New Delhi, September 18 — India’s pharmaceutical industry is projected to register a healthy revenue growth of 7–9% in FY2026, driven by robust performance in domestic and European markets, even as headwinds persist in the United States, according to a sector outlook released by rating agency ICRA.
The domestic market is expected to expand by 8–10%, supported by sales force expansion, deeper rural penetration, improved productivity of medical representatives, and new product launches—particularly in chronic therapies such as diabetes, cardiac care, and oncology. ICRA’s sample set of companies reported a 10.3% year-on-year growth in Q1 FY26, following an 11.6% rise in FY25, underscoring the sector’s resilience.
Europe is forecast to contribute 10–12% growth, building on an 18.9% surge in FY25. The region continues to offer steady traction for Indian drug makers, especially in specialty and complex molecules.
In contrast, the US market—India’s largest pharmaceutical export destination—is expected to moderate, with growth slowing to 3–5% in FY26 from nearly 10% in FY25. The decline is attributed to pricing pressures, regulatory scrutiny from the USFDA, and falling sales of key generics such as lenalidomide. Compliance issues, including warning letters and import alerts, have led to delays in product launches and increased remediation costs, impacting profit margins.
Despite these challenges, operating profit margins for ICRA’s sample entities are projected to remain stable at 24–25%, aided by favorable raw material prices, improved operating leverage, and a rising share of specialty products. Research and development (R&D) spending is expected to hold steady at 6–7% of revenues, with companies increasingly focusing on complex therapies over commoditized generics.
ICRA also highlighted recent policy support, including GST exemptions and rate cuts on select lifesaving drugs and medical supplies, which are expected to enhance affordability and align with India’s broader healthcare inclusion agenda.
The report maintains a “stable” outlook for the sector, citing strong balance sheets, healthy liquidity, and strategic investments—including an estimated ₹42,000–₹45,000 crore in capital expenditure for FY26, of which ₹25,000 crore is earmarked for inorganic growth.
