API Manufacturing in India: Growth, Trends & Global Impact

API manufacturing in India plays a vital role in the pharmaceutical sector, with Active Pharmaceutical Ingredients (APIs) accounting for approximately 35% of market share.

The World Health Organization (WHO) says that an active pharmaceutical ingredient (API) is any drug or is a combination of medications used in finished pharmaceutical product (also known as FPP) to have a pharmacological effect or to directly affect the diagnosis, treatment, cure, mitigation, or the prevention of disease, or to have an immediate impact on restoring, correcting, or changing the physiological functions in people.

The global market for the Active Pharmaceutical Ingredients (APIs) has undergone rapid changes in recent years, driven by advancements in technology, new regulatory frameworks, and shifts in demand.

India is the third biggest producer of APIs, making up 8% of the world’s total. India has developed over 500 distinct APIs, and the WHO has added 57% of them to its prequalified list.

Experts predict that the API manufacturing market in India will reach $14.77 billion in 2025 and grow to $22.02 billion by 2030, with a compound annual growth rate (CAGR) at 8.31% from 2025 to 2030.

What is API Manufacturing?

API stands for “active pharmaceutical ingredient,” which means that it is the part of a medicine that works. An API is what makes a medicine work the way it should. It means that APIs are one of the two primary parts of medications. The remaining portion consists of excipients—chemically inactive substances that help facilitate the action of the API.

Because of this, APIs are very significant because they are what make a medicine work the way it does. However, it’s important to note that APIs by themselves do not qualify as complete medications. They need an excipient and must be processed correctly to be safe for use in medicine.

There are mainly two types of APIs:

Synthetic Chemical APIs: Manufacturers create these APIs by combining different chemicals, and people generally favor them because they are easier to produce and readily available. It is easier and cheaper to build these APIs in large quantities.

For example:

• Paracetamol (acetaminophen): People use it to lower their temperature and relieve discomfort.
• Ibuprofen: It is a common anti-inflammatory drug.

Natural Chemical APIs: Natural chemical APIs come from plants, animals, or minerals. These APIs play a vital role in therapies that depend on intricate natural substances.

For example:

• Morphine is taken from the poppy plant to help with pain.
• Digoxin is a drug that comes from the foxglove plant and is used to treat heart problems.

Why India is a Global API Hub

It’s not a surprise that India is the world’s largest producer of APIs. Multiple reasons have contributed to India’s strong position in the global API industry.

Government Initiatives: The Indian government has initiated the Production Linked Incentive Scheme (PLI) to boost drug production in India. The PLI programs are critical to the government’s goal of making Atma Nirbhar Bharat. It provides 15,000 crore INR in incentives for specific pharmaceutical products.  On February 24, 2021, the Union Cabinet gave the scheme the go-ahead.

Low-Cost Production: One reason India is a good global API supplier is that it has reduced production costs. Although it may not be as low as China’s, it’s lower than most other countries. The use of affordable materials and workers significantly reduces cost of production.

Advanced Infrastructure: The pharmaceutical business in India is one of the fastest-growing in the world. It is one of India’s best investment businesses, offering significant growth potential and importance. 

In the last few years, the government and commercial sectors have both seen a substantial increase in their research and development (R&D) and API production capabilities. India’s potential to emerge as a global API hub depends on its resource availability and a well-developed infrastructure.

Availability of Skilled Workers: India is home to many scholars and has one of the most skilled technical workforces in the world. Some of the world’s best scientists, chemical engineers, and pharmacists are developing innovative APIs in India. These professionals handle all the technical details of making APIs, from creating the necessary chemicals to writing the documentation and ensuring the quality is good.

Current Trends in Indian API Manufacturing

Global events, government policies, and technological advancements are rapidly transforming how developers create APIs in India. Here are some beneficial trends that will shape the future:

Domestic Production Push: India has been making it easier to produce key APIs domestically, reducing our reliance on imports. It is especially essential for necessary pharmaceuticals, because dependence on the raw materials could put national health security at risk.

Supply Chain Localization Post-COVID: Following COVID, our government’s efforts to stimulate domestic industry, particularly through the Production Linked Incentive (PLI), have gained momentum. Due to the supply chain problem caused during the COVID-19 pandemic, the government has initiated programs to produce bulk pharmaceuticals and medical devices for domestic use and export.

Green Manufacturing Practices: Green chemistry plays a very significant role in reducing the environmental harm of the API manufacturing. More and more people nowadays are adopting eco-friendly practices, including the use of solvents, reducing waste, and utilizing less energy.

Challenges Faced by Indian API Manufacturers

The production of API manufacturing in India is not without difficulties, despite its many benefits. To guarantee continued growth and worldwide competitiveness, several obstacles still need to be overcome.

Raw Material Dependency: API production requires a stable raw materials supply, especially in chemical intermediates. However, many of these resources originate from China. However, due to geopolitical conflicts, trade restrictions, and environmental laws, chemical-exporting countries have raised the raw material costs and disrupted their supply chains for Indian API makers in recent years. Indian API firms are producing more raw material and intermediates domestically to reduce the supply chain risks.

Regulatory Hurdles: Meeting FDA and EMA quality and regulatory criteria is one of India’s biggest API manufacturing concerns. Exporting APIs worldwide requires compliance with GMP and other international standards. Compliance requires technology, trained people, and infrastructure investments, making it difficult and expensive.

Indian API manufacturers are using advanced quality management systems to meet international requirements. Many organizations are building sophisticated manufacturing facilities with automation and digital monitoring systems.

Environmental Concerns: India has stricter environmental standards, especially in the chemical and pharmaceutical industries. API manufacturers use dangerous chemicals and generate waste, raising pollution and sustainability concerns. Breaching environmental regulations can result in penalties, operational shutdowns, and harm to a company’s reputation.

Indian API producers are going green to decrease their environmental impact. Many companies are purchasing solvent recovery systems, waste treatment plants, and energy-efficient machinery.

Future Outlook for the API Industry in India

API manufacturing in India appears to have a bright future because of robust growth and innovation indicators.

India holds the third position in global API production, contributing 8% to the international market. The country manufactures over 500 distinct APIs, representing 57% of those listed on the WHO prequalified list.

Analysts expect the Indian API market to grow at compound annual growth rate (CAGR) at 13.7% over the first four years, nearly 8% faster than the growth of the generic API market. Many venture capitalists and investors have found the Indian API market to be profitable.

India’s strong domestic market provides an additional benefit: a sophisticated chemical industry, a highly qualified labor force, strict quality and manufacturing standards, and affordable costs (about 40% lower than in the West) for establishing and running a modern factory.

Technology plays an essential role in transforming the API industry. AI-powered quality checks and automated production lines are only just two examples of how digital transformation is helping producers increase productivity, reduce errors, and expedite compliance.

Conclusion

More than just a manufacturing success story, the emergence of the API manufacturing in India represents a very significant development in the field of global healthcare. India is revolutionizing global access to reasonably priced, high-quality medications through innovative processes and robust bulk drug production.

Experts anticipate substantial growth in India’s API market between 2024 and 2035. The country is poised to lead the world as an API supplier, driven by increasing demand for generic preparations related to scientific advances and a strong focus on sustainability.

API producers in India are well poised to meet the future demand and explore new growth opportunities in the biopharmaceutical industry through innovation, sustainability, and optimization.