Icra Projects 7–9% Growth for Indian Pharma in FY26 as US Momentum Slows

New Delhi, September 18, 2025 – The Indian pharma industry is likely to achieve revenue growth of 7–9% during FY26, spurred by robust domestic demand and sustained European growth, though growth momentum in the US market slows down, said rating agency Icra.

Domestic and European Markets to Drive Growth

Icra predicts the Indian market to grow by 8–10 per cent during FY26, led by consistent demand, portfolio growth, and rising penetration of speciality treatments. Revenues in Europe are expected to increase by 10–12 per cent, driven by increased demand for generics and better acceptance of Indian manufacturers as dependable suppliers.

US Market Headwinds

US revenue expansion will slow sharply to 3–5 per cent in FY26 from close to 10 per cent in FY25. The slowdown is driven by chronic pricing pressures, back-endloaded product launches, and regulatory risk. Analysts say, while niche and complex generic launches can help mitigate these headwinds to some extent, margin pressures in the globe’s largest pharma market won’t subside anytime soon.

Profitability Outlook

Operating profit margins are expected to stay robust at 24–25 per cent in FY26, near 24.6 per cent in FY25. Icra sees the stability due to better input costs, operating leverage, and increasing share of complex generics and speciality products like injectables and biosimilars.

R&D and Investment Plans

R&D expenditure should remain flat at 6–7 per cent of revenues, focusing on complex molecules, biologics, and speciality treatments to cut reliance on commoditised generics. Capital spending of Icra’s sample group of companies is likely to be Rs 42,000–45,000 crore in FY26, including approximately Rs 25,000 crore for mergers, acquisitions, and other inorganic growth opportunities.

Industry Context and Recent Trends

Indian pharma industry, worth more than USD 50 billion now, has recorded its exports to surpass USD 27 billion in FY24 and retain the position of the “pharmacy of the world.” New approvals of biosimilars and difficult-to-make generics recently in Europe and increasing partnerships with international companies in contract manufacture and research are likely to open up diversified revenue streams. Yet, reliance on China for major raw materials (APIs) and changing US FDA compliance norms continue to be major concerns.

Future Outlook

Although the US market will continue to be a challenge in FY26, the Indian pharma sector is expected to grow steadily, driven by domestic demand, European growth, and a shift towards speciality and complex products. Consolidation is expected to continue in the industry as mid-cap players look to acquire companies to grow internationally. Emphasis on R&D in biologics, oncology, and injectables, and digitalisation in manufacturing and supply chain infrastructure may offer long-term resilience.

If India is able to curb API dependence and gain a greater slice of the biosimilars market, then growth after FY26 may easily surpass current expectations, making Indian pharma a driving force for accessible global healthcare.

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