India's Pharma Sector: Growth & Global Reach

Introduction

India, proudly known as the “Pharmacy of the World” plays a crucial role in the global pharmaceutical landscape. The industry contributes around 2% to the country’s GDP and provides employment to approximately 3.5 million people (direct and indirect). In FY2024, it reported a strong performance with total revenue reaching ₹4.3 lakh crore, reflecting a 10% growth over the previous year, backed by a robust ecosystem of over 3,000 pharmaceutical companies and more than 10,500 manufacturing units.

As of March 2024, India ranks as the 3rd-largest producer of pharmaceuticals globally by volume and holds the 13th position by production value. Notably, the sector is highly export-oriented, with 52–55% of its revenue coming from international markets across more than 200 countries, reinforcing India’s role in ensuring global access to affordable medicines.

Financial Performance Overview of Nifty Pharma Companies

Tracking the Growth Engines: Key Metrics of India’s Top Pharmaceutical Stocks

1. Sales Growth: Despite being a highly regulated and globally competitive space, the pharmaceutical industry in India has demonstrated steady and resilient growth over the years. This growth has been driven by rising healthcare awareness, broader access to medicines, and increased government focus on strengthening public health infrastructure.

2. P/E Ratio: Pharmaceutical stocks in India often trade at higher price-to-earnings (P/E) ratios, supported by the sector’s defensive nature, consistent demand for healthcare, and strong global integration. Their ability to scale innovation through specialty generics, tap high-margin markets like the US and EU, and maintain regulatory compliance gives them a competitive edge. Additionally, factors such as strong balance sheets, low cyclicality, high return on capital employed (ROCE), and growing investments in complex therapies contribute to sustaining premium valuations.

Macroeconomic Factors Impacting the Pharmaceutical Industry

1. India’s Export Dominance: The World’s Pharmacy in Action

India’s pharmaceutical industry is going global in more than just ambition. Today, exports account for 52%-55% of the industry’s total revenue, indicating that India has become a significant global supplier of affordable and high-quality medicines.

Together, the U.S. and Europe account for approximately 56% of India’s pharmaceutical exports, with the U.S. alone accounting for 34.5% and Europe contributing an additional 21.1%.

1.1 ANDA Approvals: A Signal of Rising Global Trust

One of the clearest signs of India’s growing strength in pharma is its rising share of U.S. generic drug approvals. 

An ANDA (Abbreviated New Drug Application) is a way for a company to get permission to sell a generic medicine in the U.S. Between 2011 and 2023, ANDA approvals for Indian companies jumped from 119 to 363. Today, nearly 47% of all U.S. generic approvals come from India.

That level of market presence is the result of years of consistent progress in regulatory compliance, manufacturing excellence, and the establishment of global credibility, particularly in highly regulated markets such as the United States.

1.2 Why Chronic Diseases in the U.S. Matter to Indian Pharma

Preventing Chronic Disease (PCD), an official journal of the U.S. Centres for Disease Control and Prevention (CDC), U.S. Government, reports that as of 2023:

• 76.4% (representing 194 million) of American adults reported at least one chronic illness.
• Over 130 million people (51.4%) live with multiple chronic conditions (MCC).
• Even among younger adults (Aged 18–34), MCC prevalence has jumped sharply, from 21.8% in 2013 to 27.1% in 2023.

From 2018 to 2024, U.S. prescription volumes rose from 6.1 billion to 7.1 billion—driven largely by chronic conditions like diabetes, hypertension, cardiovascular disease, and mental health. India, a global powerhouse in generic drug manufacturing, has directly benefited from this rise.

In 2024 alone, generic medicines made up nearly 90% of all prescriptions in the U.S., and India contributed 47% to the total volume of generic prescriptions filled across the US market. While areas like immunology, obesity, and diabetes still see a strong presence of branded drugs, Indian companies are making steady progress with complex generics and biosimilars.

