U.S. Tariff Shock & India’s Pharma Sector

Why in News?

In September 2025, the U.S. announced a 100% tariff on branded and patented pharmaceutical imports effective October 1, 2025, leaving India’s pharmaceutical industry at a critical crossroads.

India’s Pharma Position

• Pharmacy of the World – India’s pharmaceutical industry is valued at $50 billion, contributing 1.72% of national GDP.
• Export strength – Ranked as the 3^rd largest exporter by volume, shipped $27 billion in 2023, rising to $30.47 billion in FY25.
• Growth – The sector’s 10%-12% CAGR adds 0.5%-1% to GDP growth annually, bolstering forex reserves.
• Generics dominate – Generics form the backbone of India’s exports, accounting for 70% of exports to the U.S. and Europe.
• U.S. dependence – Exports to the U.S. alone reached $9 billion in FY25, a 14.29% surge year-on-year, and India supplies 40% of U.S. generics.
• Import Vulnerability – India imports $5 billion worth of active pharmaceutical ingredients (APIs) mainly from China (72% share), thereby exposing its supply chain to risks.
• Domestic Reforms – GST rationalisation (September 22, 2025), aligned with Ayushman Bharat, reduced drug/device costs and boosts consumption by 8%-10%, insulating markets from tariff-driven hikes.
• Pharma Diplomacy – 6 MoUs signed with Trinidad & Tobago (July 2025), Singapore API pact and expanded Serum Institute’s collaboration in low‑middle‑income nations.
• Trade Promotion – iPHEX (the international pharmaceutical exhibition) could double exports to Africa significantly.

U.S. Tariff Shock (2025) –

• Target – It targeted branded drugs (unless made domestically).
• Potential Impact – If extended to generics, could cut export revenues by 10%-15%, trimming GDP growth by 0.2%-0.3% in FY26.
• Firm-level risks – Some firms with over 30% U.S. exposure face rerouting costs, regulatory hurdles, API inflation (up 5%-7%), and stalled research and development.
• Strategic shift – This tariff shock could spur “China-plus-one” strategies, redirecting exports to Africa and Southeast Asia, potentially raising India’s regulated market share from 3% to 3.5% by 2030.

Quick Fact

Reference

The Hindu | The U.S. tariff shock, India’s pharma future