The Indian pharmaceutical industry has been on an upward trajectory over the past few decades, contributing around 1.72 per cent of the GDP of the nation. The Indian pharma industry is anticipated to reach $ 65 bn by 2024 and $ 130 bn by 2030. This growth is driven by the increasing demand for affordable and high-quality medicines, both domestically and internationally. Currently, India is the 3rd largest producer by volume and 14th largest by value worldwide. Indian pharma exports witnessed a growth of 103 per cent since 2013-14 – from INR 90, 415 Crores in 2013-14 to INR 1,83,422 Crores in 2021-22. About 20% of the global exports in generic drugs are met by India, thereby making India “Pharmacy of the World”.

India’s API Industry

Active Pharmaceutical Ingredient (or API) is a crucial segment of the pharma industry, contributing to around 35 per cent of the market. API is the biologically active component of a drug that causes an intended medical effect. According to World Health Organization, API is any substance or combination of substances used in a finished pharmaceutical product (or FPP) intended to furnish pharmacological activity or to otherwise have direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to have an immediate impact in restoring, correcting, or modifying physiological functions in human beings.

India is the 3rd largest producer of API accounting for an 8 per cent share of the Global API Industry. 500+ different APIs are manufactured in India, and it contributes 57 per cent of APIs to prequalified list of the WHO. The Indian API market is anticipated to increase at a CAGR of 13.7 per cent during the first four years – about 8 per cent higher than the generic API industry. The Indian API space has become lucrative for several investors and venture capitalists. India’s robust domestic market, advanced chemical industry, skilled workforce, stringent quality and manufacturing standards, and low costs (about 40 per cent less than that in the West) for setting up and operating a modern plant give an added advantage.

The growing antagonism between the West and China has also pushed the global pharma majors to source more from countries other than China. India’s emergence as the alternate source of bulk drugs has been quite remarkable. 

Some of the major players operating in the India active pharmaceutical ingredient market include Solara, Aurobindo Pharma Limited, Dr. Reddy's Laboratories, Lupin Limited, Sun Pharmaceutical Industries Limited, Divi’s Laboratories Ltd., Aarti Drugs Ltd., Neuland Labs, Century Pharmaceuticals Ltd., and Proventus Life Sciences Pvt Ltd. among others.

Government of India’s Schemes and Initiatives

To capitalize on its API potential, India is building a holistic and conducive ecosystem. In 2020, the government approved INR 6,940 crore for a production-linked incentive (PLI) scheme for the promotion of domestic manufacturing of Key Starting Materials (KSMs)/Drug Intermediaries (DIs), and APIs. Manufacturing of 35 active pharmaceutical ingredients – representing about 67 per cent of APIs for which India has 90 per cent import dependence – has already started in India under the PLI scheme. The Department of Pharmaceuticals has also given "in-principle" approval to proposals from the states of Himachal Pradesh, Gujarat, and Andhra Pradesh under the "Promotion of Bulk Drug Parks" scheme. This is a crucial initiative to support bulk drug manufacturing in India. The scheme, with a budget of INR 3000 crores, provides financial aid to these three states for the creation of bulk drug parks with the objective of reducing the cost of manufacturing bulk drugs by establishing world-class common infrastructure facilities and increasing the competitiveness of the domestic bulk drug industry. The Government of Assam has also proposed a Pharmaceutical Park in Chaygaon, Kamrup Rural on a land area of 100 acres with an estimated project cost of INR 153.64 crores.

Furthermore, to promote innovation within the industry, various measures have been proposed such as raising the limit for foreign direct investment (up to 100 per cent, FDI has been allowed through automatic route for Greenfield pharmaceuticals projects) and implementing a new strategy for protecting intellectual property rights.


In 2022, India's pharmaceutical business underwent a tremendous transformation, moving from being a volume producer to a valued supplier. Post-COVID-19, the Indian pharma sector has gained momentum as a key player in the global markets. India sets to double its API market in the next 3 years, says Saurabh Mukherjee, Founder and Chief Investment Officer of Marcellus Investment Managers. Cutting-edge research and development in the production of generic APIs would only be possible with the proper regulatory support—through PLI schemes and other incentives—combined with trained, high-skilled individuals. With the ongoing efforts, India is well-positioned to become a global leader in the pharmaceutical industry.

This blog has been authored by Bhavya Tyagi and Barnali Das.

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