Over the past decade, India's healthcare landscape has transformed from being a primarily generic drug manufacturing economy to encompass innovators, contract service providers (CDMO/CRO), hospitals, and diagnostics. The sector has also witness robust growth fuelled by increasing affordability, improved access, and medical technology advancements.

Shibani Sircar Kurian, EVP, Fund manager and Head of Research, Kotak AMC, said, "The evolution of the pharma industry in India has charted a course that is similar to the technology sector. However, what started out as India being a low-cost producer of generic drugs has metamorphosed into a far more complex industry. Despite this, the domestic branded generic market remains crucial for Indian pharma, where efficiency and scale have driven global generic dominance and steady, profitable growth. However, competitive pricing and low single-digit volume growth in export markets are pushing companies to reinvest profits into complex drug R&D and speciality drugs, offering larger markets, better margins, and higher entry barriers."

India's emergence as a global pharma player has fostered a strong CDMO (contract development and manufacturing) /CRO (contract research) ecosystem, leveraging high-quality technical talent. "This sector experiences significant growth due to increased outsourcing by innovator companies and supply chain de-risking," said Kurian. While commercial CDMO manufacturing is projected for mid-to-high teens growth, pre-clinical, clinical development, and discovery services anticipate even faster expansion. Ongoing investment, rising global biologics trials, and a maturing R&D ecosystem signal a shift towards value-led contracts, positioning Indian CDMOs as vital global partners.

The other segment of growth has been the healthcare ecosystem. Experts believe favourable government policies and rising insurance penetration is driving structural growth in the hospital sector, which has a substantial runway for expansion due to India's low hospital bed density (1.3 per 1,000 people vs. WHO's 3). Government schemes like Ayushman Bharat are further boosting demand by extending insurance coverage. Finally, a growing focus on preventive care is driving demand for vaccines and diagnostic tests, with diagnostics expected to see double-digit structural growth in the coming years.

"With such multifaceted growth drivers – from pharmaceutical innovation and contract services to expanding hospital networks and a rising focus on diagnostics and prevention – the Indian healthcare sector presents a compelling and promising investment theme for the foreseeable future," said Kurian.