Decoupling from China

Context: Rather than counterproductive bans or boycotts, reducing dependence on China would be prudent for India’s pharmaceutical industry.

Counterproductive nature of the boycott

• Dependence of China: They are especially costly when production is organized through global supply chains, as in pharmaceutical industries.

• Despite being the third-largest producer of finished drugs, India imports 70% of API and 100% in the case of paracetamol and ibuprofen.
• This is due to harsh environmental controls and price competitiveness from China.

• Concern to Potential Patients: Disruption in medicinal supplies can affect both developing and developed nations.

• For E.g. This has impacted supplies of Dexamethasone, a drug found to be significantly improving COVID survival rate (UK study).

• Severe contraction of Indian pharma Industry impacted supplies in the developing countries especially in Africa (almost 50% of medicinal supplies in value terms.)

Arguments favoring self-reliance in Pharma. Industry without the need of boycott/ban

• Huge market share owned by Indians: Market share of foreign-owned multinationals in India fell from 80-90% in 1970 to 23 % today.

• Cheap medicine: Prices in India fell from being among the highest in the world to amongst the lowest.

• Legislative Protections:

• The Indian Patents Act, 1970, removed patent protection in pharmaceuticals, facilitated the indigenous pharma. Industry.
• The Foreign Exchange Regulation Act 1973 and New Drug Policy 1978 restricted but did not ban, the activities of foreign multinationals.

• Recent steps taken:

• In March, the government announced Rs 3,000 crore to develop three bulk drug parks.
• Indian firms have capacities to produce COVID-19 treatments, including Remdesivir.

Way Forward: 

• Restricting bans/boycotts: should be avoided in light of the increasing need for self-reliance. 

• The US, while seeking self-reliance through indigenous drug development, has avoided immediate bans and excluded certain products from tariff increase.

• Long term Policy: Reducing dependence on China will take time and would be strategically prudent.