The next move on India’s trade chessboard

Few global leaders have kept the world of trade on its toes quite like the United States President Donald Trump. His latest announcement of a phased tariff regime on pharmaceutical imports into the US once again has sent ripples across the Indian pharma industry, triggering discussions on exports, competitiveness and the future of one of India’s largest overseas markets. As explored in this month’s cover story, the development is yet another reminder that in today’s world, trade policy can alter industry sentiment almost overnight 

This feature, however, begins where that conversation leaves off. If tariffs represent one side of the trade equation, Free Trade Agreements (FTAs) represent the other. Every Free Trade Agreement is, in essence, a wager. A wager that easier market access today will deliver economic gains years later. New Delhi has been placing that bet with increasing conviction. Since 2021, India has concluded nine FTAs across 38 countries, signalling a shift in its trade strategy. For pharma, one of the country’s largest export sectors, the expectation is clear. The outcome, however, is far less certain. 

Indian pharma built its global standing long before the current FTA momentum gathered pace. That raises an important question. Can preferential trade agreements fundamentally alter the industry’s competitive position, or do they merely provide an advantage that still has to be earned through quality systems, regulatory credibility, innovation and manufacturing excellence? 

More than a tariff story 

Much of the public discourse around FTAs tends to revolve around tariff concessions. Yet, for pharma, tariffs have rarely been the defining factor in determining export success. In many developed markets, pharma products already attract relatively low or zero import duties under existing WTO commitments. The latest generation of FTAs therefore offers value in a different way: by making trade more predictable, reducing operational friction and creating an environment that encourages long-term commercial relationships. 

For businesses making in vestments that often take years to translate into commercial returns, predictability carries considerable weight. Vivek Valsaraj, CFO, Piramal Pharma, believes the significance of FTAs extends well beyond their impact on duties. “India’s expanding FTA network should be viewed as more than a trade facilitation mechanism. At their core, FTAs bring together interdependent economies, create greater predictability in commercial relationships and provide businesses with the confidence to make long-term investments.” 

That perspective is echoed by Neeraj Bansal, Partner and Head, India Global, KPMG in India, who argues that the real commercial gains increasingly lie in easing the movement of business rather than merely lowering import costs. According to him, agreements such as the India–UAE CEPA, India–Australia ECTA and the India–UK CETA are designed to strengthen regulatory cooperation, improve customs efficiency and enhance policy certainty, making it easier for companies to operate across borders. As India’s pharma exports crossed USD 31 billion in FY26, reducing such business friction is becoming increasingly important as companies expand across regulated and high growth markets. 

For an industry whose global reputation was built on manufacturing scale, cost competitiveness and quality rather than preferential trade access, this distinction is significant. As Dr Vellaian Karuppiah, COO, Shilpa Medicare, points out, “India’s export strength was built on manufacturing scale, cost competitiveness, quality systems and one of the largest bases of regulator-approved facilities outside the US — not on tariff preferences.” In his view, the significance of the latest agreements lies less in tariff reductions and more in the regulatory cooperation, customs facilitation and greater predictability that accompany them, enabling companies to move from opportunistic, priceled exports towards deeper, long-term supply relationships.

Do FTAs really create a competitive advantage? 

Paradoxically, the biggest value proposition of modern FTAs may have very little to do with tariffs. For the pharma industry, preferential market access has never been the sole determinant of export success. Instead, the debate is increasingly shifting towards what happens beyond the tariff schedule — regulatory cooperation, customs facilitation, institutional cooperation and the ability to reduce the non-tariff frictions that often determine how quickly and efficiently medicines reach global markets. 

It is this distinction that many industry leaders believe is often overlooked. As Bansal highlights, “FTAs should be viewed as enablers rather than standalone growth drivers.” He argues that market access today is increasingly shaped by ease of doing business rather than import duties alone, with provisions that improve regulatory cooperation, customs efficiency and business certainty often delivering greater commercial value than tariff concessions themselves.

The same sentiment resonates from the manufacturing floor. Dr Karuppiah, believes “Tariff concessions are essentially a one-time reset; the durable advantage sits with the other three,” referring to regulatory compliance, manufacturing excellence and supply-chain resilience. While lower tariffs may create an initial commercial advantage, sustaining that advantage depends on consistently meeting stringent quality standards, navigating regulatory inspections and ensuring uninterrupted supply. 

The commercial implications extend beyond exports to investment decisions themselves. Valsaraj notes, “Tariff benefits are certainly helpful, but in our view, they are only one part of a much larger equation.” In an environment marked by geopolitical shifts and supply-chain realignments, he believes the certainty created by FTAs encourages businesses to make long-term manufacturing investments and forge deeper commercial partnerships. 

That perspective extends to the research-based pharma industry as well. According to Anil Matai, Director General, OPPI, investment decisions are influenced as much by confidence in intellectual property protection, regulatory stability and the ability to commercialise innovation as they are by market access itself. In that sense, FTAs are becoming less about lowering barriers to trade and more about signalling a stable, predictable environment for long-term investment. 

