Abstract:It was argued in the context economic reforms in pharmaceuticals sector, particularly in the context of changing patent regime, that growth in exports would be restricted, imports would get a fillip and balance of trade would be adversely affected. The paper looks into the recent experience in exports and imports of drugs and pharmaceutical products. It is found that there is a tremendous growth in the exports. The focus of exports has shifted from intermediates and bulk drugs to formulations. The expiry of patents on drugs worth billions of dollars in the near future, would provide a big opportunity for Indian generic producers. However, the expansion of formulation exports is increasingly facing challenges from various corners-increasing application of non tariff barriers by importing countries, authorised Indian generics being targeted by global anti-counterfeit drive and competition from China. Import of formulations did not increase as has been anticipated. Paper also finds that there is a negative and growing trade balance, owing to the import of intermediates and bulk drugs. The industry is now increasingly adopting the strategy of importing intermediates and bulk drugs and processing them into formulations. The removal of ratio parameter linking the production of intermediates and bulk drugs to the production of formulations has eliminated compulsions on the indigenous production of intermediates and bulk drugs.