New Delhi [India], September 18 : India's pharmaceutical industry is set to record healthy revenue growth of 7-9 per cent in FY26, even as challenges in the United States market continue to weigh on performance, noted rating agency ICRA in its latest sector outlook.
According to ICRA, the growth momentum will be driven by 8-10 per cent expansion in the domestic market and 10-12 per cent gains in Europe, while sales in the US are likely to moderate to 3-5 per cent, compared with nearly 10 per cent growth achieved in FY25.
"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 per cent revenue growth in FY2026 in the domestic market," said Kinjal Shah, Senior Vice President & Co-Group Head ICRA.
Shah noted that companies in ICRA's sample set have been reporting double-digit growth in the Indian market, with a 10.3 per cent year-on-year rise in the first quarter of FY26, following 11.6 per cent growth in FY25. Chronic therapies, new product introductions, and price hikes have been the main contributors despite subdued volumes for branded generics.
ICRA said recent government measures, such as GST exemptions and rate cuts on select lifesaving drugs and medical supplies, are expected to enhance affordability and align with the country's broader healthcare inclusion agenda.
On the other hand, according to ICRA, the outlook for the US market remains cautious. Revenues, which had grown by 9.9 per cent in FY25, are expected to slow due to pricing pressures and falling sales. In addition, ongoing regulatory scrutiny by the US Food and Drug Administration (USFDA) has led to warning letters, import alerts, and product launch delays.
"Such compliance issues not only delay market entry but also trigger penalties and additional remediation costs, straining profit margins," ICRA noted.
Adding to the uncertainty, the recent imposition of 50 per cent tariffs by the US on Indian imports across multiple sectors, with pharmaceuticals so far exempt, remains a key risk factor. The US government's proposal for a "most favoured nation" pricing policy could also put pressure on Indian drug exporters.
Meanwhile, in Europe, ICRA expects revenue growth of 10-12 per cent in FY26, after a sharp 18.9 per cent jump last year.
The report also flagged that Indian pharma companies are increasing research and development spending to 6-7 per cent of their revenues, with increased focus on complex molecules and speciality products.