India’s pharmaceutical industry is projected to register revenue growth of 7–9% in FY26, according to ICRA’s latest outlook, despite persisting headwinds in the United States market. The sector’s performance will be supported by robust domestic demand and steady expansion across European markets.
The domestic market is expected to grow 8–10%, backed by sales force expansion, deeper penetration into rural areas, and a pipeline of new product launches. Branded generics continue to be a key growth engine, with chronic therapies, fresh introductions, and price revisions driving momentum. The industry reported a 10.3% year-on-year revenue increase in Q1 FY26, following an 11.6% rise in FY25.
Government support has also played a significant role in improving access and affordability. Exemptions and GST rate reductions on certain lifesaving medicines and medical supplies are encouraging broader healthcare inclusion, further fueling demand.
On the international front, European revenues are forecast to climb 10–12% in FY26 after a strong 18.9% jump last year. Gains will be driven by new product approvals and stable pricing conditions across the continent.
However, growth in the US market is expected to moderate significantly. After expanding 9.9% in FY25, revenues from the US are projected to rise just 3–5% in FY26, weighed down by pricing pressures, intense competition, and heightened regulatory oversight by the US Food and Drug Administration (USFDA). Issues such as warning letters, import alerts, and delays in product launches are increasing compliance costs and squeezing margins.
Although pharmaceuticals have been spared from the recently announced 50% US tariff on Indian imports, the risk of future inclusion remains. In addition, the proposed most-favoured-nation (MFN) pricing policy in the US could pose further profitability challenges for Indian exporters.
To counter these risks, Indian pharmaceutical companies are stepping up research and development (R&D) investments, allocating 6–7% of revenues to the segment. A sharper focus on complex molecules, specialty products, and innovation is expected to sustain long-term growth while insulating the industry from external shocks.