Taken together, the message is clear. FTAs may widen the doorway to international markets, but walking through it still demands capabilities that no trade agreement can confer. For Indian pharma, competitiveness will continue to be earned through quality, regulatory credibility, innovation and execution rather than tariff concessions alone. 

Beyond volume, towards value 

If the last three decades established India as the world’s pharmacy, the next may well determine what kind of pharmacy it becomes. The industry’s global leadership has largely been built on affordable generics, vaccines and cost-efficient manufacturing. Increasingly, however, export growth is expected to come from products where scientific capability, technical complexity and regulatory expertise command a premium over manufacturing scale alone. 

For integrated manufacturers and CDMOs, this shift presents a significant opportunity. Valsaraj, believes “the greatest opportunities are likely to arise in high-value segments where integrated players capable of supporting the full product lifecycle—from development through commercial manufacturing— can differentiate themselves through technical capabilities, quality excellence and execution reliability, rather than cost alone.” He points to growing global demand for sterile injectables, complex formulations, antibody-drug conjugates (ADCs), peptide technologies and integrated CDMO services, particularly across North America, Europe, the UK and Japan. 

Dr Karuppiah, sees a similar shift unfolding within pharma manufacturing. “In plain generics, price competition is intense and a tariff concession is quickly competed away. In complex formulations, injectables, biologics, biosimilars and other specialty segments, the barriers to entry — regulatory, technical and logistical — are far higher, so reduced friction and regulatory cooperation disproportionately help companies that already have depth in these areas.” In other words, FTAs may not fundamentally change the economics of conventional generics, but they could improve market access for companies already positioned in differentiated, higher value segments. 

The opportunity, however, extends beyond expanding exports. It also presents a chance for India to deepen its role within global pharma value chains. According to Matai, “The next opportunity lies in moving up the value chain—from being recognised primarily for scale and affordability to becoming a global centre for innovation-led manufacturing.” He believes this transition will depend on strengthening capabilities in biologics, advanced therapies, specialty medicines, novel drug delivery systems and other technology intensive areas, supported by continued investments in research infrastructure, scientific talent and advanced manufacturing. 

Yet, higher-value exports demand higher-value capabilities. As pharma supply chains become increasingly specialised, manufacturers will need to strengthen automation, digital manufacturing, integrated development capabilities and supplychain resilience. Dr Karuppiah emphasises the importance of backward integration, API and key starting material diversification, digitised and traceable manufacturing, scalable capacity and stronger ESG credentials. Similarly, Valsaraj believes competitive advantage will increasingly depend on advanced manufacturing technologies, integrated development and manufacturing solutions, innovation led capabilities and the ability to serve as reliable long-term partners rather than simply efficient manufacturers. 

On the other hand, Bansal, argues that the companies most likely to benefit from FTAs will be those that view them as part of a broader growth strategy rather than a standalone trade advantage. He believes firms investing in innovation, complex generics, biosimilars and specialty medicines, while combining strong regulatory track records with reliable manufacturing operations and diversified supply chains, will be better positioned to convert preferential market access into sustained business growth. 

Collectively, the experts suggest that the next phase of India’s pharma exports will not be defined by greater volumes alone. Rather, it will depend on whether Indian companies can leverage expanding market access to build deeper capabilities, strengthen innovation and move decisively towards higher-value manufacturing.

What still needs fixing? 

While FTAs can create favourable conditions for trade, they cannot, on their own, transform India’s pharma export trajectory. Their success will ultimately depend on how effectively they are complemented by domestic reforms that strengthen the industry’s competitiveness, resilience and innovation ecosystem. 

A recurring theme across industry voices is the need to reduce structural vulnerabilities within the supply chain. Dr Karuppiah, believes that reducing dependence on imported APIs and key starting materials remains critical to strengthening supply security. In his view, market access created through FTAs will generate lasting value only if it is supported by continued investment in innovation, quality infrastructure and regulatory credibility at home. 

Adding to it, Matai emphasises that intellectual property protection and stronger incentives for R&D, clinical development, advanced manufacturing and talent development will be essential to support long-term investment. 

Among this discussion, Bansal, offers a note of caution. While FTAs undoubtedly create new opportunities, they also expose Indian companies to stronger global competition and increasingly demanding regulatory expectations around quality, sustainability, data integrity and supply-chain traceability. Companies that assume lower trade barriers will automatically translate into higher exports risk overlooking the execution required to compete in these markets. Instead, he believes the greatest gains will accrue to businesses that combine market access with innovation, operational excellence and a deep understanding of evolving customer and regulatory requirements. 

In brief

Ultimately, trade agreements, much like tariffs, are ultimately instruments of policy. Their significance lies not merely in what they promise on paper, but in how effectively industry translates those promises into commercial outcomes. As global supply chains continue to evolve and geopolitical considerations increasingly shape pharma trade, India’s expanding FTA network offers an important opportunity. Whether that opportunity becomes a lasting competitive advantage, however, will depend less on the agreements themselves and more on the capabilities, innovation and regulatory credibility that Indian pharma brings to the table. 

neha.aathavale@expressindia.com

nehaaathavale75@gmail.com

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