Indian Pharma’s 2025 Budget Wishlist: Growth, Innovation, and Challenges

From making a few reasonably priced generic medications, the Indian pharmaceutical sector has advanced to become the global center for the production of pharmaceuticals and vaccines. In addition to meeting 25% of the UK’s pharmaceutical needs, India distributes pharmaceutical items to more than 200 countries, 50% of Africa, and 40% of the US generic market. With over 60,000 products in 60 therapeutic categories and more than 500 APIs, India is the world’s third-largest manufacturer of pharmaceuticals by volume and fifteenth by value. With a focus on biopharmaceuticals and biosimilars, Indian businesses have not only increased access to healthcare around the world but have also established themselves as reliable partners in enhancing healthcare systems around the world.

Numerous measures have been taken by the Indian government to facilitate and promote innovation and development in the Pharma sector, especially in cell and gene therapies such as a boost in funding and infrastructure investments. For instance, the Pharma MedTech Sector’s Scheme for Promotion of Research and Innovation (PRIP) was introduced to strengthen research and innovation capabilities. This program has sanctioned a total spending of INR5,000 crore (about US$604.5 million) between 2023 and 2028 and supports innovative research in pharmaceutical as well as the medical technology field. These findings are likely to make the environment of India regarding research vibrant as well as more cooperative.

Despite these encouraging growth dynamics and government support, however, many challenges have to be met before the potential of this industry can be seized in the future. The available R&D funding is less than satisfactory, and state-of-the-art testing facilities, intellectual property protection, and insufficient incentives for investment in industry-wide ventures are required. So, Pharma Inc.’s expectations comprised largely of increased public healthcare funding and incentives for pharmaceutical research and development, with some tax exemptions towards more life-saving medications in this 2025 budget.

Reduction in Custom Duties for life-saving drugs
Executives in the healthcare sector stated that increasing the number of life-saving medications free from import duties and GST will help make them more affordable for patients. They want the benefit to extend to all cancer drugs. The government was pushed by hospital owners to lower customs taxes on necessary medical supplies and equipment. Depending on the kind of medication and whether it is imported or not, India has different tax rates for necessary medications.

Modification in Section 115BAB
Anil Matai, director-general of the Organization of Pharmaceutical Producers of India (OPPI), stated that expanding the application of Section 115BAB of the Income Tax Act, 1961 to businesses exclusively involved in pharmaceutical research and development, acknowledging the high-risk, long-gestation nature of R&D, and offering a 200% deduction rate on R&D expenses.
According to Section 115BAB, a corporation that manufactures or produces any kind of item or a thing that aids in conducting research to or distributing such items is eligible for a 15% concessional tax rate. According to Deloitte, businesses engaged solely in research-related activities will be eligible for a concessional tax rate under section 115BAB, rather than being limited to research pertaining to the company’s manufactured or produced goods, given that the government wants to encourage research, innovation, and development in India.

Removal of Section 194R
The Income Tax Act’s Section 194R permits businesses to deduct taxes from any type of gift or incentive and remit it to the government. In the pharmaceutical industry, it stands for drug samples that businesses give to physicians and medical facilities. The additional administrative load placed on businesses by having to keep track of smaller transactions is one of the main causes of the demand. The process is made more complicated by the requirement that the business deducts the tax imposed under Section 194R on behalf of the beneficiary, such as a hospital.
Thus, the removal of Section 194R which is marketing samples, would facilitate streamlining business operations, according to Sudarshan Jain, Secretary of, the Indian Pharmaceutical Alliance (IPA).

Other additional expectations
Furthermore, efficiency and simplicity in doing business will be achieved when Advance Pricing Agreement (APA) processes, such as fixing deadlines for quick settlement of the case, as well as making sure renewals are done within time, are free of procedural redundancies. Going ahead, the necessity of expanding public funding for health programs and incorporating the Ayushman Bharat scheme’s missing middle class is of crucial importance.
To promote innovation and investment, the industry group has also urged for removing turnover conditions for safe harbor laws for R&D and requiring deadlines for appeals, especially those handled by the Income Tax Appellate Authorities (TAA).
Further, it would be encouraging if the Union Budget restored 200 percent weighted deductions for R&D expenditures, expanded the patent box regime to include income from patents abroad, and allocated at least 10% of the National Research Fund to life sciences, according to Sudarshan Jain, Secretary, IPA.

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