Mumbai: India’s pharmaceutical industry is expected to post steady revenue growth in the current fiscal year, demonstrating resilience and strategic adaptability amid mounting global challenges. According to ratings agency ICRA, the sector is projected to grow by 7–9 per cent in FY2026, driven by robust performance in domestic and European markets, even as the outlook for the United States, its largest export destination, turns cautious.
The domestic market remains a key pillar of growth, with ICRA forecasting an 8–10% increase in revenues. This is supported by deeper rural penetration, expansion of sales forces, and continued momentum in chronic therapies. Companies have also benefited from new product launches and regular price revisions, which have helped offset subdued volume growth in branded generics. Government measures such as Goods and Services Tax (GST) exemptions and rate reductions on select medicines and medical supplies have further improved affordability and access, aligning with broader healthcare inclusion goals.
In Europe, Indian pharmaceutical firms are expected to record 10–12 per cent revenue growth, following an 18.9 per cent increase in FY2025. This performance is attributed to the launch of nicotine-replacement therapies and other specialty products, including injectables and respiratory drugs. The region continues to offer opportunities for Indian companies to diversify their portfolios and reduce dependence on the US market.
By contrast, growth in the United States is projected to slow to 3–5 per cent in FY2026, down from nearly 10% in the previous year. The decline is largely due to price erosion and falling sales of key drugs such as lenalidomide. Regulatory scrutiny from the US Food and Drug Administration remains a persistent challenge, with warning letters and import alerts delaying product launches and triggering penalties. These issues also increase compliance costs, putting pressure on margins.
Adding to the uncertainty is the recent imposition of 50 per cent tariffs by the US on Indian imports across multiple sectors, effective from August 27, 2025. While pharmaceuticals have not yet been included, the possibility of future inclusion remains a concern for exporters. The proposed ‘most favoured nation’ pricing policy by the US government, aimed at addressing global drug price disparities, could also impact Indian companies operating in that market.
Despite these headwinds, operating profit margins for Indian pharmaceutical firms are expected to remain stable at 24–25 per cent, supported by lower input costs, improved operating leverage, and a growing share of specialty products. Liquidity remains healthy, with companies maintaining sizeable cash reserves and liquid investments.
The sector’s strategic adaptability is evident in its investment plans. ICRA estimates total capital expenditure for its sample set of 25 leading companies, accounting for around 60 per cent of industry revenues, to reach ₹42,000–45,000 crore in FY2026. This includes ₹25,000 crore in acquisitions aimed at expanding geographic and therapeutic footprints. While leverage is expected to rise modestly, with Total Debt/OPBITDA increasing to 1.1–1.2x by March 2026 from 0.8x a year earlier, the overall financial position remains sound.
Research and development spending is projected to stay at 6–7 per cent of revenues, with a growing focus on complex molecules and specialty products. This shift reflects a broader industry trend towards innovation and differentiation, as companies seek to move beyond traditional generics and build more resilient business models.
ICRA’s outlook for the sector remains Stable, underpinned by sustained demand in both domestic and export markets, strong balance sheets, and robust earnings. However, the coming quarters will test the industry’s ability to navigate regulatory risks, tariff uncertainties, and evolving market dynamics.
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