Advantage India: How China-US trade war has opened exports opportunity for Indian Pharma

The trade disputes between the US and China have intensified lately, which can potentially escalate to a full-fledged trade war. Earlier in the month, the United States Trade Representatives (USTR) proposed to impose an additional 25% tariff on 1,300 Chinese products valued at approximately $50 billion. This list included various pharmaceutical products but the possibility of a potential trade war in pharmaceutical appears unlikely for now.

Opportunities for exports to US

The US is a leading pharmaceutical market, with aggregate spending valued at $467 billion during 2017, and estimated to increase to over $600 billion by 2022. It is the largest export destination for the Indian pharmaceutical market accounting for 12.5% share in case of bulk drugs and 39.8% share in India’s exports of formulations.

Since India and China both are major import sources of active pharmaceutical ingredients for the US, the imposition of additional tariffs on Chinese pharmaceutical products in future could generate appreciable opportunities for Indian exporters. US imports of bulk drugs from China and India during 2012- 2016 recorded a CAGR of 1.4% and 4.5%, respectively. Therefore, impending tariff rise on Chinese bulk drugs could generate a surge in Indian bulk drug exports to the US.

Exports opportunity to China

The threat of increasing protectionist measures may have also prompted China to open up its market to Indian pharmaceutical industry. During April this year, China exempted import tariffs on 28 essential drugs including drugs for cancer treatment. There are substantial opportunities in the Chinese market ' the aggregate spending during 2017 was valued at $123 billion, recording a healthy CAGR of 9.4% during 2013-2017. The Indian pharma sector has to seize this opportunity and mark its presence in the worlds’ second largest pharma market.

The writer is an economist with the Export-Import Bank of India