Indian pharma industry eyes 9% annual growth on strong domestic and export markets, says report

The Indian Pharmaceutical Industry is set for significant growth, driven by strong domestic and export market performance, according to Indian credit rating agency, CareEdge Ratings. The agency anticipates an approximate 9% growth rate for the industry during FY25-FY27, potentially pushing its value beyond $ 70 billion (₹5.81 lakh crore) by FY27.

From FY18 to FY24, the sector exhibited a robust Compounded Annual Growth Rate (CAGR) of around 8%. This surge was underpinned by an 8% increase in exports and a 7% rise in the domestic market. In FY24 alone, the industry expanded by 9%, reaching an estimated $ 54 billion (₹4.48 lakh crore). Export growth stood at 10%, while the domestic market grew by 9% compared to FY23.

CareEdge Ratings noted that regulated markets, which contribute about 60% of total exports, saw an 11% year-on-year growth in FY24. Meanwhile, semi-regulated and unregulated markets rebounded with a 7% growth after a 3% contraction in FY23 due to geopolitical issues. The agency predicted continued growth in these segments at a CAGR of approximately 8% for FY25-FY27, with exports to regulated markets expected to grow at around 9% during the same period.

On the domestic front, CareEdge Ratings attributed the 9% growth in FY24 to several factors. Enhanced demand for acute and chronic segments, price revisions allowed by the National Pharmaceutical Pricing Authority (NPPA), and the launch of new products all positively impacted revenue. Specific therapies like cardiac, diabetes, and central nervous system (CNS) disorders recorded over 10% growth.

According to the report, exports particularly thrived in the North American market, which accounts for 40% of India’s pharmaceutical exports. Factors such as eased pricing pressures, renewed biotech funding, and deeper penetration in generics drove a 13% growth rate in North America. European, African, and Asian markets also reported healthy growth rates between 7% and 8.5%.

CareEdge Ratings observed that Indian pharmaceutical companies are becoming more selective in their Abbreviated New Drug Application (ANDA) filings due to heightened competition and high costs. This has led to reduced competitive intensity in the US generics market, altering the trajectory of price erosion and increasing demand for critical drugs.

The report also noted improvements in the regulatory environment. Between FY13 and FY18, Indian pharma companies faced significant regulatory challenges. However, over time, these companies have established robust systems, resulting in improvements. The proportion of Form 483 observations classified as Official Action Initiated (OAI) by the US Food and Drug Administration (USFDA) has decreased from 22% in CY14 to 10% in CY23.

Looking ahead, CareEdge Ratings projected an approximate 9% growth in the Indian pharmaceutical industry during FY25-FY27. This growth is expected to be driven by structural trends such as domestic market expansion, anticipated price increases, new product introductions, and deeper market penetration in tier-2 and tier-3 cities. In the export sector, growth is expected from diversifying into specialty molecules, capitalising on opportunities in the off-patent market, and increased penetration into Rest of the World (ROW) markets.

Indian pharmaceutical companies saw an improvement in margins in FY24, increasing by approximately 100 to 120 basis points to around 23%. This was primarily due to an enhanced product mix and the introduction of new products. CareEdge Ratings projected that the Profit Before Interest, Lease Rentals, Depreciation, and Tax (PBILDT) percentage will further increase by about 50 to 100 basis points in FY25, driven by entry into complex and specialty segments, selective ANDA filings, and reduced raw material costs.

"The Indian pharmaceutical sector is expected to grow by approximately 9% during FY25-FY27," said D. Naveen Kumar, Associate Director at CareEdge Ratings. "This growth is driven by structural trends such as domestic market expansion, new product introductions, and deeper market penetration in tier-2 and tier-3 cities. These developments are supported by increasing consumer awareness, enhanced digital engagement, and strategic industry consolidation through mergers and acquisitions to bridge gaps in brands and therapeutic areas."