Union Budget 2026: Pharma Sector Seeks Tax Relief and Strong Push for R&D

Mumbai: Ahead of the presentation of the Union Budget for FY 2026–27 on February 1, India’s pharmaceutical and healthcare industry has called for higher tax incentives and stronger government support for research and development (R&D). The demand has been highlighted in a recent ET–PwC survey of senior industry leaders.

R&D a Key Priority for Growth

According to the survey, nearly three-fourths of CXOs believe that accelerating R&D is critical for sustaining growth and driving innovation in the pharmaceutical sector. Industry leaders have urged the government to offer enhanced tax deductions, targeted incentives, and greater support for drug discovery initiatives.

The survey covered 40 CXOs from pharmaceutical companies with annual revenues ranging from ₹500 crore to over ₹10,000 crore, reflecting broad-based industry concerns.

India Lags Behind Global Peers in R&D Spending

Despite India’s strong presence in the global pharmaceutical market, investment in R&D remains relatively low. India currently spends only about $3 billion annually on pharma R&D, compared to $15–20 billion in China and $50–60 billion in the United States, industry leaders pointed out.

Need for Risk Financing and Faster Approvals

Executives stressed the need for robust risk financing mechanisms, particularly for biotech startups engaged in early-stage research. Simplification of regulatory processes, faster approvals, and greater adoption of digital technologies were also identified as crucial to improving India’s global competitiveness.

GST Concerns and Rate Rationalisation

The industry has also flagged challenges arising from the inverted duty structure under GST. Companies have urged the government to address this issue through rate rationalisation, which they believe would support growth and foster innovation. Nearly 67% of respondents identified R&D incentives as the single most important driver of future growth.

Industry Growth Outlook

Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance, said the industry is on track to reach $120–130 billion by 2030 and $450 billion by 2047. He emphasized that achieving these targets would require a strong policy push toward R&D and innovation in the upcoming budget.

Call to Restore Weighted R&D Deductions

Sheetal Arora, Promoter and CEO of Mankind Pharma, said the Budget presents an opportunity to strengthen R&D tax incentives. He called for the reintroduction of weighted R&D deductions at globally competitive levels, expansion of Production-Linked Incentive (PLI) schemes, and duty rationalisation to boost self-reliance in Active Pharmaceutical Ingredients (APIs).

Government Action Needed

Arushi Jain, Director at Akums Drugs and Pharmaceuticals Ltd, India’s largest contract manufacturer of generic medicines, noted that India has emerged as a reliable global supplier of affordable medicines, contributing significantly to exports and foreign exchange earnings. However, she stressed that low R&D spending remains a critical gap, urging the government to introduce concrete measures in Budget 2026 to significantly boost pharma R&D.