Recent Indian Government Policy Changes and New Introductions (2026) – Pharmaceutical Industry Focus
The New Drugs and Clinical Trials (Amendment) Rules, 2026 came into effect in March 2026, reducing approval timelines from 90 to 45 working days for several regulatory actions while introducing a prior-intimation system for certain low-risk categories. This marks a significant shift toward faster regulatory approvals and improved ease of doing business for pharmaceutical companies.
The revised Schedule M Good Manufacturing Practices (GMP) rolled out on January 1, 2026, represents one of the most critical regulatory changes, with stricter international quality standards requiring compliance from both large manufacturers and MSMEs. Thousands of MSMEs are struggling to meet these standards, with industry bodies like IDMA requesting a one-year extension until December 2026 to prevent widespread plant closures.
The Production Linked Incentive (PLI) Scheme received Rs. 15,000 crore (US$ 2.04 billion) outlay for 2020-21 to 2028-29, with Rs. 604 crore (US$ 69.76 million) disbursed in H1 FY25, boosting manufacturing, investment, and product diversification. The government extended the deadline for the PLI Scheme for bulk drugs and APIs to January 16, 2026, giving companies more time to apply for domestic manufacturing support.
On December 5, 2025, the government announced a Rs. 60,000 crore (US$ 7 billion) API-push to boost domestic pharmaceutical manufacturing and cut import dependence on critical active pharmaceutical ingredients. This initiative addresses the vulnerability of single-source API and KSM supplies that has been a major concern for supply chain resilience.
Union Budget 2025-26 allocated Rs. 5,268 crore (US$ 602 million) for the Department of Pharmaceuticals, up 28.8% over previous budget estimates, reflecting strong government commitment to the sector. The budget focuses on infrastructure, high-potential sectors, and innovation-driven growth in the pharmaceutical industry.
The Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) now has 16,912 Jan Aushadhi Kendras operational as of June 30, 2025, with a target of 25,000 by March 2027, offering 2,110 medicines and 315 devices/consumables to promote affordable quality generic healthcare. This initiative significantly improves access to affordable medicines for millions of Indians.
The GST 2.0 reform stands out as a pivotal policy milestone for pharma, simplifying tax structures, enabling seamless input credits, and reducing inefficiencies across the value chain. This policy simplification complements the affordability focus with a sharper emphasis on quality improvement.
The High-Level Committee on regulatory reforms made important strides in 2025, emphasizing faster and more predictable approvals, digitalisation of regulatory processes, and improved ease of doing business for pharma and biotech companies. CDSCO introduced fast-track drug testing from June 2026, allowing early sample submission and faster approvals while maintaining strict safety standards.
The government is planning a roadmap for ICH/PIC/S accession to further enhance the global acceptability of Indian pharmaceutical products. Recent FDI policy updates allow up to 100% FDI via automatic route for Greenfield pharma projects, with up to 74% for Brownfield projects via automatic route and beyond that with government approval.
Import controls were imposed to protect local manufacturers, with Minimum Import Prices (MIP) on key ingredients for drugs like Atorvastatin (cholesterol) and various antibiotics through late 2026. This policy supports the local pharmaceutical manufacturing base while manufacturers invest in quality and compliance upgrades.
The India-New Zealand Free Trade Agreement, concluded in December 2025, expands opportunities for Indian pharmaceutical exports by providing preferential market access to the Pacific region. This trade agreement complements growing demand in Europe, Africa, and Latin America markets.
The government announced a second semiconductor mission with budget of $436 million for producing equipment and materials, supporting India’s clean energy and pharmaceutical manufacturing infrastructure. Customs duty exemptions apply to materials used in lithium-ion battery production, supporting electric vehicle and clean energy transition that benefits pharmaceutical manufacturing.