Most of the Indian pharmaceutical exports to the US are generic drugs | Photo Credit: GIVEN RUVIC
The United States is the largest pharmaceutical export destination in India that represents a third of our pharmaceutical exports. India mainly exports high -cost high -cost medicines’, with thin profit margins, to the United States. Therefore, any change in costs such as additional tariffs can damage quite fast.
The highest rates will lead to an increase in medicines prices in the US, which can reduce the demand for such products: the effect of commercial exhaustion of the increase in rates, that is. The commercial diversion will occur if some of the existing imports of the change of the USA. From a country (high rate) to another (low rate) due to the differentials of rates imposed by the US. UU. The real impact of the increase in rates on the Indian pharmaceutical industry will defend how large or small are the effects of exhaustion and commercial diversion.
Unlike Ireland or Switzerland that export expectations patented medications and that save lives to the United States, most Indian pharmaceutical exports to the US. UU. They are generic drugs. The substitutedness between Indian generic drugs and the patented thesis is low. Therefore, it is unlikely that any differential tariff between India and other exhibitors change exports from one country to another. Therefore, it is likely that the effect of commercial diversion of the increase in rates is less for the Indian pharmaceutical industry.
In addition, most of the Indian pharmaceutical exports to the US. UU. They have a relatively inelastic demand. These are necessary goods and are available at low prices in the US. Therefore, any rate price increase is likely to be absorbed by US consumers without a significant reduction in demand. Therefore, the effect of commercial exhaustion in the Indian pharmaceutical industry is also likely to be less.
Therefore, both commercial exhaustion and the effects of commercial diversion would be or less magnitude for Indian pharmaceutical exporters. The general impact of the increase in rates on pharmaceutical exports would be lower than in other products, such as cars or textiles, which have high elasticity and are considered luxury or fashionable goods.
Silver Lanca for India
It is likely that the impact on the increase in the rate on the Indian pharmaceutical industry is short -lived for two reasons. First, the highest tariffs pincolizcan to US consumers who depend significantly on Indian generic medicines. According to reports, four out of ten medical recipes in the United States are for medications in India. The low prices of Indian generic medicines helped American consumers to save more than $ 200 billion in 2022. The same US citizens who are convinced of greater labor opportunities of greater tariffs on imports can become expensive and without affecting. Imported medications are built once. Once.
The limited manufacture of pharmaceutical products in the USA can also suffer if the Tit-For Tat tariff war continues between the United States and China. Since China is an important producer of active pharmaceutical ingredients (API), the increase in the rate of China’s API imports will lead to a higher cost of manufacturing drugs in the United States.
As a consequence, some of the medications manufactured in the United States can become little competitive fish Substitutable products from other countries, including India.
Trump recently exempted mobile phones, computers, chips and other important articles for their technological industry. If it imposes tariffs on pharmaceutical products, there is a great possibility that the thesis is or low magnitude or is enrolled again son who later. However, India Inc should be ready for any rate in anyity in the future.
The Government, through the linked incentive scheme (PLI), is helping companies to build local API production facilities. This will help reduce the need for imports from China and give companies better control over costs. Those who invest in making locally will be better prepared for future tariff challenges.
Gupta is an associated professor, and Naaz is a consultant, at the WTO Studies Center, Iift, New Delhi
Posted on April 16, 2025
