Pharma & Healthcare Update: Budget 2026-2027: Key Initiatives in The Pharmaceutical and Healthcare Industry

Budget 2026-2027: Key Initiatives in The Pharmaceutical and Healthcare Industry

The Finance Bill 2026–2027 (“Budget”) underscores the Government’s continued focus on strengthening India’s pharmaceutical, healthcare, and life sciences ecosystem through targeted policy interventions, fiscal support, and regulatory reforms. With an emphasis on innovation, domestic manufacturing, R&D, and access to affordable healthcare, the Budget seeks to address structural challenges while enhancing India’s global competitiveness.

The pharmaceuticals and healthcare sector has emerged as a strategic priority in the Budget and the key measures focus on strengthening biopharma manufacturing, research and clinical infrastructure, medical tourism, and traditional medicine systems.

We have highlighted below the key initiatives impacting the pharmaceutical and healthcare industry and outlines their potential legal and commercial implications for the industry.

BOOSTING THE BIOPHARMACEUTICAL INDUSTRY

India’s bioeconomy has grown from $10 billion in 2014 to $165.7 billion in 2024, with a target of $300 billion by 2030. The government aims to make India a global bio-manufacturing hub driven by innovation, sustainability, and inclusive development. Despite strong vaccine leadership and innovation capability, this sector has faced constraints relating to scale-up of biologics manufacturing, regulatory approval timelines and specialised infrastructure affecting global competitiveness and speed to market.

The Budget responds to these concerns through the proposed ₹10,000 crore “BiopharmaShakti” programme intended to be implemented over five (5) years, aimed at boosting innovation and manufacturing of biologic products and biosimilars. Building on previous policies such as PLI incentives, bulk drug parks, and customs duty exemptions, it seeks to position India as a global bio-manufacturing hub. The initiative is anchored in scaling up biopharma manufacturing capacity to support biologic medicines critical for managing chronic and long-term non-communicable diseases, aligning healthcare priorities with public needs. It specifically targets biologics and biosimilars as high-value therapies relevant to chronic and long-term care needs.

One of the key measures also includes strengthening the Central Drugs Standard Control Organisation (“CDSCO”) through the introduction of scientific committees to support regulatory decision-making. This is expected to improve regulatory certainty and reduce approval timelines.

Further, the Budget provides for the creation of a biopharma-centric innovation and manufacturing network, including the establishment of three (3) new National Institutes of Pharmaceutical Education and Research (“NIPER”) and the upgradation of seven (7) existing institutions. It will also create a network of 1,000 accredited India clinical trial sites to address capacity and quality gaps in clinical research, strengthen compliance standards, and enhance India’s attractiveness for global trials.

Collectively, these measures complement existing initiatives such as BioE3 and the National Biopharma Mission which promote regenerative biomanufacturing, MSME participation, and sustainable growth aligned with India’s net-zero objectives. Going forward, effective integration of BiopharmaShakti with existing bioeconomy programmes and regulatory reforms will be critical to translating fiscal support into scalable innovation and positioning India as a high-value biotechnology hub.

Impact

• Enables scale-up of biologics and biosimilars as a core growth segment for Indian pharma.
• Improves regulatory throughput and clinical trial readiness for complex products.
• Positions India for better participation in global biopharma value chains.

MEDICAL TOURISM

The medical tourism market in India is a rapidly growing sector projected to reach between $13 billion and $16.2 billion by 2026-2030. It remains a key contributor to healthcare-led foreign exchange inflows, supported by cost competitiveness and clinical expertise. Primary issues in this sector include fragmented infrastructure, limited integration of allied and post-treatment services, and the absence of large-scale, globally competitive healthcare destinations.

Under the Budget, a scheme is proposed to support states in establishing five (5) regional medical tourism hubs in partnership with the private sector. The scheme envisages the development of large-scale, integrated healthcare destinations combining advanced hospital infrastructure, diagnostics, post-treatment care, rehabilitation services, and AYUSH systems under a single framework. This integrated approach is intended to improve continuity and quality of care for international patients while simultaneously strengthening domestic healthcare infrastructure. The public–private partnership nature of the proposed model aims to enhance service standards, operational efficiency, and global visibility of India’s healthcare offerings.

It is also expected to generate employment across the healthcare value chain, including doctors, nurses, allied health professionals, technicians, and support staff.

The success of the initiative will depend on effective coordination between states and private players, providing clarity on regulatory and accreditation requirements, and ensuring that medical tourism growth complements domestic healthcare access.

Impact

• Catalyses development of large-scale integrated healthcare destinations through PPP models.
• Creates sustained demand across hospitals, diagnostics, and allied healthcare services.
• Enhances India’s postition as a regional medical tourism hub.

SCALING TRADITIONAL MEDICINE

India’s Ayurveda, Yoga, and Naturopathy, Unani, Siddha and Homoeopathy (“AYUSH”) sector, estimated to be worth over USD 18–20 billion and witnessing rising global demand for traditional and preventive healthcare solutions, remains a significant pillar of the country’s wellness economy. Despite growing international interest, it has faced challenges relating to limited institutional capacity, uneven quality standards in manufacturing and a shortage of formally trained healthcare personnel.

