• Research & Analysis Services I Academic I Market & Industry I Government Policy I
Contribution to Economy: Manufacturing Pharmaceutical Drugs in India

Contribution to Economy: Manufacturing Pharmaceutical Drugs in India

The Union Cabinet, chaired by the Prime Minister, Shri Narendra Modi has approved the Production Linked Incentive (PLI) Scheme for Pharmaceuticals over a period of Financial Year 2020-21 to 2028-29. The Scheme will benefit domestic manufacturers, help in creating employment and is expected to contribute to the availability of a wider range of affordable medicines for consumers. The scheme is expected to promote the production of high value products in the country and increase the value addition in exports.

Trade (exports & imports)

India is the 12th largest exporter of medical goods in the world. Indian drugs are exported to more than 200 countries in the world, with the US being the key market. Generic drugs account for 20% of the global export in terms of volume, making the country the largest provider of generic medicines globally. Indian drug & pharmaceutical exports stood at US$ 24.60 billion in FY22 and US$ 24.44 billion in FY21. Indian drug & pharmaceutical exports stood at US$ 2,196.32 million in September 2022. About 20% of the Global exports in generic drugs are met by India.

Total incremental sales of Rs.2,94,000 crore and total incremental exports of Rs.1,96,000 crore are estimated during six years from 2022-23 to 2027-28.

India supplied around 45 tons and 400 million tablets of hydroxychloroquine to around 114 countries globally.


  • Exports of Drugs & Pharmaceuticals values at USD 2052.78 mn in September 2022 and shares 6.29% of the total exports of the month.
  • Exports of  Drugs and Pharmaceuticals valued at  USD 24475.36 mn from Apr21- Mar22.
  • Drugs and Pharmaceuticals shared 5.86% of the total exports of the country in the period Apr21- Mar22.
  • The medical devices sector to grow from current USD 11 bn to USD 50 bn in next few years
  • India has exported more than 65 mn doses of Covid vaccines to nearly 100 countries in 2021.
  • Indian pharma exports witnessed a growth of 103% since 2013-14, from INR 90, 415 Crores in 2013-14 to INR 1,83,422 Crores in 2021-22.
  • Pharmaceutical exports from India registered a growth of 4.22% to reach $14.57 bn during the April-October period.
  • The Average Index of Industrial Production of Manufacturing of pharmaceuticals, medicinal chemicals and botanical products in the FY 2021-22 is 221.6 and has grown by 1.3%.
  • The index of Industrial production of Manufacture of pharmaceuticals, medicinal chemical and botanical products (weight: 4.98%) values at 195.

At present low value generic drugs account for the major component of Indian exports. As far as patented drugs are concerned, the same are imported as well as manufactured in the country. The scheme incentivizes the manufacturing of patented drugs and other high value drugs at an incentive rate of 10% of incremental sales which is highest amongst the product categories under the scheme. The information was given by the Union Minister of Chemicals and Fertilizers, Shri Mansukh Mandaviya in a written reply in the Lok Sabha.


The scheme is expected to generate employment for both skilled and unskilled personnel, estimated at 20,000 direct and 80,000 indirect jobs as a result of growth in the sector.

The pharmaceutical department is estimated to create 58,000 more jobs and grow upto 45% by 2025. The Indian healthcare business, which is expected to be over 10,000 crore and expanding at a CAGR of 22.9%, is considered as being fundamentally dependent on the pharmaceutical sector. The Indian pharmaceutical market ranks 13th in terms of value and third in terms of volume worldwide. By 2020, the pharma market will be touching $55 billion with a CAGR of about 15.9%, with generics occupying 70% market share followed by over-the-counter 21% and patented drugs capturing 9% market share.

More women are needed in the pharmaceutical sector; “Keeping in mind the surge in the pharmaceutical sector, one must not neglect certain aspects of the Indian sector which is highly unorganised and fragmented in nature. It has nearly 25,000 companies and only 330 are organised. Total employable candidates with B. Pharm degrees were 42.3% in 2016 as against those 40.62% in 2015. Also as per the industry-wise hiring targets for women in pharma and healthcare sectors, the total target is about 38.67% women as per the India Skill Report and the total employability of women is only about 28.28% which calls for the need of gender diversity to be maintained in the pharmaceutical industry.”

