Despite ongoing global trade and energy uncertainties, India's pharmaceutical and medical technology sectors are set to experience strong growth driven by manufacturing incentives, regulatory reforms and improved access to foreign markets, although supply-chain vulnerabilities, reliance on imported APIs and U.S. trade investigations pose risks of production disruptions, export delays and market volatility. In recent months, the United States has threatened to impose 100% tariffs on imported pharmaceuticals to push U.S. drugmakers to expand domestic manufacturing, while disruptions in the Strait of Hormuz have caused propane and polypropylene shortages, forcing several Indian pharmaceutical and medical device plants to partially suspend operations and slow production of critical drugs and supplies. These developments are creating challenges for India's pharmaceutical market, which was valued at around $55 billion in 2025 and is expected to grow to $120 billion-$130 billion by 2030, with domestic consumption reaching $23.5 billion in 2023-24. The sector is India's fifth-largest contributor to value-added manufacturing and accounts for about 4% of total foreign direct investment, supported by liberal FDI policies that permit 100% foreign ownership in greenfield projects and up to 74% in brownfield ventures. The industry covers generics, vaccines, biologics, active pharmaceutical ingredients (APIs) and contract manufacturing. India also has the largest number of U.S. FDA-compliant plants outside the United States, supplies roughly 8% of global API demand and plays a critical role in global vaccine production, providing over half of UNICEF's supply and a significant share of WHO-procured vaccines. India's medical devices market, valued at approximately $14 billion-$16 billion in 2025, remains smaller by comparison but is growing quickly and is projected to reach $30 billion-$50 billion by 2030. The sector allows 100% FDI under the automatic route, meaning investments do not require prior government approval, which continues to attract both domestic and foreign investors.
- Indian companies hold a strong position in U.S. and EU prescription markets, accounting for roughly 20% of global generic output, and as of 2024, India represents about 2% of the global medical technology market, ranking among the top 20 worldwide. Key production hubs and manufacturing clusters are concentrated in Karnataka, Maharashtra, Gujarat, Uttar Pradesh, Delhi, Tamil Nadu and Telangana.
- India imports approximately 90% of its crude oil, with about half coming from Middle Eastern producers, including Iraq, Saudi Arabia, the United Arab Emirates and Kuwait, leaving a significant share of its energy supply vulnerable to disruptions in the region. Additionally, India relies on liquefied natural gas (LNG) imports for roughly 50% of its consumption, with Qatar and the United Arab Emirates supplying nearly 60% of these imports. Finally, India is also reliant on liquefied petroleum gas (LPG), a primary household cooking fuel, importing around 60% of demand, about 90% of which comes from the Middle East. The Strait of Hormuz is a critical maritime chokepoint through which 40%-50% of India's crude and natural gas imports pass. In the wake of the Iran conflict that began on Feb. 28, the Indian government has prioritized ensuring household LPG supply amid Middle East disruptions, directing refiners to maximize LPG output. Since LPG production uses propane, this move reduces the propane available for industrial uses, including polypropylene production, which is slowing the manufacturing of medical devices.
In recent months, the Indian government has enacted regulatory and policy reforms to accelerate innovation, expand domestic pharmaceutical and medical technology manufacturing and reduce reliance on imported APIs. In January, the government updated the New Drugs and Clinical Trials Rules (2019) to modernize the regulatory framework, a move intended to accelerate approval processes, substitute some licensing requirements with advance notifications, waive permissions for low-risk bioavailability and bioequivalence studies, and expand the use of digital procedures, thereby easing compliance costs and providing greater certainty for investors and drug developers. Authorities are also considering regulatory sandboxes for pharmaceuticals and medical technology, which would allow new medicines, devices and digital health technologies to be piloted and brought to market faster under supervised conditions, supporting quicker innovation cycles. In December 2025, the government strengthened the Promotion of Research and Innovation in Pharma-MedTech scheme to broaden funding for foundational and advanced research, covering complex generics, biosimilars and cutting-edge medical technologies, while fostering partnerships between industry and academic institutions. During the same period, authorities also unveiled a $7 billion program aimed at expanding domestic production of APIs to curb import dependence, backed by investments in large bulk drug parks to increase capacity for essential inputs and medical devices.
