India pharma APIs: NITI Aayog flags 65% China share

What NITI Aayog flagged this week

India’s pharmaceutical supply chain remains heavily dependent on China for critical inputs, with Chinese imports accounting for 65% of key materials, NITI Aayog said on Tuesday. The observation was published in the eighth edition of its Trade Watch Quarterly. The think tank highlighted reliance on critical active pharmaceutical ingredients (APIs), Key Starting Materials (KSMs), and intermediates. It also pointed to particular vulnerability in fermentation-based products.

The most exposed part of the chain: fermentation-based inputs

NITI Aayog’s report noted that the dependence is especially high for fermentation-derived products used across bulk drugs and intermediates. Separately, the document also referred to fermentation-based precursors and building blocks such as nucleotides and amino acids as areas where China remains central. This matters because these inputs sit early in the value chain and disruptions can cascade into finished drug availability. The report framed the dependence as a supply chain and sustainability challenge for the sector.

Cost pressure in domestic manufacturing and R&D

Alongside import dependence, NITI Aayog said rising environmental compliance requirements have increased manufacturing and R&D costs in India. The report did not quantify the cost increase but positioned it as a structural factor affecting competitiveness. Higher compliance costs can reshape sourcing decisions and influence where firms place new capacity. In such conditions, dependence on imported inputs can become harder to reduce quickly.

India’s API trade position: exports still small

The report said India’s exports in this segment were $1.2 billion, representing a 0.6% share of global demand. It pegged global demand at $190.2 billion in 2025. At the same time, the report reiterated that India continues to depend on imported raw materials and intermediates, particularly from China, despite strengthening in several specialised chemical intermediates and antibiotics. The combination highlights a gap between India’s manufacturing depth in select areas and its broader upstream security.

Import concentration: top five categories dominate

NITI Aayog stated that the top five API categories account for 84% of India’s imports. For these categories, China supplies between 66% and 86% of the products in 2025, according to the report. This suggests concentration risk, where a small set of product categories and a single supplier geography can drive a large part of overall exposure. Such concentration also increases sensitivity to logistics, policy changes, or geopolitical disruptions.

Where India stands globally in generics and APIs

The report also referenced India’s strengths, describing the country as the world’s largest supplier of chemically synthesised generic medicines and the third-largest API producer. But it added that dependence remains high for crucial fermentation-based precursors and building blocks used in bulk drug manufacturing. This contrast underlines that scale in finished formulations and parts of APIs does not automatically translate into self-reliance in upstream materials.

Policy direction: reducing critical-input dependence, not just deficits

NITI Aayog has also been tasked with drawing up a strategy to reduce India’s supply chain dependence on China and to secure supply chains from risks linked to geopolitical developments. In a separate statement cited in the broader coverage, NITI Aayog vice chairman Suman Bery said India’s focus should not be on the overall trade deficit with China. Instead, he suggested the emphasis should be on reducing dependence on Beijing for certain critical inputs. He pointed to diversification of supply sources for critical inputs including APIs and supply chains for renewables.

Wider dependence beyond pharma: medical devices mentioned

The report ecosystem discussion extended beyond pharmaceuticals to include medical devices, noting an almost complete dependence on China and the Global North for critical medical-grade raw materials and components needed for domestic manufacturing. While the article’s core focus is APIs and KSMs, the inclusion signals that input dependence is a cross-sector supply-chain issue. It also suggests that policy responses may target multiple healthcare manufacturing segments together.

Key numbers at a glance

Market impact: what the report changes for investors

The report draws attention to input-side risks in a sector where India has global scale in generics but faces upstream import concentration. For listed pharmaceutical companies, import dependence in fermentation-based inputs and key intermediates can influence margins and supply certainty when disruptions occur. The report also highlights how regulatory and environmental compliance costs can add to manufacturing and R&D costs domestically. For investors, these points matter because they shape the pace and economics of backward integration and supply diversification.

Analysis: why the 65% figure matters

A 65% dependence on a single country for critical inputs can amplify vulnerability during crises such as pandemics or geopolitical conflicts, a concern also raised in the broader supply-chain strategy discussion. The additional detail that China supplies 66% to 86% of products within the top five imported API categories indicates that dependence is not only broad but also deep in core items. The report’s data on India’s $1.2 billion exports and 0.6% share of a $190.2 billion global market in 2025 provides context on India’s current position in the global API trade. Together, the figures explain why policy conversations are focusing on supply chain security and diversification.

What to watch next

NITI Aayog’s report and related statements indicate a policy push toward reducing dependence on China for critical inputs rather than targeting the overall trade deficit alone. The strategy work being prepared is expected to focus on securing supply chains from geopolitical risks and supporting diversification. For the pharma industry, the most relevant near-term signals will be measures that address fermentation-based inputs, KSMs, and intermediates, where dependence is repeatedly flagged.