New Delhi: Indian active pharmaceutical ingredients (API) industry is set to grow 7-8 per cent in FY25, from an estimated size of $13-$14 billion in 2023, a report said on Monday.

The growth will be driven by a steady ramp-up in the pharmaceutical formulations industry which, in turn, will be aided by an increasing geriatric population, higher prevalence of chronic diseases, and rising demand for contract manufacturing with global customers looking to diversify their supply chain along with greater focus on domestic sourcing, according to the report by credit rating firm ICRA.

“Given the lower input costs, along with growth in revenues, ICRA expects the earnings improvement recorded in FY2024 to sustain in FY2025 and the operating profit margin (OPM) to enhance to 12-14 per cent from 11-13 per cent in the previous fiscal,” said Deepak Jotwani, Vice President and Sector Head–Corporate Ratings, ICRA.

However, the impact of subdued demand from some key export markets such as Europe and tensions in the Red Sea impacting supply chain and freight costs will continue to be monitored, he added.

India imported APIs and bulk drugs worth Rs 377 billion in FY2024, accounting for 35 per cent of its total API requirement.

The country has witnessed favourable traction in the production-linked incentive (PLI) scheme launched by the government for the bulk drugs industry.