2. India’s API Dependence on China: Where We Stand

From FY2015 to FY2025, India’s bulk drug imports more than doubled, rising from ₹33.2 thousand crore to ₹75.6 thousand crore. China remains the top supplier, with its share growing to over 42%, despite government efforts to reduce dependence. USA’s share stays modest (8–10%), while imports from other countries show gradual diversification. The data highlights persistent import reliance, especially on China.

2.1 China’s Dominance in India’s API Supply Chain: Risks, Realities, and Responses

India’s imports of bulk drugs and drug intermediates have increased sharply, mainly due to a significant rise in purchases from China. In the last five years, China’s share in these imports has grown from 68% to 74% between FY2021 to FY2025 highlighting India’s growing reliance on Chinese suppliers.

Overdependence on a single country—particularly in the face of rising geopolitical tensions or global disruptions like pandemics—poses a significant national security concern. India's strong position in generic drug manufacturing is at risk, as any disruption in the supply of APIs from China could lead to production setbacks, resulting in potential drug shortages and sudden price spikes.

2.2 India's Efforts to Reduce API Dependence on China

India depends on China for 65–70% of its API (bulk drug) needs, posing health and security risks. The Katoch Committee formed in 2013 under Dr. V.M. Katoch to revive India’s API sector—raised this concern in 2015 and suggested steps like bulk drug parks. Although customs duty exemptions were removed in 2016 to boost local production, limited capacity held back progress.

Even after tensions like the 2017 Doklam standoff, import levels stayed the same. A 2018 BCG–CII report also pushed for shared infrastructure to cut costs. Recent efforts like the PLI scheme and bulk drug parks have started, but slow implementation means India’s reliance on China may continue for another 5–7 years.

3. Currency Fluctuation

Between January 1 and July 8, 2025, the U.S. Dollar Index (DXY) declined by 10.3%, falling from 108.5 to 97.3. Since Indian pharmaceutical exports are largely invoiced in U.S. dollars, this depreciation directly lowers the rupee value of export earnings.

As a result, even with stable export volumes, the rupee-denominated revenues are likely to decline, exerting pressure on the profitability and financial performance of export-driven pharmaceutical companies.

4. Tariff on Pharmaceuticals

At a recent Cabinet meeting on July 08, 2025, Donald Trump said his administration plans to make an announcement about new tariffs on pharmaceutical products. The plan would give companies about a year to move their manufacturing to the U.S. before the tariff is applied. Trump said the tariff could be around 200%.

Right now, pharmaceuticals are not included in Trump tariffs on most countries. However, he had earlier warned that more tariffs on the pharmaceutical sector could be introduced.

If the U.S. imposes a 200% tariff on pharmaceutical imports, it could have significant consequences for India’s pharmaceutical industry, as the U.S. is one of its biggest export markets.

Nifty Pharma Outpaces Market: Stability Amid Economic Uncertainty

Between July 2024 and June 2025, the NIFTY Pharma index rose by 11.5%, significantly outperforming the Nifty 50 (5.7%) and other major sectors such as FMCG, Auto, and Oil & Gas, which generated negative returns.

This resilience is due to the Pharma sector being classified as an “essential goods” industry, which means demand for medicines and healthcare products remains steady even when the economy faces challenges.

While sectors like FMCG and Auto were affected by weak rural demand and high input costs, and Oil & Gas faced policy and price volatility, Pharma benefited from strong domestic demand, robust U.S. generics exports, and cost efficiency. Its defensive nature shielded it from broader macroeconomic pressures.

Final Thoughts

India’s pharmaceutical sector presents a compelling investment opportunity driven by strong export momentum, innovation in complex generics, and rising global healthcare needs. With over half its revenue from international markets and consistent sales and profit growth across top companies, the sector offers long-term stability and scalability.

While challenges like API dependence on China and potential U.S. tariffs pose risks, government initiatives and shifting global supply chains offer structural tailwinds. Pharma’s essential role, global trust, and high return potential make it an attractive option for investors seeking sustainable growth, especially in an increasingly health-conscious and ageing global population.