CRISIL SME Tracker: Strong domestic demand to drive pharma growth in FY23

In December, the domestic pharmaceuticals market grew 10.4 per cent on exceptional growth in both volume sales and prices

pharma, medicine, drugs
Business Standard
2 min read Last Updated : Jan 31 2023 | 12:03 AM IST
Strong domestic demand and exports to semi-regulated markets are expected to drive revenue growth for the pharmaceuticals sector in the current fiscal year (FY23), though export demand from regulated markets is expected to remain moderate owing to high pricing pressure amid intense competition.

In December, the domestic pharmaceuticals market grew 10.4 per cent on exceptional growth in both volume sales and prices. However, this growth was led by anti-infective therapeutics and could taper in coming months.
 
In this milieu, small and medium enterprises (SMEs), which have a 30-40 per cent share in industry revenue, are expected to grow 7-9 per cent in FY23, compared with 6-8 per cent in FY22. Growth would be led by domestic demand, while exports, which account for about 45 per cent of industry revenue, remain weak. 

SMEs also benefit from their presence across the value chain and as contract manufacturers for large players.

Among key SME clusters, Indore and Chennai are estimated to have witnessed good growth in FY22 owing to a recovery in domestic demand. Growth in the Ahmedabad and Mumbai clusters, however, was capped by underperformance in export markets.

Over the medium term, the Pharma Production-Linked Incentive (PLI) scheme is anticipated to boost domestic manufacturing, while reducing import dependency for bulk drugs. Typically, SMEs manufacture and market formulations based on less complex molecules, given their higher exposure to generic products. PLI could help some of them diversify their portfolios and improve export growth.

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Topics :CRISIL SME TRACKERPharmaceutical companiesPharma sector

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