What India Inc Can Learn From Pharma’s TRIPS Journey As Global Tariffs Rise: Economic Survey

Modern sectors now facing tariff-driven external shocks must learn this lesson: competitiveness must be developed before it is demanded, the Survey stated.

By strengthening internal capabilities early on, Indian pharma firms positioned themselves to enter and grow in regulated export markets.

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India Inc can draw inspiration from the domestic pharma industry, which transformed itself in the aftermath of the TRIPS Agreement in 1995, to deal with an unpredictable global tariff regime, according to the Economic Survey 2025-26.

The pharmaceutical sector, which had expanded under the process-patent regime of the 1970 Patent Act, faced a sudden change in its operating environment when the TRIPS-compliant product-patent regime took effect in 1995.

This shift challenged the very foundation of India's competitive advantage, reverse engineering, and cost-efficient process innovation.

However, the manner in which the sector responded offers a compelling template for industries currently confronting rising external trade barriers, especially tariff escalations in major markets, the Economic Survey stated.

The new regime enabled Indian firms to legally replicate patented drugs by developing alternative production pathways, thereby creating one of the most affordable pharmaceutical ecosystems in the world.

The earliest and most important response to the TRIPS shock was a clear shift toward developing internal capabilities and the Indian pharmaceutical companies moved beyond simple process improvements, the Economic Survey stated.

They began investing heavily in formulation science, transitioning R&D from reverse-engineering existing drugs to creating new chemical entities, cost-efficient Novel Drug Delivery Systems, and complex generics that meet global regulatory standards, it stated.

Industry-wide R&D spending grew from Rs 1,250 million in FY94 to nearly Rs 209.8 billion by FY19, it added.

This expanded scientific and technological foundation fostered innovation-led competitiveness.

By strengthening internal capabilities early on, Indian firms positioned themselves to enter and grow in regulated export markets.

This is a strategic lesson for modern sectors now facing tariff-driven external shocks: competitiveness must be developed before it is demanded, the Survey stated.

"In the current situation of an unpredictable global tariff regime, India Inc can draw inspiration from the pharmaceutical sector to capitalise on this situation to its advantage.

"India Inc must focus on capability building through strong R&D, Market diversification to reduce dependence on a single market and build resilience, and partnership-driven models such as co-development, licensing, and contract manufacturing to help reduce risk,” the Economic Survey stated.

Additionally, strategic consolidation is necessary to expand in capital- and compliance-heavy environments, it added.

Elaborating further, the Economic Survey pointed out that the second primary strategic response the pharma industry undertook was “rapid market diversification”.

As TRIPS-era constraints narrowed domestic opportunities, Indian pharmaceutical firms pivoted outward, targeting regulated markets such as the US and Europe by filing large-scale Drug Master Files (DMFs) for APIs and Abbreviated New Drug Applications for generics.

India’s global share of DMF filings rose sharply from 14.5 per cent in CY 2000 to 48.7 per cent by CY 2007, with 331 active DMF filings by India in 2019.

These filings helped the pharmaceutical industry penetrate these markets despite the restrictions of the TRIPS agreement.

This demonstrated a core structural insight: over-reliance on a single market magnifies vulnerability, while multi-market exposure insulates firms from tariff shocks. Recognising the need for distribution access and regulatory footholds, Indian firms undertook targeted acquisitions abroad.

These moves enabled a local presence in developed markets, improved compliance, and accelerated the adoption of technology.

By the early 2010s, India had become the world’s largest supplier of affordable generics, responsible for nearly 20 per cent of global supply, the Economic Survey stated.

Export markets diversified, regulatory credibility deepened, and the innovation pipeline expanded, it added.

“What began as an existential threat evolved into a catalyst for global leadership. This strategic realignment translated into a substantial expansion of India’s pharmaceutical exports. Between FY01 and FY25, pharmaceutical exports increased from USD 1.9 billion to USD 30.5 billion in FY25, representing a nearly 16-fold rise driven by market diversification, regulatory alignment, and enhancements in capability,” it stated. 

(Disclaimer: This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)

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