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Our view

The pharmaceutical industry’s fortunes have started looking up after two years of slowdown wrought by rollout of the Goods and Services Tax (GST) at home and pricing pressures in the export market. Driven by a sharp spurt in exports, the industry logged double-digit growth of 15% in fiscal 2019, signalling a return to the healthy ways of fiscal 2013-2016.

We expect double-digit growth of 10-11% to continue over the medium term.

The domestic growth story has been largely stable, barring a few regulatory interventions such as pricing regulation on essential drugs in fiscal 2015 and GST in fiscal 2018.

Over the next two fiscals, domestic growth is expected to hold steady at 11-12%, driven by

• Increasing healthcare penetration because ofAyushman Bharat, the government’s flagshipscheme
  
• Greater incidence of non-communicable diseasesand ageing population
  
• Growing per capita income
  

Exports, which account for half of the industry’srevenue, are also expected to clock a good compoundannual growth rate (CAGR) of ~9% over fiscal 2019-2021, riding on

• Robust product pipeline as players look at nicheand limited-competition products
• Rising generic penetration in European nations
  
• Indian players’ focus on entering newer andsmaller markets in Africa
  
• Short-term supply opportunity for bulk drugexports owing to Chinese disruption

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