India has decided to liberate foreign direct investment (FDI) in the medical devices sector from the conditions imposed on its pharmaceutical cousins. This begs the question : to what end? To recap, from January 21, FDI in medical devices will qualify for automatic approval of up to 100 per cent. Notably, this is irrespective of how the FDI flows into the country – via new investments in manufacturing/research (‘greenfield’) or the buyout of existing assets (‘brownfield’). This is unlike the pharma sector where brownfield investment is conditional, not automatic. Until now, medical devices were bound by the same FDI rules as pharma.
A Press Information Bureau (PIB) release evinces the fond hope that the move will encourage FDI inflows into medical devices thereby strengthening the hand of a “huge pool of scientists and engineers” who have the “potential to take the medical device industry to a very high level.” It says rather dismissively that the “domestic capital market is not able to provide much needed investment in the sector.”
Uninformed observers can be forgiven for inferring that a misguided FDI policy was a key obstacle that stood between India’s medical device sector and greatness.
Not true. Continue reading
Today’s edition of the Indian Express has an edit piece that I have authored on why the government should stop repeatedly tinkering with India’s foreign direct investment (FDI) policy for pharmaceuticals.
In this piece I have argued that there is no connection between the availability of essential medicines and the FDI policy and that this repeated hullabaloo around foreign investment is taking away the focus from those factors that do, in fact, have an impact on essential medicines. Not to mention the blatant double standards that it displays towards foreign-owned companies. You can read the column here. Continue reading
The issue of controlling foreign direct investment (FDI) in the Indian pharmaceutical sector continues to make headlines with various arms of the government putting forth their own formulas to tame the grasping foreign hand.
The Indian Express reports that the ministry of commerce under Anand Sharma would like all FDI proposals – including where foreign ownership is limited to 49 per cent – to be routed through the Foreign Investment Promotion Board (FIPB). This is at odds with Continue reading
India seems set to reverse a ten year-old policy governing foreign direct investment (FDI) in pharmaceuticals. If Prime Minister Manmohan Singh gives his nod to the recommendations of an inter-ministerial group then automatic approval for FDI in Indian drug companies will be capped at 49 per cent. Beyond this limit, a foreign investor will have to seek permission from India’s Foreign Investment Promotion Board (FIPB) which may or may not grant it on a case-by-case basis.
Even when permission to hold beyond 49 per cent is granted to a foreign investor, the investee company will be required to maintain its level of investment in research and development and production of “essential” medicines for five years. See Mint’s report here.
The proposal is based on the belief that restrictions on FDI will help local industry and prevent shortage of essential medicines. That’s all wrong. Continue reading