Indian pharma remains a global generics exporter, but its corporate drug R&D spending just hit a decadal low while India's overall research budget sits at 0.64% of GDP, far below the 2.4 3.5% the United States and China commit.
India's drug industry draws on a deep pool of chemists and biologists. It runs the factories that supply much of the planet with affordable generic medicine. What it increasingly will not do is pay for the kind of research that turns those scientists into inventors.
Indian pharma R&D spending hit a decadal low in the fiscal year ending March 2025, according to Business Standard's analysis of company filings and corroborated by the government's Economic Survey 2025-26 summary on PRSIndia. The headline figure is older but starker: the sector spent roughly $3 billion, or about Rs 209.8 billion, on R&D in fiscal 2018-19, and the trajectory since has trended down rather than up.
That retreat matters because it is happening at the exact moment when the global drug business is being rewritten. China now accounts for roughly one-third of the drug assets licensed out worldwide and around 40% of biotech innovation, according to industry tallies compiled by Pharmaceutical Intelligence and republished by BioSpectrum India. India's biotech sector, by contrast, remains heavily weighted toward contract research, biosimilars, and services for other companies' pipelines rather than originator drugs it owns outright.
The root cause is structural rather than cultural. India's gross domestic expenditure on R&D, the GERD figure that captures a country's total research spending across government, academia, and business, sits at 0.64% of GDP, according to the Economic Survey 2025-26 as summarized by Business Today and cross-referenced in a Press Information Bureau release. The United States spends closer to 3.5% of GDP on research; China sits around 2.4%, according to The Wire's framing of the comparable GERD gap. India's lower spending alone would not be decisive. What makes the gap binding is who pays.
In China, the private business enterprise sector funds roughly 77% of national R&D. In India, that share is 41%, per the Economic Survey 2025-26 summary on PRSIndia. The remaining difference is not made up by government laboratories; it shows up as research that simply does not happen. Indian companies have the engineers: the country produces roughly 1.5 million of them a year, plus thousands of STEM PhDs. And yet the R&D-to-talent conversion rate into patents, originator molecules, and licensed-out drug assets trails China and South Korea by a wide margin.
The pharmaceutical consequences are concrete. Indian pharma, long a dominant generics exporter, was built on formulation chemistry and process engineering rather than on novel molecular invention. A round of tariff and supply-chain pressure documented in Business Standard's budget coverage of the Economic Survey's pharma chapter has heightened the strategic question: does India keep competing on cost, or does it move up the value chain into biosimilars, complex generics, and ultimately new chemical entities it owns? The R&D retreat suggests boards are choosing the easier answer.
BioSpectrum India, an industry trade publication, framed the choice bluntly in a recent industry view: innovation and R&D are fundamental, not optional, for the next phase of Indian pharma growth. The Press Information Bureau release accompanying the Economic Survey restated the government's diagnosis: private R&D intensity must rise. Whether boards, investors, and policymakers translate that diagnosis into budget lines is the open question.
The lever is real. GERD is not a cultural inheritance; it is a sum of decisions made by finance ministries, corporate boards, and university funders. India can keep producing more engineers than nearly any country on earth while its own companies finance someone else's inventions, or it can begin to fund the risk-bearing research that turns its generics exporter status into an originator one. The current trajectory points toward the first outcome.