India's pharmaceutical sector, the world's largest supplier of generic medicines, is growing at a rapid pace. According to a McKinsey report, exports rose at 9 per cent annually in 2024, nearly twice the global average. India now meets 20 per cent of global drug demand, supplying 40 per cent of the US generic market and 25 per cent of the UK market. The country has also surpassed the US in FDA-approved manufacturing sites. Meanwhile, India maintains a 30-35 per cent cost advantage over US and European manufacturers due to lower labour costs, efficiency improvements, and digital adoption.

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Technology is set to transform Indian pharma

Mckinsey report suggests that AI & generative AI could unlock $60-100 billion in additional revenue, improve margins by 4-7 per cent, and boost productivity by 50 per cent. Leading contract development and manufacturing organisations have already invested $650 million to expand operations, reinforcing India's role in global pharma supply chains. However, the sector faces disruptions, and automation and new treatment modalities could reshape pharmaceutical operations.  

Trump's tariffs threat looms

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We are experiencing a global trade war across industries, something we call the 'Trump effect.' Pharma is no exception, with Trump eyeing 25 per cent imports. For Indian producers, it's a bigger problem to decipher since India accounts for 60-65 per cent of US generic drug volumes. 

Currently, Indian pharma exports to the US face zero import duty, while India imposes a 10 per cent tax on US pharma imports. Tariffs could hurt supply chains and even raise costs for American consumers. Indian generics saved the US healthcare systems over $1.3 trillion between 2013 and 2022. Tariffs would raise healthcare inflation in the US and potentially cause drug shortages. 

Indian firms have three possible ways to counter tariffs: Passing costs to US consumers, expanding US-based manufacturing, or diversifying exports beyond the US. Business leaders are now in a wait-and-watch mode, hoping for an early resolution through the India-US trade deal.