India currently contributes less than 2% to the global exports of nutraceuticals, although it has proven capability and credibility to have a bigger share. The reciprocal tariff measures introduced by the US in 2025, raising duties on several Indian nutraceutical imports to as high as 50%, risk derailing the industry from its transformative potential.

India’s nutraceutical market is valued at about $22 billion (as of 2025), while the global nutraceutical economy is expected to touch nearly $450 billion. With its strong plant-based ecosystem, scientific capability, and processing strength, India has every reason to become a global leader in this space.

But what may appear to be merely a technical reclassification under the US tariff regime actually has serious commercial implications. By taxing the same molecule differently depending on the end use rather than chemical identity or scientific basis, the policy effectively penalises efficiency and scale.

The real challenge lies in classification versus scientific reality

The issue isn’t the existence of tariffs; it is how they are being applied. When identical carotenoids or botanical extracts attract different tariff treatment simply

because of classification semantics, distortions are inevitable. In real terms, this has raised input costs by nearly 35–50% in certain categories, directly affecting pricing, margins, and export competitiveness.

For an industry working on thin margins, operating in some of the most heavily regulated markets in the world, there is a danger of strategic uncertainty. In a region like the US or Europe, where market success is defined by trust, consistency, affordability, and scientifically established credibility, this randomness does not put India on a favourable competitive footing. It also risks the existence of small and medium companies as the cost pressure increases.

Why this matters for supply chains and growth

This is not just about exporters. It’s about global health supply chains. Many active plant-based nutraceutical ingredients, especially priority carotenoids and botanicals, are not amenable to large-scale farming efforts in the US because of agro-climatic conditions. The major gap is fulfilled by India because of its natural resources, scientific capabilities, and manufacturing strength.

When tariff policy penalises such essential inputs, it discourages investment, slows innovation, and weakens export momentum. The impact spills over into functional foods, dietary supplements, and a wide health ecosystem that depends on predictable and scientifically aligned cost structures.

Domestic substitution in the US isn’t realistic

The idea of replacing Indian supplies from within the US cannot be considered a feasible alternative. The cultivation of ingredients like turmeric, boswellia, ashwagandha, and ginger, and even botanicals, depends heavily on geography,

climatic conditions, and even farmed practices. Large-scale production, therefore, cannot happen in the US.

Policy actions that can help immediately

India’s Ministry of Commerce and Industry should urgently take forward negotiations with the USTR (United States Trade Representative) on two priority tracks:

Option 1: Expand Annexure III exemptions In September 2025, only a narrow list of botanicals such as aloe, Tasmanian pepper, coconut, and centella were exempted. Subsequently, exemptions were extended to cinnamon, turmeric, and ginger in certain applications showing a willingness to acknowledge genuine non-substitutable supply needs.

The next logical step is to include lutein, zeaxanthin, Alpinia, and Valerian used for dietary supplements. These cannot be cultivated in the US at commercially viable scale or quality. OmniActive Health Technologies has already submitted this recommendation to the Government of India, seeking urgent engagement with USTR.

Option 2: Reclassify carotenoids under Chapter 32 Carotenoid preparations for human consumption should be placed alongside existing colorants such as synthetic carotenoid coloring matters (HS Code 3204.18.00), annatto, paprika, and other natural colorant extracts currently classified under Chapter 32. A simple definitional update—“carotenoid colouring matters and human consumption preparations thereon”—would remove arbitrary distinctions between carotenoids used for food coloring versus dietary supplementation and align tariffs with scientific truth.

Both approaches draw on precedent. India’s pharmaceutical exports remain exempt because of their indispensable role in global healthcare. The same logic applies to essential botanical nutrition, where the US. has no domestic substitute industry to protect.

The larger opportunity for India

This tariff anomaly requires not only correction but also offers an opportunity. Due to greater awareness and emphasis on preventive wellness as well as an ageing global population, nutraceuticals products demand may see a huge boost and India can play a leading role since we have all that it takes.

However, for this opportune moment to be fully harnessed, the system of tariffs needs to have more science than semantics. This will help promote more exports, encourage foreign investment, make more robust value chains, create jobs, and consolidate India’s position as a trusted international business partner in health, wellness, and nutrition innovation.

(The author is Executive Chairman & Managing Director, OmniActive Health Technologies Ltd. Views are personal)