The Union Budget 2026 has increased the allocation for the Department of Pharmaceuticals to ₹5,931.22 crore, up from ₹5,268.72 crore in Budget 2025–26. The 12.6 percent increase places the department among the faster-growing allocations in the Union Budget. Within this total, the Production-Linked Incentive (PLI) scheme for pharmaceuticals has been allocated ₹2,445 crore in Budget Estimates for FY26–27. The allocation continues direct financial support for domestic manufacturing of Active Pharmaceutical Ingredients (APIs), Key Starting Materials (KSMs) and Drug Intermediates (DIs).
Reducing Dependence on Chinese API Supplies
India currently imports around 70 percent of its APIs and nearly 90 percent of its KSMs from China. The pharmaceutical PLI scheme was introduced to reduce this dependency by offering financial incentives linked to production volumes.
The ₹2,445 crore allocation for FY26–27 supports manufacturers producing identified critical APIs, including paracetamol, antibiotics and oncology-related intermediates. According to programme data, the Department of Pharmaceuticals is tracking 56 critical APIs under the scheme. Of these, 41 have already achieved domestic production milestones, while 15 APIs remain to be localised.
Infrastructure Support Through Bulk Drug Parks and Clusters
The ₹5,931.22 crore departmental allocation also supports ecosystem development beyond the PLI scheme.
The department continues to fund Bulk Drug Parks, which provide shared utilities, common effluent treatment plants, testing facilities and logistics infrastructure for API manufacturers. At present, three parks are operational in Gujarat, Himachal Pradesh and Andhra Pradesh, with additional parks planned.
The Department of Pharmaceuticals is also supporting pharmaceutical clusters through common infrastructure facilities, quality testing laboratories and research and development centres to enable regional manufacturing hubs.
Positioning for Global Supply Chain Diversification
Global pharmaceutical companies are diversifying manufacturing locations in response to geopolitical risks, pricing pressures and supply reliability concerns.
India’s manufacturing ecosystem is supported by its regulatory acceptance in major markets, including approvals from the U.S. Food and Drug Administration and the European Medicines Agency.
Under the pharmaceutical PLI scheme, eligible companies receive incentives ranging from 10 to 20 percent of incremental sales achieved from domestically manufactured products, providing financial support during capacity ramp-up phases.
Implications for Manufacturing Expansion
The ₹2,445 crore allocation for the pharmaceutical PLI scheme and the expanded departmental budget provide multi-year funding visibility for companies planning new API facilities or expanding existing plants.
The availability of Bulk Drug Parks with pre-approved land and shared infrastructure lowers entry barriers for manufacturers, particularly small and mid-sized firms. Domestic production under the PLI framework also supports supply chain requirements increasingly sought by regulated markets in the United States and Europe for diversified sourcing.
The increased allocation to the Department of Pharmaceuticals in Budget 2026 reinforces continued public funding support for domestic API, KSM and drug intermediate manufacturing and associated infrastructure.
