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India supplies nearly one in every five generic medicines consumed worldwide. At a time when tariffs, geopolitical tensions, and supply chain disruptions dominate headlines, global capital continues to flow into the country’s pharmaceutical sector. This sustained confidence raises a direct question for any pharmaceutical manufacturing company assessing long-term strategy.
What fundamentals continue to anchor India’s position as the Pharmacy of the World?
Short-term uncertainty has introduced volatility into markets. Trade policy shifts, currency movement, and raw material dependencies create operational pressure. Yet these factors sit alongside a deeper structural story built on scale, cost efficiency, regulatory depth, and manufacturing maturity. Examining these macroeconomic and sector-level drivers offers clarity on why India remains central to global pharmaceutical supply and value chains.
The pharmaceutical value chain carries greater complexity than most manufacturing sectors due to regulatory oversight, scientific specialisation, and fragmented participation. At a high level, it is divided into three distinct sub-sectors.
API manufacturing forms the foundation, supplying bulk drugs and intermediates. Formulation manufacturing converts these inputs into finished dosage forms across oral solids, injectables, and specialised therapies. Outsourcing and contract services cover development, testing, scale-up, and commercial production for external clients.
Few organisations operate across all three segments at scale. Each layer demands distinct capabilities, capital intensity, and compliance infrastructure. Regulatory expectations vary by geography, product type, and customer profile, adding further complexity.
Understanding this value chain supports informed capital allocation and partnership decisions. Investors and industry leaders gain clarity on where value concentrates, where margins sustain, and where scale delivers a defensible advantage.
India ranks 3rd globally by pharmaceutical production volume and 13th by value. This gap reflects a deliberate focus on high-volume, low-cost generics rather than patented or premium therapies. The model prioritises access, affordability, and scale, which aligns with global demand for essential medicines.
India’s pharmaceutical sector ranks 5th in manufacturing value added. It attracts 4% of total foreign direct investment (FDI) and generates a total surplus of approximately US$19 billion. Direct and indirect employment spans close to 2.7 million people, reinforcing the sector’s economic weight.
Revenue growth has remained resilient since the pandemic, with the industry delivering close to 10% compound annual growth. Domestic demand, export expansion, and rising global reliance on Indian generics and vaccines continue to drive this momentum. Exports alone reached US$ 30.5 billion in FY2025, growing at an 11% compound annual rate over the last decade.
The United States remains a key destination, with exports growing at a faster pace than the global average. India supplies nearly 40% of US generic drug imports, underscoring the depth of this trade relationship and the lack of comparable alternatives at scale.
Long-term projections remain robust. According to Bain & Company, the Indian pharmaceutical sector could grow to nearly eight times its current size by 2047, with Contract Development and Manufacturing Organisation (CDMO) and Contract Research Organisation (CRO) exports forming the backbone of this expansion. Growth drivers extend well beyond conventional generics.
Speciality generics have gained traction as patent cliffs open new opportunities in complex formulations. Active pharmaceutical ingredients (APIs) continue to attract investment, supported by policy incentives aimed at reducing import dependence. Biosimilars and vaccines represent areas where Indian manufacturers have built both scientific capability and cost advantage.
Contract development, manufacturing, and research services also form a critical pillar of future growth. Global pharmaceutical companies seek reliable partners that combine regulatory compliance with flexible capacity. Indian CDMOs and CROs increasingly serve this demand across development, scale-up, and commercial manufacturing.
Innovation now plays a larger role within the ecosystem. Product portfolios show greater diversification, supported by targeted research investment, digital integration, and collaboration across academia and industry. This shift strengthens long-term competitiveness while preserving the core strength in cost-efficient manufacturing.
India’s pharmaceutical sector rests on a strong manufacturing backbone built over decades. Cost-efficient labour, engineering expertise, and large-scale facilities enable rapid capacity expansion without compromising output consistency. This advantage proves critical during periods of global supply disruption.
Regulatory competence remains a defining strength. Indian manufacturers hold a large share of approvals from major regulators, including the US FDA and European agencies. Experience in navigating complex inspections and compliance frameworks supports long-term customer trust.
API manufacturing expertise adds strategic depth. Although import dependence persists, domestic capabilities continue to expand under incentive schemes and bulk drug parks - specialised industrial zones in key states, which provide shared infrastructure for manufacturing Active Pharmaceutical Ingredients (APIs), Key Starting Materials (KSMs), and Drug Intermediates (DIs). This trend improves resilience and reduces exposure to external shocks over time.
Export reach further strengthens competitiveness. Indian pharmaceutical products reach close to 200 countries, serving regulated and semi-regulated markets alike. Scale allows manufacturers to respond quickly to demand surges, particularly for essential medicines.
Currency dynamics often favour exporters. A weaker rupee lifts export realisations, offsetting part of the pressure from imported raw materials. While margin management remains essential, the overall impact supports revenue stability.
Policy alignment continues to reinforce sector fundamentals. Production-linked incentive schemes target APIs, key starting materials, and high-value formulations, encouraging domestic capacity creation. Investment commitments have already exceeded initial targets, with multiple projects operational across critical bulk drugs.
Bulk drug parks enable lower capital costs and integrated ecosystems. These hubs improve efficiency while supporting compliance and environmental standards.
Foreign direct investment policies remain liberal. Full automatic approval for greenfield projects and defined thresholds for brownfield investments signal long-term openness to global capital. Cumulative equity inflows exceed INR 1.5 lakh crore, placing pharmaceuticals among the country’s top investment destinations.
While short-term portfolio flows show caution due to external uncertainty, strategic investors continue to commit capital. This divergence reflects confidence in structural growth rather than cyclical market sentiment.
India’s pharmaceutical sector continues to attract global investment because its fundamentals remain intact. Scale, cost leadership, regulatory depth, and export capability form a durable base that absorbs short-term volatility. Tariff risks and supply chain dependencies introduce operational challenges, yet they do not undermine the sector’s long-term trajectory.
Growth prospects rest on expanding exports, product diversification, and deeper integration into global value chains. Policy support and private investment reinforce this direction, strengthening resilience across APIs, formulations, and contract services.
The next phase of growth builds on proven strengths while moving steadily toward higher value and greater self-reliance. A careful assessment of manufacturing strategy and long-term collaboration opportunities can position organisations to participate meaningfully in this evolution.
ZIM Laboratories Limited is a therapy-agnostic and innovative drug delivery solution provider focusing on enhancing patient convenience and treatment adherence to drug intake. We offer a range of technology-based drug delivery solutions and non-infringing proprietary manufacturing processes to develop, manufacture, and supply innovative and differentiated generic pharmaceutical products to our customers globally. At ZIM Labs, we provide our customers with a comprehensive range of oral solid value-added, differentiated generic products in semi-finished and finished formulations. These include granules, pellets (sustained, modified, and extended-release), taste-masked powders, suspensions, tablets, capsules, and Oral Thin Films (OTF).
