Indian Policies to Promote Local Production of Pharmaceutical Products and Protect Public Health

Indian Policies to Promote Local Production of Pharmaceutical Products and Protect Public Health

Published by: Geneva: World Health Organization; 2017

Download here

India has been among the most successful countries in terms of fostering the emergence of a dynamic pharmaceutical manufacturing sector. There are a number of factors, including government policies and business incentives, that help to explain the evolution of the Indian pharmaceutical sector. 

India has a very large population (approximately 1.25 billion), including a large segment of individuals living on low incomes. China’s situation is not so dissimilar (approximately 1.4 billion). The factors that may be relevant to establishing a successful pharmaceutical sector in a country with a very large population and a developing market may be different from the factors relevant to a smaller country and/or one experiencing different economic circumstances. 

The success of India’s pharmaceutical sector today seems largely grounded in dynamic private companies seeking to take advantage of market opportunities. A major driver of revenue growth has been export of generic formulated products to high-value developed country markets, particularly those of the United States and Europe. The revenues from exports have allowed the major Indian generic producers to invest in upgrading of plant and equipment so as to allow conformity with strict regulatory requirements, enabling export expansion.

The India Government has promoted the concept of the pharmaceutical cluster, which provides exemption from import duties for products that are exported, and from local taxes (depending on the state government). Recognizing that Chinese pharmaceutical companies have made significant inroads into India’s production and export of APIs, the India Government is actively studying proposals for the creation of API-specific clusters situated nearby to existing petrochemical complexes that will enable Indian API producers to exploit lower costs.

The India Government is anxious to promote transition to R&D on new pharmaceutical products, both small molecule/synthetic chemistry and biological products. It is interested in promoting biotechnological invention as well as the production of biosimilar products. Looked at from the standpoint of rupee/dollar amounts, India Government programs to encourage domestic R&D are very modest in comparison with those of the United States, for example.

One of the key features of India’s current success in the pharmaceutical sector is the evolution of a robust “ecosystem” of supporting infrastructure, suppliers and service industries. Such an ecosystem may develop as a natural consequence of dynamic economic activity around a particular industry. The cluster concept in part may be a way to facilitate the development of an “artificial ecosystem” (i.e. one that evolves on the basis of government policy).

This report addresses the dichotomy between India’s successful local pharmaceutical manufacturing sector and the situation regarding access to medicines among poorer parts of India’s population. The India Government allocates a relatively small proportion of its budget to health care in general, and to medicines procurement in particular. The Government should be doing more in terms of commitment of resources to providing medicines for the poorer parts of the population.


Keywords: pharmaceuticals, production, local, India, policy, tax, infrastructure, incentives, zone, cluster

JEL Classification: H25, H51, I18, I25, L65