Exports and domestic demand to drive steady growth for pharma SMEs in FY26

Rising US and EU demand is set to drive SME-led growth, though tougher compliance rules may test smaller firms

Export demand from regulated and semi-regulated markets is expected to support revenue growth of India’s pharmaceutical sector this financial year (FY26). New product launches and drug shortages in the US and European markets are expected to provide further support. 

Domestic demand is likely to remain stable, with existing products seeing only modest price growth. However, new product launches will contribute to revenue growth. 

This trend is favourable for small and medium enterprises (SMEs), which account for approximately one-third of the industry’s revenue. Typically, these SMEs manufacture formulations that involve less complex molecules. They benefit from their presence across the value chain and their role as contract manufacturers for larger pharmaceutical companies. 

The SME segment is estimated to have grown 7-9 per cent in the financial year 2024. The export boost helped the Ahmedabad, Mumbai and Baddi SME clusters achieve healthy growth, while stable domestic demand supported the Indore and Chennai clusters.

The entities are estimated to have maintained the growth trajectory in the financial year 2025, at 7 per cent, with exports of formulations and bulk drugs constituting around 46 per cent. Key chronic therapeutic areas, such as cardiac and neuro, dermatology and gastrointestinal treatments in the acute therapy category, drove growth. 

The momentum has persisted into FY26, driven by price increases and new product launches. 

A key event that calls for immediate and close monitoring, however, is the requ­irement to comply with the revised Schedule M by Dec­ember 2025, which could cre­ate financial headwinds for SME players, potentially leading to business closures and formulation shortages, despi­te their stable financials.  crisil ratings