India imports about 65% of the raw materials needed to make medicines from China, NITI Aayog said Tuesday, warning that heavy dependence on a single country or region leaves the pharmaceutical supply chain vulnerable.

Speaking while releasing the Trade Watch quarterly report, NITI Aayog Vice‑Chairperson Ashok Kumar Lahiri said the “Middle East crisis” has underlined the need to diversify suppliers for critical inputs such as medicines, oil and gas. “We should not depend on one country or region,” he told reporters, adding that India must ensure multiple sources for energy and other essential supplies so crises do not disrupt domestic availability.

The report — which also presents data on India’s overall imports‑exports and energy sector — found that while India is a global leader in producing affordable generic drugs, much of the active pharmaceutical ingredients (APIs) and other chemical inputs still come from China. Officials said the finding supports recent policy discussions on securing supply chains and boosting domestic capability.

Lahiri urged negotiators to include a dedicated pharmaceuticals chapter in any free trade agreement (FTA). “When negotiating FTAs with countries or blocs, a separate chapter on pharmaceutical products should be included,” he said, according to excerpts shared by the Aayog. The recommendation reflects concerns that tariff and non‑tariff provisions must specifically protect and promote India’s pharma value chain.

The report also highlighted rising costs for R&D and manufacturing in India. Stricter environmental rules, Lahiri noted, have pushed up the cost of running production facilities and carrying out research into new drugs. “Environmental regulations have become quite tight. That has increased the cost for companies to produce medicines and pursue new R&D,” he said. The Aayog suggested that India’s system for translating academic research into commercial products needs strengthening to attract long‑term investors.

India’s strength remains production. The Aayog’s study concluded that India performs well on drug manufacturing but needs to move up the value chain — into higher‑margin, branded and innovative products — to capture greater global value. “Indian firms have good international credibility. If they bring high‑quality, reasonably priced branded products, our grip on global markets can strengthen,” Lahiri said.

The report also underlined India’s role as a supplier of affordable generics worldwide: about half of the low‑cost medicines exported from India go to African countries. In 2025, global demand for medicines and inputs was estimated at roughly ₹123.13 lakh crore (about $1.3 trillion), of which about ₹96.61 lakh crore went to finished medicines and roughly ₹24.72 lakh crore to chemicals and raw materials used by drug makers, the Aayog noted.

To reduce dependence on imports and build resilience, the Aayog offered a set of policy suggestions:

• Encourage Indian firms to move beyond generics into high‑value pharmaceutical segments.

• Strengthen links from college and university research to industry so discoveries commercialise faster.

• Make regulatory approvals for life‑sciences innovation clearer, faster and more transparent to draw patient long‑term investment.

• Include pharma‑specific provisions in FTAs and pursue bilateral deals — Lahiri said India and the US are close to finalising a bilateral trade pact and expected to sign it soon.

Experts and industry sources say the challenge is not only policy but capacity and investment. Building API manufacturing at scale requires capital, land, and trained personnel; cleaning up chemical manufacturing to meet environmental norms adds to costs. The Aayog’s recommendations aim to balance ecological compliance with incentives for domestic production.

Further details on timelines, funding packages or specific incentives were not available in the report. Authorities are reviewing follow‑up measures, and officials said more clarity on implementation will be provided as the government consults industry stakeholders.

Why it matters
India’s dependence on China for pharma inputs is a strategic vulnerability for public health and industrial policy. Any disruption — from geopolitical tensions to supply shocks — can affect drug availability and prices at home and for countries that rely on Indian exports. Moving up the value chain would also help India capture higher margins and reduce exposure to external suppliers.

Further details are awaited as policymakers and industry leaders discuss the Aayog’s recommendations and the implications for upcoming trade talks.