Article’s

The formal ratification of the India-EU Free Trade Agreement (FTA) on January 27, 2026, marks a structural paradigm shift for the Indian pharmaceutical export sector. While mainstream economic discourse centres on tariff liberalisation, this research contends that the Mutual Recognition Agreement (MRA) concerning Good Manufacturing Practices (GMP) is the true operational catalyst. Historically, Indian exporters have been burdened by extreme Lead Time Variability arising from redundant, non-synchronised regulatory inspections at EU borders, forcing firms to maintain bloated Safety Stock levels as a buffer against bureaucratic delays. This study quantifies the inventory optimisation potential unlocked by the MRA’s removal of these non-tariff barriers. Utilising a Quantitative Simulation Research Design, the research models two supply chain environments: a pre-FTA baseline characterised by stochastic border disruptions (mean = 47.4 days, σL = 8.6 days), and a streamlined post-FTA Green Channel scenario (mean = 28.9 days, σL = 1.2 days). Applying the Probabilistic Safety Stock model (SS = Z × √(L·σD² + D²·σL²)) with 95% CSL, the simulation demonstrates an 86% reduction in required Safety Stock — from 14,190 units to 1,980 units per SKU. These findings are validated by a decisive F-Test (F-Stat = 51.34, p = 4.2 × 10⁻¹⁶). The study concludes that the MRA enables Indian firms to transition from a defensive Just-in-Case strategy to a lean Just-in-Time model, releasing approximately ₹610 Crores in working capital across a 1,000-SKU portfolio and generating ₹152 Crores in annual P&L improvement.