Foreign direct investment (FDI) in India's pharmaceuticals business has reached a five-year low, signalling a dramatic shift that might transform the country's health sector. The inflow for the fiscal year ending March 31, 2025, was only $891 million, a dramatic 16% decrease from the previous year's $1.06 billion. It is the second consecutive year of decrease, raising questions about the financial stability of a sector vital to both domestic health needs and global drug supply chains.

According to media reports, this slump is more than simply a numbers game. "FDI is a key pillar for innovation, affordability, and supply stability in pharma," said a senior policy advisor from the Department of Pharmaceuticals, who requested anonymity. "A continuous drop suggests weakening investor confidence, which can have long-term consequences for medicine accessibility." 

Official data from the Ministry of Commerce and Industry show that the trend is more than a blip. After reaching a peak of $2.06 billion in 2022-23—a remarkable 46% increase over the previous year—the industry experienced a 48.3% drop in 2023-24. The most current figures reveal that the downward spiral is continuing. Quarterly numbers for January to March 2025 show a sharp 40% drop from the same period last year. 

In rupee terms, the annual inflow declined from ₹8,844 crore in 2023-24 to ₹7,500 crore in 2024-25—a 15.2% decrease. The March 2025 quarter saw a ₹457 crore drop compared to the previous year. 

India has received $729 billion in foreign equity since 2000. Despite being termed "the pharmacy of the world", India's pharmaceutical sector accounts for only 3.21%. IT services (16.3%) and telecommunications (5.5%) continue to garner far more investor interest. 

The pharmaceutical sector's contribution has now fallen below construction development, chemicals, and even non-conventional energy, which are not typically considered public health drivers. 

Experts suggest numerous explanations. One, the global economic downturn has made investors more cautious. Two, India's regulatory environment—particularly for brownfield initiatives (existing drug companies)—requires government approval for foreign investment greater than 74%. "This adds time and complexity, deterring quick capital flows," said a Mumbai-based pharmaceutical investor. 

Greenfield projects (new investments) have 100% automatic approval, but few are coming in. Furthermore, from April 2020, the government has tightened investment regulations for countries with shared land borders, limiting money from critical pharma partners such as China. 

Lower FDI inflows may hinder the sector's ability to support research, expand manufacturing, and improve medicine quality—essential for combating diseases such as tuberculosis, cancer, and antibiotic resistance. Less funding also implies fewer jobs and slower technological adoption, affecting drug affordability and availability. 

India's domestic health ecosystem is significantly reliant on a consistent influx of money to develop low-cost, high-volume medications. A protracted fall in FDI may damage the system's base. 

With $23.42 billion in total foreign equity since 2000, the pharmaceutical sector remains vital—but it is currently facing a financial shortage at a time when public health demands are increasing. Addressing investor confidence and eliminating approval delays is no longer optional for a country seeking to become a global health leader.