Market demand and supply

The Government took various measures to increase the supply of essential drugs such as granting expeditious approvals to new manufacturing sites of existing manufacturers to  enhance their production capacity, issuing licences to new manufacturers/importers, helping the manufacturers in sourcing raw material and helping importers of drugs in getting maximum supplies on priority from the importing countries through support from diplomatic channels, restricting exports for a certain period,  and allocating the drugs namely Remdesivir, Tocilizumab and Amphotericin B, during the period of limited supply,  to States in an equitable manner to ensure availability of these drugs across the country. Domestic production and import of critical drugs was monitored regularly by the Government. Regular meetings were held with manufacturers to identify and address the issues faced by the manufacturers in the augmentation of the production. The availability of all major drugs required for management of COVID-19 was regularly monitored through weekly surveys of retail pharmacies.

An example; Tocilizumab is a patented drug of Hoffman La Roche, a Swiss multinational company. It is not manufactured in India and is available in India through imports only. Its imported quantity was maximised through persistent efforts of the Government with the sole manufacturer of Tocilizumab. 1,00,020 vials (80 mg) and 13,001 vials (400mg) were commercially imported between 1st April and 25th July, 2021. In addition, 50,024 vials (80 mg) were received in donation from Roche in the month of May, 2021.

Supply and demand of pharmaceuticals are mutually exclusive. The supply chain is wholly reliant upon pharmaceutical companies being able to effectively forecast demand for a particular product. The process of forecasting is often made difficult when a new medicine has just been brought to market or rapid deployment of a drug needs to happen in response to a pandemic due to a lack of concrete evidence to base estimations on.


Facing competition from domestic and multinational players, Indian pharma companies have started to diversify and are taking bold steps to strengthen their portfolios, including by developing capabilities to manufacture more differentiated and complex generics, investing in innovators, and building capacity to manufacture biosimilars. A key challenge Indian organizations face is that the business differentiator is shifting from being reverse-engineering experts to having improved operational performance parameters such as service level and cost to deliver. Competition is fierce. Pressure to bring down the cost of drugs is an additional element—resulting in the need to reexamine the supply chain. Most Indian companies have successfully figured out how to reverse engineer and manufacture generic drugs but have paid little or no attention to operational aspects.

Supply chain costs depend heavily on the type of product. Specialised cold chain requirements for vaccines and other complex formulations can significantly increase supply chain cost. India’s best-in-class pharma is 8 percentage points higher than both the best-in-class global FMCG firms and best-in-class global pharma.

Major supply chain challenges      
(% of executives who cite the challenge as “extremely relevant”)

Demand Planning

When a company fails to meet demand it can have major implications on the drug and the pharmaceutical company. The company may experience loss in sales and bad reputation. It has been reported that where the drug itself is concerned, if the launch of a medicine is delayed due to a failure in estimation, it costs on average $15 million per drug, per day. Further research has also shown that a blockbuster drug will lose $1 billion in revenue annually until capacity is developed to meet demand.

Overestimations in demand generally happen when the market is at its most volatile, or, if the reach of a new drug has been overestimated. These inaccuracies can cost companies. If a product’s demand is overestimated, companies have to find ways to correct their misjudgement by cutting the price of medicines which reduces margins and by making employees redundant to pay for the excess of stock.

India stands 7th worldwide in that exported the highest dollar value worth of drugs and medicines during 2020

The Financial Outlay of Pharmaceutical Drugs under PLI Scheme is INR 21,940 crore.

The scheme will be part of the umbrella scheme for the Development of Pharmaceutical Industry. The objective of the scheme is to enhance India’s manufacturing capabilities by increasing investment and production in the sector and contributing to product diversification to high value goods in the pharmaceutical sector. One of the further objectives of the scheme is to create global champions out of India who have the potential to grow in size and scale using cutting edge technology and thereby penetrate the global value chains.

Ananya Khar

Ananya Khar is a Research Intern at Tatvita. Presently she is pursuing his bachelors in the Liberal Arts department at the Savitribai Phule Pune University.    

Leave a Reply

Your email address will not be published.