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Tuesday, August 04, 2020

Explained Ideas: Why the sudden boycott of China would be counter-productive for India’s pharma industry

Decoupling would be prudent in the long run but it must be strategic and with significant policy support, writes Rory Horner.

By: Explained Desk | New Delhi | Updated: July 8, 2020 10:34:51 am
india china news, china boycott, boycott of chinese goods, india china border dispute, china news, indian express An Indian stands on a portrait of Chinese President Xi Jinping during a protest against China in New Delhi, Tuesday, June 30, 2020. (AP Photo: Altaf Qadri)

There is a growing clamour in India for boycotting trade with China amidst recent political tensions between the two countries. Such a possible move, however, is a major cause of concern for India’s pharmaceutical industry as well as for people in India, and globally, who rely on the country’s world-renowned supply of medicines, writes Rory Horner, senior lecturer at the Global Development Institute, University of Manchester.

“Trade boycotts or bans are especially costly when production is organised through global supply chains, as is the case with the pharmaceutical industry. Although India is the third-largest producer of finished drugs in the world, it relies significantly on China for supplies of active pharmaceutical ingredients (APIs), the key components in making medicines. An estimated 70 per cent of API requirements of India’s pharmaceutical industry are sourced from China. For some drugs, such as paracetamol and ibuprofen, this dependence is almost 100 per cent,” he explains.

Given this, restricting or banning the import of APIs would cause significant disruption to the Indian pharmaceutical industry which had $40 billion in revenues in 2018-19, according to Pharmexcil.

Such a prospect is especially of concern to potential patients. “A severe contraction of Indian pharmaceutical production and its almost $20 billion worth of annual exports, would affect access to medicines both in India and globally. The impacts would be especially high in low and middle-income countries which have become increasingly dependent on affordable medicines supplied by India”.

But reducing dependence on China will not be easy to achieve argues Horner. “In India, any decoupling from China must be strategic, with significant policy support, and it will take time for a paced indigenisation”. Horner warns that “an ad hoc or reactive decoupling could disrupt the production of a wide range of medicines which currently require ingredients from China”.

Horner concludes that “in the short run, boycotts or bans would be counter-productive for Indian industry, while also affecting access to much needed medicines to India’s citizens and beyond. In the long run, however, reducing dependence would be strategically prudent”.

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