India API Industry - Market

Indian API Industry: Market Insights

The Indian API Industry market is estimated to witness a high CAGR during the forecast period (2020-2026). The Indian pharmaceutical industry is the world’s third largest in terms of volume and thirteenth largest in terms of value. The increasing incidence of chronic diseases, along with growing importance of generics are some of the major factors driving the growth of the Indian APIs market. Advancements in active pharmaceutical ingredient (API) manufacturing, and growth of the biopharmaceutical sector is also driving the market growth.

The growth of the industry has been driven by adopting global standards and setting up large scale plants in the country. India has the highest number of US FDA approved plants, approximately 665 and occupies 44% of global abbreviated new drug applications (ANDA).

The Indian government has launched many government schemes to promote API (bulk drug) through clusters and Production Linked Incentive (PLI) program. The PLI program helps and support the ‘Make in India’ initiative for domestic manufacturers.

The Indian pharmaceutical industry achieved tremendous growth over the past few decades. India supplies 20% of global demand for generic medicines in terms of volume and supplies more than 60% of the global demand for various vaccines and Antiretroviral (ARV) drugs. India’s API industry is ranked as the third largest in the world, and the country contributes approximately 57 per cent of APIs to prequalified list of the WHO.

Comparative study of India and China

China has emerged as the global leader in production and export of APIs by volume of global API production. China holds a significant share of APIs and intermediates such as penicillins, vitamins, antipyretic, analgesics, prils, statins and sartans among others in the world.

The Indian API industry is valued at INR 798 Billion in 2020 and is projected to reach INR 1,307 Billion by 2026, at a CAGR of 8.57%.

The China API industry is valued at INR 982 Billion in 2020 and is projected to reach INR 1,431 Billion by 2026, at a CAGR of 6.49%.

Cost breakup and comparison between India & China

Cost of production and breakup include financing, logistics, production and set-up costs. China is expected to dominate position in the market due to infrastructure investment, large-scale manufacturing capacities, cost efficiency, technical capabilities and supportive government policies among others. Cost of production in China is approximately 20-30% lower than in India. The raw material cost is 25-30 % expensive in India compared to China. The labor cost in India in 1.85% less compared to China. The cost of raw materials accounts for almost two-thirds of the cost of manufacturing of API products.

Chinese government has launched a new mechanism to reduce the time for clinical trial approval (CTA). Approval timeline for smaller molecules decreased from 25 months in 2015 to nine months in 2018. Approval timeline for large molecules decreased from 22 months in 2015 to 8 months in 2018.

Indian government also has plans to provide impetus to domestic API manufacturing. The government is also considering to exempt manufacturers from Drug Price Control Order (DPCO) if a medicine is manufactured from a locally produced API. Further:

1. Land and other infrastructural facilities at concessional rates, interest subsidies on bank loans (through interest subvention up to 7.5 per cent)
2. Single-window environmental clearance to API manufacturers for all drugs once the plant is approved by the environment ministry
3. Income tax benefits for an initial period of 10 years for each product from the date of launch of the product

In March 2020, the Indian Government announced a package of INR 9,940 crore for bulk drugs industry to boost domestic production and exports. The Government has also approved INR 6,940 crore for a production linked incentive (PLI) scheme for promotion of domestic manufacturing of critical key starting material (KSM), drug intermediates and active pharmaceutical ingredients.

China ranked 31st and India ranked 63rd in 2019 in World Bank’s ease of doing business rankings 2020. India ranked 68th and China ranked 56th for trading across borders in 2019.

Procedures and time required to start business - India vs China

Manufacturing capacity comparison for select APIs - China vs India