Ahead of union budget, pharma industry seeks R&D boost, GST rationalisation

Anil Matai, Director General, OPPI:

“As India approaches the upcoming Union Budget, OPPI believes that there is an opportunity to further strengthen the country’s healthcare and life sciences ecosystem with a clear patient-first focus. Sustained policy support over the past few years has laid a strong foundation for innovation, regulatory reforms, and improved access. The forthcoming Budget may have the potential to build on this by prioritising higher and more targeted investment in R&D and healthcare space. This will, in turn, foster a robust intellectual property environment, and enable a streamlined pathways for parallel and faster introduction of new medicines in India.

From a fiscal standpoint, rationalisation of GST on medicines and medical products, clarity on input tax credits, greater targeted customs duty relief for critical raw materials and advanced manufacturing inputs would help ease cost pressures and improve affordability. Reintroducing or strengthening R&D-linked tax incentives and support for fiscal support clinical research can further encourage innovation-led growth and global competitiveness.

We also look forward to measures that improve regulatory predictability, encourage clinical research, and support advanced manufacturing, while ensuring that quality and safety remain paramount. As the industry continues with the ethical business practices in alignment with the UCPMP, a trust-based and collaborative approach between government, industry, and healthcare stakeholders will be key to long-term progress. Ultimately, a patient-first Budget focused on innovation, access, and affordability can help deliver better health outcomes and position India as a globally competitive and responsible healthcare leader.

Sudarshan Jain, Secretary General, Indian Pharmaceutical Alliance:

“The Indian pharmaceutical sector is a global leader in providing affordable, quality-assured medicines and has been a cornerstone of India’s economic growth. With a strong track record of resilience and innovation over six decades, the industry is poised to achieve its ambitious target of reaching USD 120–130 billion by 2030, and ultimately USD 450 billion by 2047. Recent global challenges, including US tariffs, supply chain disruptions, and geopolitical uncertainty, underscore the need for strategic support to maintain and strengthen India’s competitive edge.

The Union Budget 2026 presents a key opportunity to reinforce India’s leadership in innovation, manufacturing, and global healthcare access.

Key Recommendations:

1. Strengthen R&D and Innovation Incentives
   The industry seeks globally competitive R&D incentives that align with India’s innovation ambitions, enhance the scientific ecosystem, and support the transition from a volume-driven model to an innovation-led pharmaceutical sector. Key measures include:

• Restoration of Weighted R&D Deduction (up to 200%)
  Historically, this incentive helped build India’s scientific capability. Restoring it under the new Income Tax Act would significantly boost investment in novel drugs, complex generics, biosimilars, and vaccines
• Broadened and Strengthened Patent Box Regime
  Pharma companies are seeking:
  • Coverage for patents registered in India and abroad
  • Inclusion of embedded IP income, licensing revenues, milestone payments, and capital gains
  • Eligibility for Indian residents who conduct R&D through global collaborations
  • A competitive tax rate of 5%, in line with global best practice

2. Support Manufacturing Competitiveness

• Rationalise the GST Structure: Address the widening inverted duty structure, ensuring smooth GST refunds on both goods and services, to maintain manufacturing viability and affordability
• Reintroduce Concessional Tax Regimes for New Facilities: Incentivise Make in India, backward integration, and foreign direct investment (FDI) in pharma manufacturing

3. Simplify Compliance and Regulatory Framework

• Clarify Section 194R: Physician samples and low-value brand reminders should not be treated as taxable benefits, eliminating ambiguity and reducing unnecessary compliance burdens 

4. Increase Public Healthcare Investment

• Increase government healthcare spending towards the National Health Policy 2017 target of 2.5% of GDP by 2026–27 to strengthen the overall healthcare ecosystem

Mytri Macherla, Vice President & Sector Head, Corporate Ratings, ICRA:

“The upcoming budget is likely to focus on preventive healthcare given the significant rise in non-communicable and lifestyle diseases in the country. To boost investments in the sector, tax incentives for private sector investments in modernising medical facilities, especially in tier-2 and tier-3 cities and developing greenfield hospitals in rural areas will be a welcome step. Further, given the low doctors to people and nurses to people ratio, increased allocation towards training medical personnel would be highly beneficial.

The pharma sector seeks rationalisation of GST rates on key raw materials to address the inverted duty structure, restoration of tax incentives on R&D spend, and expansion of PLI schemes to strengthen API self-reliance. Increased public healthcare spending and targeted incentives for biopharma innovation are critical to sustain growth.”

Bhavin Mehta, Whole Time Director, Kilitch Drugs & Vice Chairperson, Pharmexcil:

“As we approach the Union Budget 2026, the pharmaceutical sector is looking for deeper policy continuity around PLI-led manufacturing, API self-reliance, and export competitiveness. While schemes such as PLI and PRIP have laid a strong foundation, the next phase must focus on scale, execution, and global cost competitiveness.

Rationalisation of import tariffs on critical raw materials, coupled with targeted incentives for value-added formulations and APIs, will be crucial to offset rising input and compliance costs. We also see a strong case for enhanced tax incentives for R&D, faster depreciation benefits for quality and compliance investments, and easier access to export credit for pharma manufacturers.

A Budget that strengthens PLI outcomes, supports green and compliant manufacturing, and aligns trade policy with India’s healthcare diplomacy will help the sector move decisively towards its $120–130 billion ambition by 2030 and reinforce India’s position as the Pharmacy of the World.”

Arpit Bhatia, Director, Laborate Pharmaceuticals:

“As India works towards strengthening its healthcare ecosystem, the upcoming Budget is an opportunity to reinforce the fundamentals of pharmaceutical manufacturing. Greater focus on quality linked incentives, support for domestic API production, and continued investment in compliance driven infrastructure will help Indian pharma companies scale responsibly. For mid sized manufacturers, ease of doing business, faster regulatory clearances, and targeted tax rationalisation can unlock capacity expansion without compromising on standards. A predictable policy environment will be critical for ensuring that Indian medicines remain trusted, accessible, and globally competitive.”