In addition, the 2026-27 budget proposes measures to boost domestic pharmaceutical manufacturing and enhance research and approvals, while continuing broader support for medical device industry growth. India's 2026-27 Union Budget proposal, which is still awaiting formal approval, outlines several initiatives to strengthen the pharmaceutical sector. These include the $1.2 billion Biopharma SHAKTI program to expand domestic manufacturing of biologics and biosimilars and support research and innovation, as well as plans to enlarge the network of National Institutes of Pharmaceutical Education and Research, create additional clinical trial sites and strengthen the Central Drugs Standard Control Organization to accelerate drug development and approvals. The proposals also include customs duty exemptions on select essential medicines, including treatments for cancer and rare diseases, to improve patient access and affordability. While no major new funding lines were announced specifically for the medical devices sector, earlier government planning has consolidated device-sector initiatives under a broader Strengthening of Medical Device Industry scheme, which supports device parks, capacity building, clinical research and workforce development and is set to remain in effect through 2026-27.
The 2026-27 budget proposal also expands India's Production-Linked Incentive scheme to boost domestic pharmaceutical and medical device production, reduce import reliance and support growing health care demand across the country. The budget proposal focuses on expanding the Production-Linked Incentive scheme, which offers financial incentives to manufacturers that increase domestic production of approved pharmaceutical products and bulk drugs. While primarily targeted at domestic companies, foreign companies can also participate by establishing or expanding manufacturing operations in India. The scheme is designed to boost local production, reduce import dependence and improve access to essential medicines, supported by measures such as price floors on key inputs to encourage investment. A separate Production-Linked Incentive scheme for medical devices, valued at around $450 million, provides 5% incentives on incremental sales of domestically produced devices over a five-year period from 2022 to 2027. It targets high-import segments including cancer and radiotherapy equipment, imaging systems, cardio-respiratory and renal devices, and implants. Demand is being driven by expanding health care infrastructure in smaller cities, rising rates of chronic disease, broader insurance coverage and increased public health spending, although India remains heavily reliant on imports for advanced medical technologies.
India's pharmaceutical and life sciences sector is poised for innovation-driven growth, fueled by expanding research and development, digital health, rising health care demand and new global export opportunities. Innovation is increasingly driving India's pharmaceutical and life sciences sector as it evolves away from a focus on low-cost manufacturing. To this end, investments by multinational companies in research infrastructure, digital health solutions and advanced analytics are enhancing India's capabilities in drug discovery and precision medicine. Sector growth is also supported by rising health care demand, driven by population growth, urbanization, an aging population and the growing prevalence of chronic diseases such as diabetes, cardiovascular conditions and cancer, which is increasing the need for both advanced therapies and affordable generics. India's cost-efficient manufacturing base and strong research capabilities continue to attract global investment, while post-pandemic supply-chain diversification and expiring drug patents are creating new export opportunities for Indian generic and biosimilar manufacturers.
However, India's pharmaceutical growth faces challenges from complex global regulations, dependence on imported APIs, quality risks and infrastructure gaps. Sector growth faces constraints from complex regulatory frameworks in global markets, which raise compliance costs for Indian exporters and can delay product launches. Additionally, the industry's heavy dependence on imported APIs, particularly from China, makes it vulnerable to supply disruptions and geopolitical risks. While India is actively promoting local API production to reduce import reliance, there are no formal restrictions on the use of Chinese APIs in products sold domestically. Furthermore, the prevalence of counterfeit and substandard products in certain low-resource regions undermines brand trust and highlights the need for stronger quality monitoring. Although India remains a global leader in generics and cost-efficient manufacturing, gaps in infrastructure and biologics development limit competitiveness, emphasizing the need for greater investment in advanced research and development and technology adoption.
The India-EU free trade agreement is set to expand market access and boost exports for Indian pharmaceutical and medical technology companies, while promoting regulatory cooperation and intellectual property protections, though compliance challenges and nontariff barriers will likely continue to pose constraints. India and the European Union finalized a comprehensive FTA on Jan. 26, significantly lowering or eliminating tariffs on most traded goods. The deal grants EU exporters of pharmaceuticals, biologics, APIs and medical devices easier entry into India, while Indian producers gain near-zero tariff access to the EU market for the same goods, down from the prior 11 % effective rate. This agreement is expected to boost trade, enhance collaboration and open growth opportunities for micro, small and medium Indian pharmaceutical enterprises by enabling them to expand exports, invest in compliance and integrate into European supply chains. The FTA aligns with the World Trade Organization's Agreement on Trade-Related Aspects of Intellectual Property Rights, which sets standards of intellectual property protections. This offers the European Union and India recognized protections for patents, trademarks and trade secrets, while preserving India's generics sector, preventing patent evergreening and providing regulatory clarity. Additional measures include customs facilitation to streamline administrative procedures and frameworks for regulatory cooperation, though full mutual recognition of standards is still under development. Both parties emphasized the need to reduce overreliance on imports, particularly APIs, encouraging closer collaboration. While this issue is more pressing for Europe, which seeks to diversify its pharmaceutical supply chains away from China, the FTA mainly benefits India by expanding its exports. Nevertheless, compliance requirements for Indian exporters, especially small and mid-sized companies, remain stringent, and pending harmonization of quality and safety standards could delay market entry. Additionally, while intellectual property safeguards favor innovation, they may in some cases benefit EU innovators, limiting flexibility for Indian generics. Furthermore, nontariff barriers, such as approval timelines, labeling rules and technical regulations, may continue to restrict trade growth despite lower tariffs.
