the pharmaceutical industry, which stands at around 8-9 per cent of revenue, continues to lag behind global standards, and biotech startups face funding challenges. Regulatory bottlenecks, including complex clinical trial approvals and non-alignment with global standards, create additional hurdles. The industry also grapples with a shortage of skilled researchers and technicians, exacerbated by brain drain to global markets. Infrastructure gaps persist, with many manufacturing facilities requiring modernisation and limited emphasis on sustainable practices.
Budget 2025 offers a critical opportunity to address these challenges and propel the sector forward. Incentives for R&D, such as higher tax deductions or rebates, could stimulate innovation, while a National Pharma & Biotech Innovation Fund could support startups and foster academic-industry collaboration. Expanding the PLI scheme for API manufacturing and introducing subsidies or tariffs could reduce import dependency.
Streamlining regulatory processes through a single-window clearance system and aligning domestic standards with international benchmarks could improve ease of doing business. Investments in infrastructure, such as creating pharma and biotech industrial parks with advanced facilities and promoting “green pharma” initiatives, are essential.
Skilling initiatives, including the establishment of centers of excellence and scholarships for advanced research, can help address talent shortages. Integration of pharma and biotech with public health missions, coupled with the adoption of AI and big data for drug discovery and diagnostics, can enhance the healthcare ecosystem.
Export promotion through bilateral trade agreements and financial support for global certifications and expos can further bolster India’s position in global markets.
India’s pharmaceutical and biotechnology sectors have demonstrated resilience and innovation, particularly in the post-Covid-19 era. However, addressing structural constraints is crucial for sustained growth. By implementing strategic measures in Budget 2025, the Government can create a conducive environment for investment, innovation, and self-reliance, aligning these sectors with India’s aspiration to become a developed nation.