Shares of Indian drugmakers experienced a significant surge of 5% on Thursday, defying the broader stock market trend, following the announcement that U.S. President Donald Trump's administration has exempted pharmaceutical products from the list of imports affected by reciprocal tariffs. This development is crucial for the Indian pharmaceutical sector, which relies heavily on exports to the United States.
President Trump recently imposed a 26% reciprocal tariff on Indian imports as part of a broader strategy that includes a 10% baseline tariff on all imports set to take effect on April 5. However, the administration clarified that these tariffs would not apply to certain categories of goods, notably pharmaceuticals. This exemption is viewed as a positive indicator for India's pharma sector, particularly because a significant portion of Indian pharmaceutical products are exported to the U.S.
According to Sonam Srivastava, the founder and fund manager at Wright Research PMS, the exemption is a vital sign for the Indian pharmaceutical industry, which has a substantial export exposure to the U.S. market. Notably, nearly a third of Indian pharmaceutical products sold internationally are imported by the United States. Data from the government-supported trade body Pharmexcil reveals that India's pharmaceutical exports to the U.S. surged by 16% in the last fiscal year, reaching approximately $9 billion.
Analysts from Jefferies expressed optimism regarding the current stability of the pharma sector, suggesting that industry stakeholders can "breathe easy for now." However, they also issued a cautionary note, indicating that the possibility of a pharma-specific tariff order cannot be entirely dismissed in the future. This highlights the volatile nature of trade regulations and their potential impact on the pharmaceutical market.
The Indian Pharmaceutical Alliance (IPA), which represents some of the country's leading drug manufacturers, emphasized the importance of this exemption. They stated that the decision to exempt pharma imports underscores the critical role that affordable, life-saving generic medicines play in public health, economic stability, and national security. Such medicines are essential not only for individual health but also for the overall well-being of the population.
In conclusion, the recent developments regarding U.S. tariffs on Indian pharmaceutical products present a mixed landscape. While the exemption provides immediate relief and optimism for the sector, the potential for future tariffs remains a concern. As the industry continues to adapt to these changes, its resilience and importance in global health will be increasingly significant.
Reporting by Kashish Tandon in Bengaluru and Rishika Sadam in Hyderabad; Editing by Savio D'Souza.
