Amid the Covid-19 pandemic, India is leveraging its status as the world leader in pharmaceutical manufacturing. However, if other countries make good on their plans to enhance their production capabilities, India’s exports could suffer in the longer run.
In a nutshell
- The Prime Minister of India Narendra Modi is aptly leveraging the country’s pharmaceutical manufacturing capacity as the Covid-19 pandemic unfolds
- New Delhi also takes advantage of the deficit in global leadership during the coronavirus crisis
- India exploits this deficit to enhance its economic position and international image by responding to needy countries’ calls for critical supplies
When the government of India began shaping its response to the Covid-19 virus in mid-January, it was horrified at the gaps in the country’s domestic medical provisions. Weeks were wasted as its health ministry fumbled procuring supplies from abroad, by which time the global scramble for everything from masks to respirators had become cutthroat. Simultaneously, frightened by a surge in demand from abroad, New Delhi imposed export bans on 26 medical products – despite India being the global manufacturing hub for generic drugs.
By the last week of March, the procurement of medical goods was so internationally sensitive that the Indian government handed the matter over to the foreign ministry. Since those nervous weeks, Prime Minister Narendra Modi’s team has become apt at leveraging the country’s pharma capacity and geopolitical strengths to navigate the pandemic.
The example of hydroxychloroquine (HCL) is telling. This innocuous anti-malarial drug was briefly touted as a fast-track remedy for Covid-19. India, the maker of about 60 percent of the world’s HCL supply, placed the drug on its export ban list. But it was then embraced by heavyweights like United States President Donald Trump and Brazilian leader Jair Bolsonaro as a miracle cure (and an alibi for their mismanagement of the pandemic).
The Chinese secured New Delhi’s promise not to support the U.S. campaign of branding the pandemic’s culprit as the ‘Wuhan virus’.
By late March 2020, Washington was urging New Delhi to lift its HCL ban given Mr. Trump’s obsession with the drug. The Modi government worked out a formula that if stocks equaled three times the estimated domestic demand, a medicine would be eligible for export. But this required Beijing to be on board as China manufactured a critical component for HCL. The Chinese came through – but first secured New Delhi’s promise not to support the U.S. campaign of branding the pandemic’s culprit, the SARS-CoV-2 virus, as the “Wuhan virus.” This concession allowed India to resume HCL exports in early April. But hours before India announced the lift of the HCL ban, President Trump muddied the waters by threatening to impose trade sanctions on imports from India.
A U.S. apology followed. Mr. Trump praised Prime Minister Modi in a tweet and U.S. officials promised deliveries of badly-needed viral testing machines. Within a week, HCL shipments went to more than a dozen countries. (Ironically, India’s medical authorities recommend HCL only as a prophylactic and restrict the use of the drug due to its unpleasant side effects.)
Mind the gap
India also took note that global leadership was strikingly lacking as the pandemic unfolded. The U.S. response to the disease became entangled in its domestic politics. The White House’s external policy was mostly concerned with attacking China and the World Health Organization (WHO). Beijing, confronted with public anger across the world, snapped, showing an angry face to most foreign governments. While New Delhi did not believe it could fill the leadership void, it saw an opportunity to improve India’s standing in far-flung parts of the world.
Aside from HCL, India began sending emergency shipments of all sorts of drugs across the world. Some requests surprised New Delhi. For example, the European Union requested 1,000 tons of paracetamol’s precursor, while the United Kingdom wanted three million packets of the current-formula painkiller on an emergency basis. “Who would have thought something like paracetamol would become a coin of diplomacy,” mused one Indian diplomat recently.
India cranks out between 60 to 70 percent of the world’s vaccines, exporting two-thirds of the doses it makes.
By the third week of May 2020, more than 130 countries had received medicines from India. These days, Prime Minister Modi or a senior Indian minister phones the recipient countries’ leaders every time shipments are made. A similar export push is starting in personal protective equipment (PPE) – the masks, gloves and gowns used by medical teams. India, initially an importer of gowns and gloves, is now the second-largest producer of PPE in the world.
The next medical battleground is expected to be over vaccines. India has limited development capacity in this area but compensates by establishing itself as the dominant player in vaccines’ production. It cranks out between 60 to 70 percent of the world’s vaccines, exporting two-thirds of the doses it makes. The Serum Institute of India alone, the world’s biggest vaccine producer, ships 1.6 billion doses a year at the cost of 50 cents per unit in its domestic factories. The company also has a production plant in the Netherlands.
The Modi government expects vaccine prioritization to become another source of contention – with countries clamoring to receive the precious vials first. It will take many months to inoculate the entire world. Both the U.S. and Chinese governments have been less than fully open in their pronouncements about multilateral vaccine development. Some of the Chinese projects are cloaked in secrecy.
In contrast to those practices, India’s many pharmaceutical firms and medical institutes have been encouraged to partner up with as many SARS-CoV-2 vaccine development efforts as they can. More than 30 of the 100-plus global programs have an Indian partner and 14 of them are India-based. New Delhi trusts that anyone wanting to produce billions of doses of a coronavirus vaccine at affordable prices will need to use Indian facilities. Also, the Modi government wants to ensure that a sufficient portion of the batches produced at home is set aside for India’s own use.
The last card New Delhi has to play is geopolitical. With President Trump’s America First policy appearing to extend to its Covid-19 response, India has strengthened the existing institutional tie-ups with the U.S. This includes its relationship with the most significant American supporter of vaccines, the Gates Foundation.
New Delhi will try to weave its medical capabilities into its outreach policies in Latin America, Africa and parts of the Middle East.
The Modi administration also takes into account Washington’s ambitious plan to create a healthcare supply chain structure to minimize China’s role once the pandemic is over. U.S. Secretary of State Mike Pompeo and senior American diplomats have been holding regular meetings with India, Japan, South Korea, Israel and other nations about such a network. Mr. Pompeo said of India and the U.S.: “We want to mesh the supply chains that both countries have access to in areas that are important for our national security.”
New Delhi has treated the country’s pharmaceutical industry as a means to provide its population with low-cost medicines. The broad business model has been Indian firms exploiting Western firms’ research to mass-produce affordable drugs, with profits coming mostly from exports. Until now, other than being a source of patent friction with some Western drug concerns, the pharma sector was not regarded as a foreign policy asset.
Post-pandemic, New Delhi will try to weave its medical capabilities into its outreach policies in Latin America, Africa and parts of the Middle East, and ride on the goodwill earned during the current crisis. The Modi team sees this as an inexpensive but impactful strategy for heightening India’s soft power. It cannot, at this point, match the funding and infrastructure capacity of China.
It is possible that, despite panicky predictions, the memory of Covid-19 will fade and global healthcare will revert to status quo ante. Indian exports could even suffer as many governments, including France and the U.S., have declared their intention to lessen their dependence on overseas medical supplies. Primarily motivated by concerns about China, such Western policies would undermine the Indian medical product industry.
The most ambitious scenario would be for the U.S. to implement what it currently plans: a refashioning of medical supply chains that excludes China or provides a parallel production platform outside of China. The Trump administration’s project incorporates India but seems to exclude other regions, for example Europe, which New Delhi would probably consider impractical.
This U.S. strategy, however, remains to be translated into policy. Its materialization would hinge on a host of variables. These include Washington’s capacity to put together such a pharmacology coalition and the White House retaining its interest in the project after the November presidential elections.