Indian Pharma Sector Eyes 10% FY27 Growth on Domestic Demand and CDMO Recovery

India’s pharmaceutical sector is expected to maintain its growth momentum in FY27, with revenue growth projected at around 10 per cent, supported by strong domestic demand, rising contract development and manufacturing organisation (CDMO) activity and a recovery in the active pharmaceutical ingredient (API) segment. However, challenges in the U.S. generic market, pricing pressure and regulatory hurdles remain key concerns for pharmaceutical companies.

According to India Ratings and Research (Ind-Ra), sector growth is expected to be driven primarily by the domestic market, which has remained resilient despite weakness in the U.S., the largest export market for Indian pharmaceutical companies. The agency expects domestic growth, increasing CDMO opportunities and an API recovery to offset pressure from declining revenues from certain generic products in the U.S.

The sector started FY27 on a strong footing, with tracked pharmaceutical companies reporting healthy revenue growth during the April-June 2026 quarter. However, performance remained uneven across geographies, with domestic sales and selected international markets performing better than the U.S. business.

The U.S. market remains a key challenge after the Revlimid opportunity faded. The market contributes around 34 per cent of the total revenue of pharmaceutical companies analysed by Ind-Ra over the past five years. Revenue from the U.S. market declined 1.7 per cent in FY26 after growing 7.6 per cent in the previous year.

The decline was largely linked to the normalisation of generic Revlimid sales following increased competition after patent expiry. Companies including Dr. Reddy’s, Cipla and Sun Pharma witnessed lower revenue contributions from generic versions of the oncology drug in Q1 FY27 compared with the previous year.

However, the U.S. market could see gradual improvement as pharmaceutical companies launch complex generics, benefit from upcoming patent expiries and gain support from relatively stable pricing trends and currency movements.

The domestic pharmaceutical market has emerged as a major growth driver for Indian companies, supported by price increases, new product launches and increased demand across various therapies. The launch of generic versions of the anti-obesity drug semaglutide has also created a new growth opportunity. More than 30 companies have introduced variants, including tablets and pen devices, supporting expansion in the domestic market.

CDMO businesses are also expected to benefit as global innovators increasingly outsource manufacturing and development activities. At the same time, the API segment is showing signs of recovery after facing pressure in recent years, providing an additional support to sector growth.

Despite the positive growth outlook, pharmaceutical companies continue to face several risks. Increased U.S. FDA inspections, pricing pressure in the U.S. market, tariffs, geopolitical uncertainty and regulatory challenges could affect profitability and business performance.

Rising input and Logistics costs are another concern. Industry estimates suggest that higher raw material, energy and freight expenses could weigh on margins even as companies deliver healthy revenue growth.

The pharmaceutical sector outlook has improved due to strong domestic growth, expanding CDMO opportunities and expectations of recovery in exports. However, investors are closely tracking the pace of U.S. business recovery, margin trends and regulatory developments.

Pharmaceutical companies with stronger domestic exposure, complex product pipelines and growing CDMO businesses could have better earnings visibility, while companies heavily dependent on U.S. generics may continue to face pressure until pricing and competition trends stabilise.

Overall, FY27 is expected to be a year of steady growth for the pharmaceutical sector, with domestic demand acting as the key support while companies navigate challenges in global markets.

Disclaimer: The article is for informational purposes only and not investment advice.