Experts speculate that the pharmaceutical industry‘s exclusion from US tariffs may be due to India’s position as the world’s largest producer of generic drugs.

President Donald Trump of the United States imposed an extra 25% duty on India on Wednesday, increasing the total tariff to 50%. Nevertheless, the tariffs do not apply to India’s pharmaceutical exports to the United States, which make up 35% of the country’s overall pharmaceutical exports. As part of the Section 232 probe, the industry is presently being examined.

According to Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance, the main cause of the exclusion is generic medication, which is essential to the US’s ability to provide cheap healthcare.

India is the world’s largest producer and offers the most reasonably priced medications. Almost 80% of generic medications worldwide are supplied by the nation’s pharmaceutical industry.

A recent study by India Ratings and Research (Ind-Ra) claims that the US healthcare sector may save a lot of money because to the low price and high value of Indian generic exports.

It also pointed out that during the previous few years, the US’s share of pharmaceutical sales has been gradually dropping. According to the paper, this is because of price erosion and how it affects margins and returns.

“The majority of Indian pharmaceutical companies operate a generic business in the US market, generating low operational profits. Nonetheless, Indian businesses have a sound balance sheet and a varied revenue model. Large cash holdings (10–11 percent of revenues) do not pose a significant risk to the sector’s liquidity, according to Vivek Jain, Director, Corporates, India Ratings & Research.

Additionally, the majority of businesses have a variety of funding sources and adequate headroom under debt covenants. Therefore, it is extremely unlikely that future tariffs will have a significant effect on Indian pharmaceuticals,” he continued.