NITI's Warning on Pharma Import Dependence Meets CII's Case for Chinese Technology
New Delhi: Twelve years into the NDA government, NITI Aayog has flagged India's dependence on Chinese raw materials in the pharmaceuticals sector. At the same time, CII has advocated greater Chinese technology infusion and investment in manufacturing sectors.
The 8th edition of NITI Aayog's Trade Watch Quarterly and the statements of R. Mukundan, the new Confederation of Indian Industry president, speaking to the Economic Times, strike a study in contrasts. While the government is acknowledging that India is lagging behind on its own self-reliance objectives, industry's demand for Chinese technology and capital remains unsatiated.
Niti Aayog's Trade Watch report for the January-March quarter of 2025-26, focussed on the pharmaceutical sector. While India performs well in certain generic drug categories, it lags in blood products, vaccines and immunologicals.
Pharma findings
The sobering findings in the Niti Aayog report (focused on India’s API and pharmaceutical trade) include that India, which considers itself a generic medicines hub, accounts for less than 4% of global pharma exports. And then it depends heavily on imports of key starting materials and intermediates (known as active pharmaceutical ingredients or APIs) to manufacture drugs. What is more, over 65% of these imports of critical APIs come from China.
If the top categories of imported APIs are considered, India's imports from China rise to beyond 85%, says the report. Plus, India has not developed capability in higher-end drugs.
"India is doing very well in low-value pharmaceutical products, both in value and volume terms, but we need to move up the value chain," Niti Aayog Vice Chairman Dr Ashok Lahiri said while releasing the report, the Indian Express reports. "We need to produce much more valuable products because that is where the money comes from," he said.
The report suggests that India has not been able to turn its generic-drug success into leadership in higher-value segments such as biologics, vaccines and immunologicals.
"Initiatives such as Mission BioPharma are moving the sector in the right direction; however, sustained investments in R&D, regulatory capabilities and advanced manufacturing will be essential to establish a stronger presence in these segments," writes Pravarkar Sahoo, introducing the Niti Aayog report.
The Niti Aayog findings include India's poor track record in drug development and research. While the world spends 15-20% of net sales on research, in India that percentage is a mere 7. It cited delays in patent grants as a reason for uncertainty in the Indian market for innovators.
Niti Aayog suggests India negotiate free trade agreements to move up the value chain. This recommendation is telling, because it amounts to acceptance that industrial policy has not solved the problem and India still needs market access and integration into global value chains.
Industry expectations vary
On the other hand, industry is arguing for integration with global supply chains (and China) at a different level, beyond imports aimed at assembly. This emerged in Mukundan's interview with ET, in which he said, "They [Chinese companies] have good technologies. If that comes along with investment as strings attached, we should not be against it."
Mukundan is the CEO of Tata Chemicals (not involved in pharmaceuticals but specialty chemicals such as soda ash, silica and so on).
He referred in this context to the Production-Linked Incentive or PLI scheme of the Union government as the "first phase of investments" in the electronics sector [for instance]. He said this phase involved "assembly of the final set", adding that India now needed to "roll out for the components, for the intermediate, [for the] whole PLI scheme."
To be sure, CII is not arguing for unrestricted Chinese entry into the Indian market. Instead, it is arguing against a blanket exclusion of Chinese components and intermediate goods and their evaluation on a "case by case" basis.
It is making the case to look beyond just assembly, and China enters the discussion because it is a lead manufacturer of many such intermediaries.
A similar debate was sparked in 2020, when the government said Apple Inc. had entered the Indian market to "manufacture" iPhones under the PLI scheme. Critics said this claim suited the Make in India narrative, but did not bear out on the ground beyond a limited threshold.
Currently, domestic value add (DVA) in India is restricted primarily to mechanical parts, enclosures, batteries, chargers and packaging, while the iPhone's high-value core components are imported from China or Taiwan. However, in December 2025, ET reported that Indian chipmakers were in talks with Apple to assemble and package chips as well, which would be a step up the value chain.
In this context, while both CII and Niti Aayog accept that India lacks capability, the divergence is in terms of the cure: Niti Aayog wants more localised R&D, innovation and FTAs to move up the value chain, in its report focused on a sector with heavy raw material (API) dependence on China.
But CII's Mukundan says India must acquire technology and manufacturing know-how from wherever it is available, including from China, though not just for cheap imports – he is talking about technology access.
The current discussions are unfolding against India's recent policy moves, wherein it eased norms to allow foreign companies with up to 10% Chinese shareholdings to invest in India under the automatic route across sectors. China's trade gap with India crossed $112 billion by March 2026, and it is now India's biggest trade partner, exceeding the United States.
Mukundan also said that a new "council" was needed for coordination between the Union government and states in order to resolve issues, similar to the GST Council, but focussed on sectors ranging from agriculture to power, land, education and health, all of which are politically sensitive.
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