OBJECTIVE: The purpose of this present study was to ascertain the economic burden due to the annual direct costs of psychotropic medications used in the management of psychiatric disorders in a developing country with limited financial resources. METHODS: The direct costs of the psychopharmacological agents evaluated were -(i) antidepressants like tricyclic, SSRI, and newer antidepressants available; (ii) antipsychotics like phenothiazines, butrophenones, and atypical antipsychotics; (iii) benzodiazepines and sedatives. The annual direct costs of the medications were ascertained from the latest monthly index for medical specialities [MIMS], and from standard chemists, and pharmaceutical firms. The statistical mode or most frequent cost was considered for further computations. RESULTS: Regarding antidepressants, tricyclics were noted to have the following annual direct costs, [1 US $ = Rs. 43]. Imipramine Rs. 1130 [US$26.3], amitriptyline Rs. 1460 [$34], dothiepin Rs. 2410 [$56.1], trimipramine Rs. 2430 [$56.5] and clomipramine Rs. 6130 [$142.6 ],. Fluoxetine has an annual cost of Rs. 840 [$19.5], mianserin Rs. 2010 [$46.7], amoxapine Rs. 3835 [$89.1], amineptine Rs. 10,700 [$248.8], and the most expensive, tianeptine Rs.21,000 [$488]. The recently introduced antidepressant sertraline has an annual cost of Rs 2740 [$63.7]. Prophylaxis for affective disorders with lithium therapy would have an annual cost of Rs. 1200 [$27.9]. Regarding antipsychotics the annual direct costs of oral medications of chlorpromazine and haloperidol were same, Rs. 2000 [$46.5], long acting oral penfluridol Rs. 500 [$11.6], and depot long acting injectable fluphenazine decanoate, haloperidol decanoate, and flupenthixol Rs. 750 [$17.4], Rs. 1500 [$34.9] and Rs. 2100 [$48.8] respectively. Newer atypical antipsychotics resperidone, Rs. 4500 [$104.7] and clozapine Rs. 5500 [$127.9]. Benzodiazepines have an annual cost of $7.5 for diazepam, $3.5 for lorazepam and chlordiazepoxide, $2.8 for oxazepam, and $17.6 for alprazolam. Sleep medications nitrazepam, flurazepam and zopiclone have an annual cost of $3.3, $8 and $18.8 respectively. CONCLUSION: The annual direct costs are comparatively less than those in Western nations, but nevertheless these produce a significant burden on the Indian families, and are a common reason for poor compliance. Another trend that can be noted above is that newer antidepressants like amineptine and tianeptine, antipsychotics like resperidone and clozapine, and hypnotics like zopiclone are much more expensive than the older medications. Thus, the annual direct costs of medications are only likely to increase with time, enhancing the financial burden in the treatment of the psychiatric disorders.