Key Details
The report combines an assessment of India’s FY2025–26 trade performance with a detailed examination of the pharmaceutical sector’s competitiveness, import dependencies and future export opportunities.
Theme | Key Finding | Why It Matters |
|---|---|---|
Overall Trade Performance | Total merchandise and services trade reached $1.84 trillion, growing 5.4% in FY26 | Reflects resilience despite global trade uncertainty |
Services Exports | Services exports grew 9% in Q4 and account for a growing trade surplus | Continues to offset pressures from merchandise trade |
Merchandise Trade | Merchandise exports fell 2.8% while imports rose 11.9% in Q4 | Highlights ongoing external trade imbalances |
Export Markets | Export growth shifted towards Hong Kong, Singapore and China | Indicates changing geography of trade demand |
Pharmaceutical Sector | Contributes 1.7% of GDP and supports 2.7 million livelihoods | Remains a strategically important export sector |
API Dependence | China supplies 66–86% of India’s leading API imports | Creates supply-chain and healthcare security risks |
Innovation Gap | Indian pharma firms invest about 7% of sales in R&D, below global benchmarks | Limits movement into higher-value products |
Future Opportunity | Growth potential lies in biologics, biosimilars and advanced therapeutics | Critical for moving beyond low-margin generics |
Summary
Services Strength Is Supporting India’s Trade Performance, but Pharma Competitiveness Requires Upgrading
NITI Aayog’s eighth Trade Watch Quarterly finds that India’s external sector remained resilient during FY2025–26 despite geopolitical uncertainty, supply-chain disruptions and slowing demand in some major markets. Total merchandise and services trade reached $1.84 trillion, growing by 5.4%, with a strong services trade surplus helping offset weakness in merchandise trade. The report also devotes special attention to the pharmaceutical sector, identifying both India’s strengths in generic medicines and the challenges that could constrain future growth.
Services Exports Continue to Drive Trade Resilience
The report finds that India’s trade performance increasingly relies on services. During Q4 FY26, services exports grew by 9% to $111.1 billion, while services imports increased more modestly, generating a surplus of $60.4 billion. Over the past decade, India’s services exports have expanded at a CAGR of 10.3%, raising the country’s share of global services exports to 4.3%. This surplus helped cushion the impact of a widening merchandise trade deficit.
Merchandise Trade Faces Continued Headwinds
Merchandise exports declined by 2.8% in Q4 FY26, while imports increased by 11.9%, resulting in a larger goods trade deficit. The report also notes a gradual shift in export destinations, with stronger growth in Hong Kong, Singapore and China, while exports to traditional markets such as the United States, UAE and United Kingdom moderated.
India Remains a Global Generic Medicines Leader
The report highlights the strategic importance of the pharmaceutical sector, which contributes 1.7% of GDP and supports approximately 2.7 million livelihoods. India remains the world’s largest supplier of generic medicines by volume and a major vaccine producer. Its export strength is concentrated in formulations and retail medicaments, where it maintains a significant global presence.
API Dependence and Innovation Gaps Remain Key Challenges
Despite its export success, the report identifies important structural vulnerabilities. India’s pharmaceutical manufacturing ecosystem remains dependent on imported raw materials, with China supplying between 66% and 86% of major API imports. The report also notes that Indian firms invest only around 7% of sales in research and development, significantly below international benchmarks of 15–20%. Combined with lengthy patent processes and growing regulatory requirements in developed markets, these factors constrain movement into higher-value pharmaceutical segments.
Future Growth Depends on Moving Up the Value Chain
According to the report, future competitiveness will depend on expanding into biologics, biosimilars, advanced therapeutics and other high-value healthcare products. The paper highlights the importance of strengthening industry-academia collaboration, improving innovation ecosystems, streamlining regulatory processes and reducing critical import dependencies. It also points to ongoing initiatives such as PLI schemes, bulk drug parks and pharmaceutical cluster development as important building blocks for the sector’s next phase of growth.
What are Active Pharmaceutical Ingredients (APIs)?
Active Pharmaceutical Ingredients (APIs) are the biologically active substances that produce the intended therapeutic effect in a medicine. While India is a major exporter of finished pharmaceutical products, many of the raw materials and chemical intermediates used to manufacture these medicines continue to be imported, making API supply chains strategically important for both healthcare security and industrial policy.
Policy Relevance
Highlights the growing importance of services exports in supporting India’s external-sector resilience amid merchandise trade volatility.
Reinforces the need to reduce strategic API import dependence, particularly given the concentration of sourcing from a single country.
Strengthens the case for expanding pharmaceutical R&D and innovation capacity if India is to move beyond generic medicines into higher-value healthcare products.
Highlights the importance of regulatory and trade diplomacy, as non-tariff measures increasingly shape pharmaceutical market access.
Supports ongoing industrial policies such as PLI schemes and bulk drug parks, which aim to strengthen domestic pharmaceutical manufacturing capabilities.
Positions pharmaceutical competitiveness as both an economic and healthcare-security priority, linking trade policy with industrial resilience and public health outcomes.
Follow the Full News Here: TRADE WATCH QUARTERLY: Thematic Analysis – Pharmaceutical Trade (Jan-Mar, Q4, FY 2025-26)