Domestic strength, US weakness: Why Indian pharma’s FY26 growth story is a two-speed race

ICRA pegs 7-9% pharma growth in FY26, but US market clouds outlook

India’s pharmaceutical sector is heading into FY26 with optimism at home but uncertainty abroad. Rating agency ICRA, as reported by ANI, projects industry-wide revenue growth of 7–9 percent, powered by robust demand in India and steady traction in Europe. But the United States, the single biggest export destination, remains a drag, with growth expected to slow sharply.

India: The domestic engine keeps humming

ICRA estimates 8–10 percent revenue growth in the Indian market, citing four factors:

Sales force expansion and productivity gains among medical representatives.
Deeper rural penetration as companies push beyond metros.
New product launches, particularly in chronic therapies.
Price hikes that have offset weak volumes in branded generics.

Kinjal Shah, Senior VP & Co-Group Head at ICRA, said companies tracked in their sample grew 10.3 percent year-on-year in Q1 FY26, after an 11.6 percent jump in FY25. Chronic therapies, diabetes, cardiac, oncology, continue to be the most dependable growth levers.

Policy support is also at play. Recent GST exemptions and rate cuts on select lifesaving drugs and medical supplies are expected to improve affordability, fitting neatly into India’s broader healthcare inclusion agenda.

Europe: Momentum after last year’s surge

Europe is the other bright spot. Revenues are forecast to rise 10–12 percent in FY26, building on the 18.9 percent surge in FY25. While growth will be slower than last year’s spike, the base effect remains healthy.

US: Pricing pain and compliance hurdles

The American market tells a different story. Revenue growth, which touched nearly 10 percent in FY25, is projected to moderate to just 3–5 percent in FY26. The reasons are familiar but pressing:

Persistent pricing pressures in generics.
Regulatory scrutiny with USFDA warning letters, import alerts, and delayed approvals.
Compliance penalties and remediation costs that eat into margins.

ICRA, as per ANI, flagged another layer of risk: the US government’s recent move to slap 50 percent tariffs on Indian imports across multiple sectors. Pharmaceuticals are exempt for now, but any reversal could be disruptive. Meanwhile, proposals for a “most favoured nation” pricing policy threaten to squeeze margins further.

R&D bets: Moving beyond generics

ICRA also noted that Indian companies are stepping up R&D spending, now at 6–7 percent of revenues. The focus is shifting to complex molecules and speciality products, a long-term play to reduce overdependence on commoditised generics and pricing battles in the US.