The Indian pharmaceutical industry stands on a strong foundation, marked by resilience and clear strategy.
But 2026 is poised to be a year of structural reset, with the industry well placed to sustain 7–9 per cent growth, driven by a shift towards complex generics, biosimilars, and speciality products. While generics and cost-competitiveness remain strengths, quality upgradation, innovation-led value creation, and closer alignment with global regulatory standards are shaping a durable growth trajectory.
In this context, Union Budget 2026 is critical. It presents an opportunity to reinforce India’s pharmaceutical leadership through stronger incentives for research and development and innovation, support for manufacturing competitiveness, simplified regulatory compliance, and higher investment in public healthcare. Policy continuity and targeted fiscal support will be essential to unlock opportunities in emerging frontiers such as cell and gene therapies, peptides, and precision medicine.
India’s innovation momentum strengthened in 2025, with strong interest in the PRIP (Promotion of Research and Innovation in Pharma /MedTech sector) scheme, which received over 700 applications. Global licensing deals, acquisitions, and regulatory approvals for Indian-origin therapies signal growing confidence in domestic scientific capability.
However, a structural gap persists. Indian pharma invests 7–8 per cent of revenues in R&D, far below the 15–25 per cent invested by global innovators. Without sustained access to long-term risk capital, India runs the danger of lagging in discovery-led research while excelling in process innovation.
Even as growth persists, the industry operates in an increasingly complex global environment. Geopolitical pressures — from US–China trade rivalries to regional conflicts — are reshaping global supply chains through onshoring and de-risking. For India, this presents both opportunity and risk.
Heavy reliance on single-source active pharmaceutical ingredients (API) and key starting materials has been a vulnerability. The production-linked incentive (PLI) scheme, launched five years ago, is delivering results, including the revival of domestic penicillin-G production.
At the same time, rising trade nationalism — through higher tariffs, tighter import rules, and non-tariff barriers — is increasing the uncertainty for export-driven companies. Regulators in the US and EU are intensifying scrutiny in the areas of quality, data integrity, and cybersecurity, raising compliance costs and increasing approval timelines. Pricing pressure and buyer consolidation in key export markets also continue to compress generics margins. However, as supply chains diversify and demand for reliable, compliant partners rises, Indian manufacturers investing in quality, compliance, and innovation are well positioned to benefit.
Despite the challenges, India’s pharmaceutical sector remains resilient. Domestic growth continues at 8–9 per cent, with exports projected to touch $32 billion, driven by demand in Europe, Africa, and Latin America. The next five years will be critical in translating this momentum into durable global leadership and advancing India’s $450–500 billion life sciences ambition by 2047.
Going ahead, key priorities include scaling up R&D through strengthened PRIP and mission-mode funding, modernising regulation via globally harmonised digital pathways, deepening global integration, and expanding into under-penetrated markets.
Indian pharma is at an inflection point. While recent reforms and early innovation gains provide a strong foundation, global leadership will require sustained investment, decisive policy execution, and uncompromising standards of quality and science. The upcoming Budget should reinstate the 200 per cent R&D tax deduction, widen the patent tax regime to include licensing and royalty income from overseas patents, correct the inverted duty structure, ensure timely GST refunds, and offer globally competitive research incentives.
Aligning innovation, affordability, and quality at scale can enable India to transition from a volume-driven generics supplier to a global leader in new therapies and biotech. What India builds now will define its place in the future of global healthcare.
(Sudarshan Jain is Secretary General and Archana Jatkar is Associate Secretary General, Indian Pharmaceutical Alliance. Views are personal)
More Like This
Published on January 26, 2026