The Aakhya Weekly #122 | From Ancient Wisdom to Modern Markets: Transforming India's Nutraceutical Landscape

Nov 15, 2024

In Focus: Blending Tradition with Innovation in India’s Nutraceutical Sector

by Aradhana Gupta

India's nutraceutical sector stands at a crucial juncture, balancing the immense potential and the structural challenges. Despite possessing a rich repository of traditional knowledge and natural resources, India's share in the global nutraceutical market, valued at approximately $400 billion, remains surprisingly low at under 2%. This underperformance highlights significant policy gaps that require immediate attention to unlock the sector's full potential and establish India as a global nutraceutical powerhouse. The sector's growth trajectory suggests it could reach $18 billion by 2025, yet, regulatory bottlenecks and fragmented policies continue to impede this potential.

From Charaka to Contemporary: India's Nutraceutical Heritage

India's relationship with nutraceuticals extends far beyond contemporary business opportunities, rooted in a 5000-year-old legacy. From the ancient texts of Charaka Samhita to the detailed nutritional sciences of Ayurveda, India has long understood the concept of "food as medicine." The term "nutraceutical" might be modern, but ancient Indian texts described "Pathya Ahara"—therapeutic foods that could prevent and treat diseases. This historical foundation, combined with the documented use of ingredients like turmeric, holy basil, and amla, provides unique advantages to India in the modern nutraceutical landscape. The challenge lies in translating this ancient wisdom into standardised, scientifically validated products that meet global regulatory requirements.

The Regulatory Labyrinth: Decoding India's Nutraceutical Policy Challenges

The Nutraceutical Sector Task Force’s establishment (TF) under the Council of Scientific and Industrial Research (CSIR) in 2021 marked a significant step toward addressing sectoral challenges. However, the current regulatory framework presents multiple challenges. The regulatory landscape governing India's nutraceutical sector presents a complex web of overlapping jurisdictions and policy gaps that significantly impede sector growth. The fundamental challenge is the absence of a dedicated regulatory framework specifically designed for nutraceuticals. The current system split between the Food Safety and Standards Authority of India (FSSAI), the Ministry of AYUSH, and various drug control authorities, creates a fragmented regulatory environment that often leads to confusion and compliance challenges for manufacturers and exporters.

The classification conundrum is a primary regulatory hurdle. Under current regulations, nutraceutical products often fall into multiple categories depending on their ingredients, claims, and intended use. A single product containing traditional herbs might require approvals from both FSSAI under the Food Safety and Standards Act and the AYUSH Ministry under the Traditional Medicines regulations. This dual oversight increases compliance costs, extends product launch timelines, and affects market competitiveness.

The health claims validation process presents another significant challenge. While FSSAI has established guidelines for health claims through the Food Safety and Standards (Health Supplements, Nutraceuticals) Regulations, the requirements often lack clarity regarding the level of scientific evidence needed. This ambiguity is particularly pronounced for products based on traditional ingredients with centuries of documented use but limited modern clinical validation. The absence of standardised protocols for validating traditional knowledge-based claims creates a barrier for companies seeking to market products with specific health benefits.

Furthermore, product standardisation and quality control regulations pose additional complexities. The current regulatory framework lacks comprehensive standards for many traditional ingredients, creating challenges in quality assessment and international trade. While the Bureau of Indian Standards (BIS) has developed some specifications, they often don't align with international standards such as those set by the United States Pharmacopeia (USP) or European Pharmacopoeia. This misalignment affects export potential and global market acceptance of Indian nutraceutical products.

The approval process for novel ingredients represents another regulatory bottleneck. Current regulations require extensive safety data for new ingredients, but the framework for evaluating traditional ingredients with historical safe use is yet to be addressed. The Novel Food Regulations under FSSAI, while necessary for ensuring safety, often lead to lengthy approval timelines that can discourage innovation and new product development. This particularly affects companies working with indigenous ingredients that have a traditional usage history and limited contemporary safety documentation.

The labelling and packaging regulations add another layer of complexity. Different regulatory bodies have varying requirements for product labelling, leading to confusion among manufacturers. FSSAI's regulations on claims and warnings often conflict with AYUSH Ministry guidelines for traditional ingredients, creating compliance challenges for products that bridge both categories.

Export regulations present additional challenges. The lack of harmonisation between Indian standards and international requirements creates barriers for exporters. While the recent introduction of Harmonized System of Nomenclature (HSN) codes has improved product classification for exports, the absence of mutual recognition agreements with major markets means Indian companies must often undergo duplicate testing and certification processes. The regulatory requirements for documentation and quality certification vary significantly across export markets, increasing compliance costs and complexity.

