The Active Pharmaceutical Ingredient (API) is the core chemical constituent of a medicine responsible for its pharmacological action, making it a fundamental concept in the pharmaceutical industry. In common Indian usage, APIs are also referred to as bulk drugs. A finished drug consists of the API, which produces the therapeutic effect, combined with inactive substances called excipients, which act as carriers or fillers.
India, often called the "Pharmacy of the World," is the third-largest producer of medicines by volume globally, yet it historically faced a structural vulnerability by importing roughly 65–70% of its bulk-drug requirement, with the majority of Key Starting Materials (KSMs) and many APIs sourced from China. This dependence, which led to supply chain risks and price fluctuations during the COVID-19 pandemic in 2020, was the problem that needed solving.
The mechanism to address this vulnerability is the Production Linked Incentive (PLI) Scheme for Bulk Drugs, launched in 2020 with an outlay of ₹6,940 crore. This scheme, a key provision of the Atmanirbhar Bharat initiative, provides financial incentives on incremental sales of domestically manufactured APIs and KSMs over a six-year period to encourage large-scale local production of approximately 53 critical molecules. The government also launched the Scheme for Promotion of Bulk Drug Parks with an outlay of ₹3,000 crore to provide common infrastructure like effluent treatment systems in parks approved in states like Andhra Pradesh, Gujarat, and Himachal Pradesh.
API manufacturing is connected to and regulated by the Drugs and Cosmetics Act, 1940, and the Drugs and Cosmetics Rules, 1945. These regulations, enforced by the Central Drugs Standard Control Organisation (CDSCO), mandate quality standards and licensing requirements. Specifically, Schedule M of the Rules prescribes Good Manufacturing Practices (GMP) for API production. The recent policy changes, like the PLI scheme, have not replaced the core regulatory framework of the Drugs and Cosmetics Act, 1940, but have amended the industrial policy by adding financial incentives to boost domestic capacity, marking a significant shift toward self-reliance in critical APIs.