The importance of the medicinal plants sector can be gauged from the fact that herbal medicines serve the healthcare needs of about 80 per cent of the world's population. India, with approximately eight percent of world's biodiversity including plant genetic diversity with medicinal properties, has the potential of becoming a major global player in market for medicinal plants-based herbal formulations and products. However, prior to establishment of Medicinal Plants Board, there was no nodal agency to look into medicinal plants as an economic 'sector' and different organisations dealt with different aspects of medicinal plants without any clear cut focus and coordination. This lack of co-ordination led to critical research gaps relating to socio-economic and policy aspects of medicinal plants. At the same time, absence of formal marketing linkages and effective buy-back arrangements hindered the development of medicinal plants sector. Developing appropriate varieties for cultivation which could ensure uniform quality and continuous supply of raw material for processing industry would not only meet the industry demand but also halt the degradation of natural resource base. To capitalize on expanding opportunities in the international market, we need to focus on scientific methods of cultivation, harvesting, processing, grading, transport, storage, labeling and marketing practices involved in the entire supply chain for medicinal plants. Policy and institutional issues particularly related to co-ordination among various stake holders are one of the major constraints faced by this sector. Species- specific and socio-economic environment specific research would be helpful for identification of an optimal institutional framework to take care of needs of various stakeholders and also cater to social needs without adverse implications for equity and environment.