India, a major exporter of pharmaceutical products, is implementing a "traffic light" warning system to protect its drug exporters from payment delays and defaults, particularly in key growth markets like Africa and Latin America. This move comes in response to a surge in delayed payments, which can significantly impact the financial health of exporting companies.

The Indian pharmaceutical industry is a significant player in the global market, exporting nearly $28 billion worth of medicines annually and supplying 20% of the global volume of generic drugs. The United States is the largest market for Indian pharmaceuticals, accounting for approximately 35% of exports. However, other regions are also becoming increasingly important, and delays in payments from these markets can create substantial challenges for Indian exporters.

The "traffic light" system is designed to provide an early warning mechanism, categorizing countries based on the risk of payment delays or defaults. While specific details of the system are not available in the provided context, such systems typically use a color-coded approach:

• Green: Indicates a low-risk country with a good track record of timely payments.
• Yellow: Suggests a moderate-risk country where payments may be delayed, requiring exporters to exercise caution.
• Red: Signifies a high-risk country with a history of payment defaults, advising exporters to avoid or minimize business.

By providing exporters with this risk assessment, the "traffic light" system aims to enable them to make informed decisions about which markets to prioritize and how to manage their payment risks. This can include negotiating payment terms, securing credit insurance, or seeking government support.

Several factors contribute to payment delays and defaults in international trade, including:

• Economic instability: Countries facing economic challenges may struggle to make timely payments.
• Currency fluctuations: Fluctuations in exchange rates can make it more expensive for importers to pay in foreign currencies.
• Political risks: Political instability or conflict can disrupt trade and lead to payment delays.
• Regulatory issues: Complex or unclear regulations can create obstacles to cross-border payments.

The implementation of the "traffic light" system reflects the Indian government's commitment to supporting its pharmaceutical industry and promoting exports. The pharmaceutical industry is vital to the Indian economy, providing employment and contributing to the country's foreign exchange earnings.

In related news, in September 2025, US President Donald Trump announced a 100% tariff on branded and patented drugs starting October 1. While the move directly targets global innovators, uncertainty looms over whether complex generics and specialty medicines—areas of growing focus for Indian companies—could also come under scrutiny. Analysts say the immediate risk is limited, but the headline risk is high, with long-term implications for growth and exports.

Overall, the "traffic light" warning system is a proactive step by the Indian government to mitigate the risks faced by pharmaceutical exporters and ensure the continued growth of this important sector.