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Despite regulatory uncertainties and tariffs casting a shadow on pharma exports to the US, its largest export market, the Indian pharmaceutical industry expects to see “moderate growth” of between 7 and 9 per cent in the current financial year (FY 26), said ratings agency ICRA, based on revenues of companies it reviews.

While about 8-10 per cent of this growth is expected from the domestic market and 10-12 per cent in Europe, “the US market is expected to moderate, with year-on-year growth slowing to 3-5 percent from nearly 10 percent in FY2025,” ICRA said. “The operating profit margins (OPM) of ICRA’s sample entities is expected to remain resilient at 24-25 per cent in FY2026, broadly in line with 24.6 percent in FY2025, aided by favourable raw material prices, improved operating leverage, and a rising share of specialty products,” it added.

Kinjal Shah, ICRA Senior Vice-President & Co-Group Head, said: “The domestic market continues to be a key growth driver for Indian pharma companies. Sales force expansion, improved productivity of medical representatives, deeper rural distribution, and new product launches are expected to support 8-10 percent revenue growth in FY2026 in the domestic market. ICRA’s sample set companies continue to report a double-digit expansion (10.3 percent Year-on-year growth in Q1 FY2026, following 11.6 percent growth in FY2025), driven by market share gains in chronic therapies, new product introductions, and regular price hikes—despite subdued volume growth for branded generics, partly due to rising genericisation.”

Recent debt-funded acquisitions to expand geographic and therapeutic footprints signal a rising risk appetite among leading players, ICRA said, adding that total capital expenditure of companies it reviews is set to reach Rs 42,000–45,000 crore in FY2026, including Rs. 25,000 crore in inorganic investments. The Centre’s GST exemptions and rate reductions on select lifesaving/ general medicines, and some medical supplies and equipment, are expected to enhance affordability and accessibility, the representatives pointed out.

Cautious outlook

The outlook on US though, is cautious. “After a strong FY2025, where revenues grew 9.9 percent over the previous year, growth is expected to slow down due to price erosion and declining sales of lenalidomide, a key revenue contributor in previous years,” ICRA said. Regulatory scrutiny by the US Food and Drug Administration (USFDA) is an ongoing risk factor, with warning letters and import alerts delaying product launches and triggering the imposition of failure-to-supply penalties, it added.

“These issues also impose significant costs for remediation, including consultant fees and increased management bandwidth, which tend to weigh on margins. Adding to the uncertainty is the recent imposition of 50 percent tariffs by the US on Indian imports across multiple sectors, effective August 27, 2025. While pharmaceuticals have so far been exempt, the possibility of future inclusion remains a key monitorable. The US government’s proposal for a ‘most favoured nation’ (MFN) pricing policy to bridge global drug price disparities could further impact Indian exporters,” it added.

In Europe, ICRA’s sample set companies are expected to witness annual revenue growth of 10-12 percent in FY2026, following a 18.9 percent increase in FY2025. A sizeable contribution here is from the launch of drugs relating to the nicotine-replacement therapy by one of the sample set companies, in addition to other new product launches (especially injectables and respiratory), it said. Research and development (R&D) spending is projected to remain steady at 6-7 per cent of revenues, with companies increasingly focusing on complex molecules and specialty products over generics.

Published on September 18, 2025