The enforcement mechanism itself requires strengthening. The current system faces challenges due to inadequate testing infrastructure, limited trained personnel, and varying interpretations of regulations across different states. This leads to inconsistent implementation of quality standards and creates uncertainty for manufacturers. The absence of a single-window clearance system means companies must navigate multiple regulatory agencies, each with its timelines and requirements.

The Nutraceutical Task Force's recent initiatives seem promising, however, they need further expansion to address these systemic challenges. A comprehensive regulatory overhaul is required to constitute clear jurisdictional boundaries, streamline approval processes, and harmonise standards in alignment with global requirements. The success of such a reform will depend on balancing consumer safety with industry growth while ensuring that India's traditional knowledge advantages are effectively leveraged within a modern regulatory framework.

Global Benchmarks: Lessons from International Success Stories

The global nutraceutical landscape offers valuable lessons in regulatory framework and market development. Japan's pioneering FOSHU (Foods for Specified Health Uses) system, introduced in 1991, revolutionised the industry by creating the world's first regulatory framework specifically for functional foods. This system has approved over 1,000 products and created a market worth over $25 billion. Similarly, South Korea's transformation through its "Health Functional Food Act" of 2002 led to market growth from $4.5 billion in 2015 to over $11.5 billion in 2023.

China's experience in modernising Traditional Chinese Medicine (TCM) into standardised nutraceutical products provides a particularly relevant model for India. Their success in getting traditional ingredients like ginseng and cordyceps accepted globally offers a roadmap for Indian ingredients. Chinese companies like By-Health and Sirio Pharma have become global leaders by investing heavily in R&D and establishing robust quality control systems that meet international standards.

Innovation and Technology: The Startup Revolution

India's nutraceutical startup ecosystem is driving significant innovation across the value chain. Bengaluru-based Nutrova has pioneered evidence-based nutraceuticals, conducting clinical trials on products - a rarity in the Indian market. Mumbai-based Wellness uses AI to analyse traditional Ayurvedic principles for personalised nutrition recommendations, while Pune-based TraceX Technologies applies blockchain technology for ingredient traceability.

The sector has seen remarkable innovations in delivery systems, with companies like Hyderabad-based Monitra Healthcare developing patent-pending technology for improved bioavailability. Direct-to-consumer brands are reshaping market dynamics, with companies like &Me securing significant venture capital funding and creating products specifically for the Indian market. These innovations demonstrate the sector's potential for value addition and global competitiveness.

The Reform Imperative: A Strategic Roadmap

The path forward requires a comprehensive policy overhaul focused on several key areas. First, establishing a unified regulatory framework under a single nodal agency would streamline approvals and ensure consistent standards. Furthermore, developing a research ecosystem requires a bridge between traditional knowledge and modern science, through public-private partnerships and dedicated funding mechanisms.

Quality infrastructure needs significant investment, including new-age testing laboratories, certification facilities, and specialised manufacturing units. The government's Production Linked Incentive (PLI) scheme should be expanded to cover more nutraceutical categories and support quality infrastructure development.

Future Horizons: Realizing the Vision

India's nutraceutical sector stands poised for transformation, but success depends on addressing these fundamental policy and infrastructure gaps. The global shift towards preventive healthcare and natural products presents an unprecedented opportunity. By leveraging its traditional knowledge, biodiversity, and growing innovation ecosystem, India can establish itself as a global nutraceutical leader. The journey from ancient wisdom to modern markets requires sustained policy support, infrastructure development, and a commitment to quality and innovation.

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Policy Papers

In the policy brief- Carbonated Beverages Industry in India: Tax Policy to Promote Growth, Innovation, and Investment, ICRIER’s Dr. Arpita Mukherjee suggests a fresh approach to GST for carbonated drinks. Mukherjee recommends a tiered tax system: 12% for zero-sugar beverages, 18% for low-to-moderate sugar content, and retaining 28% for high-sugar drinks. The brief argues that the current high, flat rate on all carbonated drinks is not only out of step with global health guidelines but also fails to promote healthier options.

By removing the additional compensation cess, Mukherjee suggests, India can foster a business environment more conducive to innovation, job creation, and new investments in the beverage sector Mukherjee also highlights the confusion in India’s current tax structure, which applies different rates to various beverages without a clear health basis, making it difficult for companies to innovate and for consumers to make informed choices. A streamlined tax policy could serve as a powerful tool for both encouraging reformulation toward healthier drinks and supporting Indian businesses.

For a deep dive into the recommendations, check out the full brief here.

The Aakhya Weekly