India, renowned as the world’s pharmacy, holds a significant share of 20% in global generic medicine production, a remarkable achievement. In the past, India heavily relied on imports to meet 85% of its domestic pharmaceutical needs in 1969. However, the current scenario has witnessed a substantial shift, with approximately 90% of local demands being fulfilled by domestic suppliers.


Nevertheless, the potential of the Indian pharmaceutical industry is far greater than its current state. Experts estimate its actual capacity to reach 100 billion dollars, surpassing the present 40-billion-dollar industry.
Location and growth of any industry are influenced by multiple factors. In the case of the pharmaceutical sector, the following two factors have hindered its progress:

1 . Raw material issues:

  • The dependence on imports for Active Pharmaceutical Ingredients (API) is a significant challenge. Indian drug manufacturers import approximately 70% of their bulk drug requirements from China.
  • The import of APIs has been consistently increasing, and India now heavily relies on China for critical ingredients, including essential medicines like paracetamol, metformin, aspirin, ciprofloxacin, amoxicillin, and others.
  • This reliance results in an unreliable supply of raw materials and hampers the development of a robust supply chain required for establishing pharmaceutical parks. Economies of scale, necessary for the industry’s profitability, are compromised without a well-developed supply chain.
  • The combination of a generic drug industry with endangered profit margins, accentuated by government pricing regulations, becomes a challenging proposition.

2. Research issues:

  • The lack of substantial profits, as compared to Western companies, limits the investible capital available for research and development (R&D) activities.
  • Pharmaceutical companies in India invest less than 10% of their turnover in R&D.
  • The average cost of bringing a new medicine to market has risen to $2.18 billion, compared to $1.19 billion in 2010.
  • Indian manufacturers have yet to develop a new molecule, a fundamental indicator of successful R&D. While several molecules have reached Phase-I, less than four have progressed to phase-III, and none have been finalized. Hence, India heavily relies on Chinese molecules.
  • Additionally, outdated R&D infrastructure, still relying on manual calculations in the 21st century, remains a concern.
  • Digitization of R&D and manufacturing processes is essential to optimize ingredient combinations, select efficient production batches, and reduce wastage of time and resources caused by manual activities.

Without adequate research, India faces challenges in developing its own drugs and addressing indigenous problems such as the rise of lifestyle diseases.

Moreover, it is crucial to reconsider the draft policy that aimed to establish research and development facilities for API production, given the current medicine shortage in the country

3. Downstream factors influencing this location include the market and supply infrastructure:

  • The majority of India’s export market lies in Africa and the USA, making the west coast ideal for exports.
  • Additionally, the presence of well-developed ports with connections to the hinterland has contributed to the concentration of industries in this region.

4. However, upstream factors also play a significant role:

  • The availability of raw materials in close proximity to petrochemical hubs in Gujarat and Maharashtra, such as Jamnagar.
  • Well-established research infrastructure and the presence of numerous medical colleges in Karnataka.
  •  Business-friendly policies, particularly the adoption of Special Economic Zones by western states, have facilitated ease of doing business.

Hence, both upstream and downstream factors contribute to the determination of the industry’s location.


It is crucial for the knowledge-based economies of Western states to prioritize research and development endeavours. By doing so, India can strive to achieve its ambitious goal of transforming the pharmaceutical and biotech industry into a 100-billion-dollar industry by 2025.

Legacy Editor Changed status to publish January 10, 2024