Material Insights · Understanding the Material World

Pharma starting materials and intermediates and Pharmaceuticals

Key starting materials and intermediates are the chemical building blocks of every API, and India, a large generic drug maker, bought about 72% of its bulk drug and intermediate imports from China in FY2023-24; the PLI scheme for bulk drugs has started domestic output but has not yet cut that share.

Pharma starting materials and intermediates (chemical) and Pharmaceuticals (industry): 3 relationships.

How they are linked

1. Building blocks of APIs

Physical flow · Strong · KSMs and intermediates → APIs → medicines

An API is made in a fixed sequence of reactions from a registered key starting material through defined intermediates, so the API maker cannot produce without them; two enterprise types in pharmaceuticals depend on them, rated up to 5 of 5.

  • 2 enterprise types that depend on them
  • 5 of 5 highest criticality, KSM and intermediate makers

For KSM and intermediate makers they are the core product, and API makers and CDMOs rate them 4 of 5 as feedstock. Because the starting material is named in the drug's regulatory filing, changing supplier generally needs requalification, so a buyer cannot quickly switch from a Chinese to an Indian source.

Enterprise types that depend on it:

  • Key starting material and intermediate makers: core product (criticality 5 of 5)
  • API manufacturers and CDMOs: feedstock (criticality 4 of 5)

Sources: Material Insights

2. Dependence on China

Shared risk · High in India · Chinese chemical makers → Indian API makers

Chinese chemical makers are the main low-cost source of many of these molecules, so a large part of India's API output rests on Chinese supply.

  • about 72% share of India's bulk drug and intermediate imports from China, FY2023-24
  • 66% the same share in FY2020-21
  • 26 APIs and their formulations whose export India restricted in March 2020

The risk showed in March 2020 when China's coronavirus lockdown disrupted supply: India restricted exports of 26 APIs and their formulations, including paracetamol, products that made up about 10% of its drug exports. API imports from China grew by around 30% in volume between 2021 and 2024, so the dependence has deepened rather than eased.

Sources: Digital Health News; CNBC (Reuters); Business Today

3. PLI for bulk drugs

Policy · Medium · Production incentives → domestic KSMs and APIs

India's production-linked incentive scheme pays makers of selected critical KSMs, intermediates and APIs on their sales so that domestic plants can compete with Chinese prices.

  • ₹6,940 crore outlay of the PLI scheme for bulk drugs, 2020-21 to 2029-30
  • 41 products covered
  • ₹1,362 crore estimated imports of pharma raw materials avoided, to March 2025

The scheme requires at least 90% domestic value addition for fermentation-based products and 70% for chemical synthesis. By March 2025 investment of ₹4,570 crore had created capacity for 25 KSMs, intermediates and APIs, with cumulative sales of ₹1,817 crore including ₹455 crore of exports, small against total imports, so the effect so far is a foothold rather than substitution.

Sources: Department of Pharmaceuticals, Government of India; The Week (PTI)

For investors

Key learnings

  1. Indian API and formulation margins depend on Chinese KSM and intermediate prices and availability, which India does not control.
  2. Because the starting material is fixed in each drug's filing, switching is slow, so domestic KSM makers win share mainly on new filings and PLI-supported products.
  3. PLI-backed KSM capacity is real but small: about ₹1,817 crore of cumulative sales to March 2025, against pharmaceutical imports of nearly $8 billion in FY2022-23 alone, about 60% of them bulk drugs.

What to track

  • India bulk drug and intermediate imports by origin: Whether the China share is falling (Monthly · DGCI&S, Pharmexcil)
  • Chinese export prices for major KSMs and intermediates: Cost pressure on Indian API makers (Monthly · China customs, industry price reports)
  • PLI bulk drug sales and commissioned capacity: Progress of domestic substitution (Yearly · Department of Pharmaceuticals, Parliament replies)

For policymakers

Key learnings

  1. India's medicine security rests on Chinese chemistry: about 72% of bulk drug and intermediate imports came from China in FY2023-24.
  2. The PLI scheme has created capacity for 25 products, but the import share rose from 66% to 72% between FY2020-21 and FY2023-24, so incentives alone have not reversed dependence.
  3. The scheme's value-addition rules (90% for fermentation products, 70% for chemical synthesis) aim at making the starting chemistry in India, not just the final API step.

What to track

  • Share of bulk drug imports from China: Headline measure of dependence (Yearly · Department of Pharmaceuticals, DGCI&S)
  • PLI products commissioned and capacity utilisation: Whether supported plants reach commercial scale (Yearly · Department of Pharmaceuticals)

India

India imported about 72% of its bulk drugs and intermediates from China in FY2023-24; the ₹6,940 crore PLI scheme for 41 bulk drugs had created capacity for 25 products and avoided an estimated ₹1,362 crore of imports by March 2025.

Sources

  1. Pharmaceuticals: materials, Material Insights (2026)
  2. Press note: PLI scheme for promotion of domestic manufacturing of critical KSMs, drug intermediates and APIs, Department of Pharmaceuticals, Government of India (2021)
  3. India imported 72% of its bulk drugs from China in FY24: reports, Digital Health News (2024)
  4. PLI scheme for bulk drugs led to import savings of Rs 1,362 cr: Govt (Rajya Sabha reply), The Week (PTI) (2025)
  5. Global supplier India curbs drug exports as coronavirus fears grow, CNBC (Reuters) (2020)
  6. Domestic API production has begun but imports still high, govt tells House, Business Today (2025)