India has emerged as a global medical tourism hub, offering cost-effective and technologically advanced treatment options. It is known for its wide access to vaccines, being one of the largest providers of generic drugs globally. The Indian Pharmaceutical Sector is a thriving sector at a CAGR of 9.43% over the past nine years and currently ranks third in pharmaceutical production by volume.

The Indian government started the Production Linked Incentive (PLI) Scheme in 2020 to boost domestic manufacturing in key sectors, especially pharmaceuticals. The PLI Scheme for Pharmaceuticals supports the “Atmanirbhar Bharat” goal by strengthening India’s manufacturing capabilities and increasing exports.

The scheme offers financial incentives based on increased sales and added value. It seeks to improve the production of high-value goods, encourage investments in innovation, and lessen dependence on imports. For the pharmaceutical sector, the government set aside Rs.15,000 crore to support the production of APIs (Active Pharmaceutical Ingredients), KSMs (Key Starting Materials), and drug intermediates.

Objective: Boost Local Manufacturing, Reduce Import Dependency

The world has long recognized India as the "pharmacy of the world," providing over 20% of global generic drugs. However, this strength hides a significant weakness. Indian pharmaceutical companies import nearly 70% of bulk drugs and API imports from China, which creates major supply chain dependency. The PLI scheme aims to address this by promoting local production of essential raw materials through financial support and stable policies. 

Reducing Import Dependency: Cutting Reliance on imported APIs 

During the Covid-19 pandemic, India’s dependence on imports became especially evident. Global disruptions showed how fragile essential supply chains can be. To address this issue, the government introduced the PLI scheme to help companies make 41 specific APIs and KSMs, which include antibiotics, antivirals, and vitamins. Pharmaceutical companies have begun investing in domestic API production through the scheme.

The country is seeking to accelerate local manufacturing as well as decrease import dependency. A significant portion of bulk drugs and advanced drug intermediates continues to be imported.

Enhancing India’s Position in Global Supply Chain

Improving domestic infrastructure increases India’s reliability as a global supplier of pharmaceuticals. As countries like the U.S., EU, and Japan look for alternatives for API imports, the PLI scheme allows Indian companies to grow and meet strict global regulatory standards. The initiative not only boosts export potential but also improves supply chain resilience. In FY 2023, India exported pharmaceuticals worth USD 27.9 billion, and capacity expansion driven by the PLI scheme is expected to raise this amount even more.

Boosting Infrastructure & Capacity: From Generic to High-Value Products

The PLI scheme focuses on incentivizing a strategic shift towards high-value, innovative products such as biologics, complex generics, and specialty formulations. Pharmaceutical companies have responded by increasing their API manufacturing capacity. They are also investing in green chemistry and fermentation-based production to meet sustainability and quality goals.

In addition to promoting capital growth, the PLI scheme also encourages job creation and skill development. Industry estimates suggest that PLI-supported pharma projects will generate over 100,000 direct and indirect jobs and thousands more in related industries by 2025. PLI schemes in key sectors have already resulted in substantial job creation. To support this growth, state governments and central agencies are establishing pharma parks and industrial clusters that provide shared infrastructure, lower costs, and ensure regulatory compliance. By helping both MSMEs and large enterprises grow, the scheme has also shifted India's export profile toward high-value-added products, contributing to overall growth across various sectors. 

Final thought: Balancing domestic growth with global competitiveness

The PLI scheme is redefining India's pharmaceutical industry by strengthening self-reliance and supporting global growth. The scheme lowers import dependency, fosters high-value manufacturing, modernizes supply chains, and aligns industry needs and growth with national priorities. As India aims to lead in the global pharmaceutical sector, balancing internal competitiveness and domestic capabilities will be key to long-term success.