- The European Union and India are also negotiating an Investment Protection Agreement, which could provide legal safeguards for investors and incentivize EU pharmaceutical investment in India. The agreement may be finalized after the FTA texts are legally reviewed and the deal enters the ratification phase.
In the meantime, the India-U.S. trade framework seeks to lower tariffs on generic pharmaceuticals and safeguard India's existing export market, though final outcomes remain contingent on ongoing negotiations and the results of U.S. trade investigations. On Feb. 2, India and the United States reached an interim trade deal that reduced punitive U.S. tariffs from 50% to 18%. In the deal, India secured zero-duty access to the U.S. market for its generic drugs and pharmaceutical ingredients. However, on Feb. 20, the U.S. Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA) — which for India was the 18% rate — after which the Trump administration introduced a new 10% baseline tariff under Section 122 of the Trade Act of 1974, which expires in July. On March 11, the United States also announced it would pursue broader Section 301 investigations targeting multiple countries, including India, to assess trade practices and determine potential further tariff actions. As a result, India will likely wait for greater clarity on the direction of U.S. trade policy before finalizing negotiations. Before the Supreme Court ruling, the Trump administration had already signaled that it was considering implementing tariffs on pharmaceuticals outside the scope of IEEPA measures. However, according to the U.S.-India joint statement on the interim trade deal issued on Feb. 6, India could receive concessions on generic drugs and their components, pending the findings of the U.S. Section 232 investigation into pharmaceuticals and related inputs. This indicates that, while Washington has prioritized India's large generic drug industry for tariff relief to help maintain price stability in the United States, these provisions remain tentative until the agreement is finalized. If a final trade deal is not signed and Washington imposes Section 232 tariffs, Indian pharmaceutical exports to the United States would face higher tariffs, disrupting supply chains and limiting growth in higher-value branded and specialty segments. In response, Indian companies would likely adjust pricing strategies, diversify into alternative export markets, and focus on strengthening domestic manufacturing under the Make in India initiative to maintain competitiveness.
- Importantly, the U.S.-India trade framework differentiates across product categories, with generic drugs on a path toward zero tariffs, while branded and patented medicines could still face tariffs of up to 100%, reflecting a broader push to encourage domestic manufacturing in the United States. This approach protects India's roughly $10 billion generic export market while creating a significant barrier for Indian companies seeking to expand into higher-value branded and specialty pharmaceuticals.
Finally, while Gulf countries are not major export destinations for India, a prolonged Iran conflict could still disrupt shipments, raise production costs and temporarily slow India's pharmaceutical output. Shortages of essential industrial gases like propane and LPG, which are critical for steam generation and reactor operations, have already led some Indian plants to reduce or temporarily halt production of medicines such as vitamins and hormones, and ongoing tensions in the Middle East will likely worsen these delays, risking longer and more frequent plant shutdowns. Additionally, rising energy prices and higher freight costs from rerouted shipping lanes will likely add to India's input cost pressures, while airspace closures and logistical bottlenecks will complicate exports of time-sensitive drugs, including cancer therapies, raising delivery costs and slowing shipments. India's pharmaceutical exports to the Gulf Cooperation Council and the broader West Asia and North Africa region are particularly at risk, as the Pharmaceuticals Export Promotion Council of India has warned that a severe Iran-related disruption could result in losses of around $250 million-$550 million for March shipments alone, driven by inflated freight charges and war-risk surcharges. These challenges increase production and transportation costs while creating uncertainty in delivery schedules. While the overall Indian pharmaceutical sector will likely remain resilient, as GCC countries account for only about 5.58% of exports and are not among India's top markets, key destinations such as the United Arab Emirates, Saudi Arabia, Oman, Kuwait and Yemen will likely face temporary shipping delays and localized disruptions.
