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India’s pharmaceuticals and medical devices industries are still hopeful that trade negotiations with the US could cut a fairer deal for both sides, after President Donald Trump announced a 25 per cent tariff rate on India on a social networking platform without divulging the finer details.
Trump on Wednesday called India’s tariffs on US exports among the highest in the world, with the most strenuous non-monetary trade barriers of any country, in a post on Truth Social. He also warned of an unspecified penalty on India over the 25 per cent tariff for buying Russian military equipment and energy.
Siddharth Mittal, managing director and chief executive officer (MD&CEO) of Biocon, said he believes that “open dialogue” would help.
"We value the longstanding friendship and economic partnership between India and the US. I believe that open dialogue and mutual understanding of issues are essential for trust and cooperation. I am sure that any differences regarding geopolitical concerns or trade policies and tariffs will be addressed through constructive and respectful negotiations, for the mutual benefit of both countries, sooner rather than later," Mittal told Business Standard, pinning his hopes on the trade talks between the two nations.
A senior official in an industry body that represents small- and medium-sized pharma companies in the country said: "We will have to wait and see. Mostly pharma will be excluded. We are waiting for the fine print."
There was lack of clarity among industry and analysts on whether Pharma has been exempt from the 25 percent tariff.
Manoj Mishra, partner and tax controversy management leader at Grant Thornton Bharat, said that pharmaceuticals are currently not part of the 25 per cent tariffs announced by the US, which is a big relief for India’s pharma exporters. “However, the strong language used by President Trump and ongoing investigations into drug imports mean that the risk is not over yet,” he said.
The US is the largest export market for Indian pharmaceutical companies, accounting for 31.35 per cent of the country’s overall pharma exports worth $27.8 billion. In turn, India imports pharma formulations worth around $800 million from the US.
The pharma industry, however, feels that even if a tariff is imposed, the competitiveness of local exporters would not be impacted in a major way as India has the low-cost generic drugs advantage. Several CEOs feel that generic drugs would be kept out of the purview of tariffs as a hike in prices would directly impact the common US citizen.
"China is not keen on playing in the generics field; it has pivoted to novel biotech. So, there is hardly any other major supplier for generics," said one Gujarat-based mid-sized firm promoter.
Meanwhile, medical device makers feel that India's competitiveness vis-a-vis China would not be impacted.
Medical Technology Association of India (MTaI) Chairman Pavan Chaudary said there is hope that the tariffs will tone down as the main competitor of the US is not India, but China. “A more insightful US administration would like to keep India on its side, rather than sending it into the Sino-Russian embrace. For that, I do hope that a more prudent deal on tariffs and reciprocal access to each other's markets would come through eventually,” he added.
Chaudary said that India may not be unfavourably affected compared to China, as the expected tariff to be imposed by the US on China is around 30 per cent, compared to 25 per cent on India. “However, the European Union (EU) may have a comparative advantage as their tariff rate stands at 15 per cent,” he added.
Moreover, the lack of clarity and dragging on the trade deal make the industry feel that negotiations are likely to continue.
Rajiv Nath, forum coordinator for the Association of Indian Medical Device Industry (AIMED) added that it would be premature and speculative to comment until something definitive is announced by a notification. “There have been too many proclamations on tariffs over the last four-to-five months, even as both the US and India continue to negotiate,” Nath said.
According to data from the Department of Pharmaceuticals (DoP), India’s total medical device exports for 2023-24 (FY24) stood at $3.78 billion till September 2024, of which $287.7 million worth of devices were exported to the US.
Nath added that if the final duty announced on medical devices is at least 15-20 per cent lower than applicable duty rate of the US on China, then there is a strong opportunity for Indian medical devices to increase their exports to the US market.
However, this is possible if the Indian companies are able to absorb the excessive high cost of regulatory approval of the US Food and Drug Administration (USFDA) for market entry and find that these costs to export are sustainable over the years. USFDA approval costs range from $9,280 to over $540,000, compared to the relatively low costs for US imports into India.
“US buyers are actively seeking to diversify their supply chain dependence from China, and India is a strong contender if we get our quality, pricing, and production capacity right,” he added.
However, Nath said that India may lose out to Indonesia and Vietnam in rubber-based products in competitiveness due to China-plus-one supplier sourcing with their lower tariff of 19 per cent.
Silver lining
Tariffs unlikely to hurt India’s pharma and medtech competitiveness, say experts
India could boost medtech exports if its tariffs are 15–20% lower than China’s
Expected tariffs: China 30%, EU 15%, India 25%
US is India’s top pharma export market with 31.35% share
In FY24, India’s medtech exports to the US totalled $287.7 mn of $3.78 bn
