The Indian government has assessed that the recently announced US tariffs on pharmaceutical products will have a limited impact on India. This assessment was conveyed by the Union commerce ministry to a key parliamentary panel. The primary reason for this limited impact is that India mainly exports generic drugs to the US, which are not the primary target of the new tariffs. The US tariffs primarily target "branded and patented pharmaceutical drugs".
The US is India's largest pharmaceutical export market, accounting for approximately $10 billion in FY25. While the tariffs have caused some concern and a dip in pharma stocks, experts suggest the immediate impact will be minimal. The Pharmaceuticals Export Promotion Council of India (PHARMEXCIL) has also stated that they do not foresee much impact on the Indian generic pharmaceutical industry.
The commerce ministry official told the Public Accounts Committee that the tariffs apply to all exporters worldwide, with the exception of the European Union (EU). Crucially, India's main competitor in generics, China, is also subject to the same tariff regime, which neutralizes any relative disadvantage for India.
While the direct impact of the tariffs on Indian pharma exports may be limited, there are some concerns. One concern revolves around Active Pharmaceutical Ingredients (APIs), where both India and China hold significant market share. If the tariffs were to expand to include generics or biosimilars, it could severely disrupt India's export sector. Some experts are assessing the potential impact on companies that generate a significant portion of their revenue from US operations, particularly if the tariff measures are extended to include complex generics and specialty medicines.
The government is also aware of the potential for the US to push for domestic pharmaceutical production, which could put pressure on Contract Drug Manufacturing Organizations (CDMOs) in India. To mitigate these risks, the Indian government is focused on diversifying its export markets. Officials highlighted the recently signed Free Trade Agreement (FTA) with the European Free Trade Association (EFTA), comprising Switzerland, Iceland, Norway and Liechtenstein. They also mentioned the India–United Kingdom FTA, which is expected to be operationalized next year, as deals that will cut tariffs and help diversify markets for India's marine exports and other sectors.
Top government officials have acknowledged that India's marine exports are facing challenges in the US market due to existing 50% tariffs. They expressed confidence that FTAs with other countries would offset some of these losses and reduce dependence on the US market.
In conclusion, while the US pharma tariffs are not expected to have a major impact on India's pharmaceutical exports due to the focus on generic drugs, the government is closely monitoring the situation and taking steps to diversify export markets and safeguard sensitive domestic sectors. The long-term effects of the tariffs and any potential expansion to include generics or APIs remain a concern, prompting the need for continued vigilance and strategic trade policies.
