Nearly 12 years later, while the world is still feeling the impact of the 2008 financial crisis, COVID-19 has caused an even bigger problem for policy makers around the world. The virus has brought life close to a stand-still on account of its highly contagious nature, leading to major disruptions in the global supply chain. And while the numbers in China have fallen, the rest of the world is now reeling from the impact, especially the US and Italy. Raghuram Rajan, in a recent article on Project Syndicate has pointed out that this crisis has exposed the underlying weaknesses in national economies, health systems, and political ideologies.
While the US-China trade war is on a temporary hiatus, with both considering tariff cuts to spur trade, a lot more has to be done to bring back the global supply chain to its pre-COVID-19 levels. In this context, India’s trade, so far, has been aimed at importing organic chemicals from China and exporting finished medical formulations. For instance, the US had asked that India lift its ban on 24 pharmaceutical ingredients and medicines made in the country.
Figure 1: Imports of Organic Chemicals (January 2019 – March 2020)
Figure 1 shows the aggregate trend in imports of organic chemicals incl. bulk drugs and intermediates. A clear downward trend can be observed here. India imports bulk drugs and intermediates. The trend here is mirrored in figure 2 below which charts the trend in antibiotics imports.
Figure 2: Imports of Antibiotics (January 2019 – March 2020)
In this context, it is imperative to consider imports of antibiotics and exports of finished pharmaceutical formulations. In figure 2, we can observe a downward trend in the imports of antibiotics. However, there was a sudden increase in imports in March 2020. This could have been due to meet the increased demand in pharmaceutical products as India is one of the leading manufacturers in this industry globally. Higher imports could’ve been to meet domestic demand.
In figure 3 below, exports of finished pharma formulations can be characterised by an upward trend albeit almost flat. What is interesting to observe here is the sudden jump in exports from in January 2020. While the onset of COVID-19 around world happened much later, Indian exports of pharma products have been on a growth trajectory. Another interesting aspect of the trend is that exports declined in March 2020. This is interesting at a time, as stated above, when the US had asked India to lift the ban on certain pharma products
Figure 3: Exports of Pharmaceutical Products (January 2019 – March 2020)
The US had also, specifically, asked for the lifting of an export ban on Hydroxychloroquine (under finished formulations – HS 3004), an antimalarial drug that India produces at a very low cost, as the tests had yielded promising but inconclusive results. India has been advocating the use of the drug to its healthcare workers as a preventive measure. Figure 4below,charts the trend in Indian exports of Hydroxychloroquine. When comparing the trend with figure 3, it appears that the trend in this product is mirrored in the trend of aggregate Indian exports of finished pharma products for January and February 2020. However, we can observe that exports of Hydroxychloroquine increased in January 2020with an even bigger rise in March. This rise can be attributed to an increased demand of this formulation as a potential cure.
Figure 4: Exports of finished formulations of Hydroxychloroquine
Given the worldwide economic shutdown, medical supplies are key to helping overcome the health crisis. In this context, partial lifting of the export ban is a way forward to tackle the COVID-19 pandemic problem. India has a unique position in this situation as the world’s largest, and cost effective, manufacturer of pharmaceutical products. Leveraging this position would not only help alleviate the inevitable economic crisis that would follow, but would also open up avenues for favours from other economies post COVID-19.
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