The Budget provides a strong impetus to Ayurveda and allied wellness systems through a multi-pronged institutional and infrastructure-led approach. The Budget proposes the establishment of five (5) medical hubs with integrated AYUSH centres, diagnostics infrastructure, and post-care rehabilitation facilities. This is expected to create comprehensive Ayurveda-led healthcare destinations, boosting the medical tourism, while also generating employment for allied health professionals. The Budget also announced the setting up of three (3) new All India Institutes of Ayurveda to support education, research, and clinical services, explicitly aimed at meeting growing global demand for Ayurveda. This is likely to strengthen academic capacity, clinical validation, and international outreach of traditional medicine systems.

It further provides for the upgradation of existing AYUSH pharmacies and drug testing laboratories across the country to improve quality assurance which is critical for both domestic use and exports. Under this initiative, the upgradation of the WHO Traditional Medicine Centre will also encourage evidence-based research and enhance global acceptance of Indian traditional medicine practices. The emphasis on scaling quality Ayurveda products for exports is also expected to have downstream benefits for farmers engaged in medicinal plant cultivation.

It proposes National Skills Qualifications Framework (NSQF)-aligned training programmes for multi-skilled caregivers, combining core healthcare with allied skills such as wellness, yoga, and assistive devices, to address workforce gaps and improve service delivery across traditional medicine led healthcare settings.

These measures are expected to strengthen institutional capacity, improve quality standards, and enhance the global credibility of traditional medicine as a scalable healthcare and export-led growth sector.

Impact

• Promotes AYUSH through institutional expansion and quality controls.
• Strengthens export potential of traditional medicine products.
• Supports workforce development and rural supply chains linked to medicinal plants.

STRENGTHENING MENTAL HEALTHCARE ECOSYSTEM

India faces a significant mental health burden yet continues to lack adequate infrastructure dedicated exclusively to mental healthcare. This sector is constrained by limited specialised infrastructure, regional concentration of premier institutions, shortages of trained professionals, and inadequate access to advanced treatment and research facilities.

The Budget announces a major step towards strengthening mental healthcare infrastructure through the establishment of two (2) new national mental health institutes in Ranchi and Tezpur. These institutes are envisaged as national-level centres for specialised treatment, academic training, and research to improve access to quality mental healthcare in underserved regions. It also proposes the establishment of a second campus of National Institute of Mental Health and Neurosciences (NIMHANS) in North India, modelled on the Bengaluru-based institution. This expansion seeks to address the absence of advanced mental health institutions in the region and to significantly enhance India’s capacity for specialised care.

Collectively, these initiatives are intended to decentralise mental healthcare expertise, build a skilled workforce, and strengthen the country’s response to an expanding mental health burden.

Impact

• Corrects regional imbalance in access to advanced mental healthcare infrastructure.
• Expands national capacity for specialist training and research.
• Lays groundwork for future growth in mental health–focused therapies and services.

CUSTOM DUTY RELIEFS

In India, patients suffering from cancer and rare diseases have faced significant affordability challenges due to high import duties on critical medicines and specialised medical nutrition, often where domestic substitutes are unavailable.

Under the Budget, the Government has proposed removing basic customs duty on 17 high-cost cancer drugs, directly lowering treatment costs and improving access to critical oncology medicines across the country. It also expands the list of rare diseases eligible for customs duty exemption on personal imports by adding seven (7) more conditions, extending relief to patients requiring specialised drugs, medicines, and medical food that are not readily available domestically.

Alongside product-specific reliefs, the Budget signals a shift towards reforming customs processes through minimal intervention and the adoption of a “trust-based system.” This is aimed at reducing procedural delays, easing compliance burdens for importers of healthcare products, and improving supply chain efficiency for time-sensitive medical imports.

These measures reflect a patient-centric approach by combining targeted duty exemptions with process simplification to enhance affordability, access, and ease of doing business in the healthcare sector.

Impact

• Directly improves affordability of high-cost cancer and rare disease treatments.
• Facilitates timely access to specialised imports where domestic options are limited.
• Simplifies compliance for healthcare imports through reduced customs intervention.

UNMET EXPECTATIONS

While the Budget makes meaningful structural interventions, certain industry expectations remain unaddressed.  The Ministry of Health & Family Welfare was allocated only INR 1.05 lakh crore for the financial year 2026-2027, which is only around 10% higher than the previous year. There was limited upward revision in major schemes, with Ayushman Bharat PM-JAY’s allocation rising only marginally to ₹9,500 crore.¹

Notably, the Budget does not introduce direct fiscal incentives for pharmaceutical R&D beyond existing schemes, despite continued calls for enhanced tax deductions and targeted support for innovation-intensive research. There is also limited clarity on comprehensive regulatory reforms for medical devices and digital health. Additionally, beyond product-specific exemptions, the Budget stops short of a broader rationalisation of customs duties on pharmaceutical formulations and active pharmaceutical ingredients, which could have further strengthened cost competitiveness and supply chain resilience.

CONCLUSION

Overall, the Budget reflects a deliberate shift towards consumer and research-led growth in healthcare and life sciences, through fiscal support and regulatory reform. The measures signal a move beyond incremental incentives towards long-term structural strengthening, with a clear emphasis on access, innovation, and global competitiveness across the sector.

Naveli Sharma, Tanya Kukade and Dr. Milind Antani
You can direct your queries or comments to the authors.

¹https://www.pib.gov.in/PressReleasePage.aspx?PRID=2221616&reg=3&lang=2#:~:text=The%20Union%20Budget%202026%E2%80%9327%20marks%20a%20significant%20milestone%20in,the%20Revised%20Estimates%20of%20FY