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100% FDI for Medical Devices Under ‘Automatic Route’ Now

The government has now allowed 100 per cent FDI under automatic route in medical devices sector to encourage manufacturing of equipments, including diagnostic kits and other devices. “Easing of norms for medical devices industry by creating special carve out in the extant FDI policy on pharma sector will encourage FDI inflows in this area,” said an official statement issued after the Union Cabinet meeting here.

The 100 per cent FDI, it added,will be permitted under the automatic route, meaning a foreign investor will not have to seek the permission of Foreign Investment Promotion Board (FIPB) to acquire an existing company or set up a new manufacturing unit in the medical devices sector. The condition of ‘noncompete clause’ would also not be applicable to greenfield (new project) as well as brownfield projects (existing units) of this industry.

The Union Cabinet has given its approval to amend the existing policy to carve out medical devices segment. “So far both in greenfield and brownfield projects, 100 per cent FDI is allowed. Within the same category, a distinct new sub-category has been carved out with regard to medical devices,” Finance Minister Arun Jaitley has said.

India has achieved an eminent global position in pharma sector. However, the same has not been replicated in the medical devices industry, it added. “In this age of super specialisation, if medicines and pharma are one aspect, in which India has attained a certain amount of core competence, we still haven’t achieved that in medical devices, particularly which are to be installed in human body for the purpose of treatment,” Jaitley said. “ The country has a huge pool of scientists and engineers who have potential to take medical device industry to a very high level. Domestic capital market is not able to provide much needed investment in the sector,” it said.

This has potentially opened the existing Indian companies in the sector to foreign acquisition.

“Easing of norms for medical devices industry by creating special carve-out in the extant FDI policy on pharma sector will encourage FDI inflows,” said an official statement issued after the Union Cabinet meeting.

Industry and Markets Welcomed The Move

While welcoming the development, Association of Indian Medical Device Industry (AIMED) Forum coordinator Rajiv Nath, however, said the government needs to make domestic manufacturing more competitive against cheaper imports by hiking customs duty.

Unless the inverted import duty structure is corrected by raising import duty from 0 per cent to 10 per cent as earlier and reimposing 4 per cent special additional duty, the shift from importing and trading by Indian investors and MNCs to manufacturing may not take place, he added.

Besides, appropriate regulations for medical devices independent of drug must also be in place, he said.

As per Director General of CII, Chandrajit Banerjee , “ This would meet a very longstanding need for local manufacturing and technology infusion in the sector, which continued to meet the growing healthcare needs of a vast country like India largely through imports. It clearly distinguishes the Medical Devices sector which is primarily greenfield so far, from the Pharmaceutical sector which was brown field and needed several protections .This step will go a long way in making the “Make in India” programme happen for this sector as the government was expected to continue to emit similarly positive signals to make the country an attractive for investors to make, market and export their products.”

Pavan Choudary, Chairman, Medical Technology Division of the CII and Managing Director, Vygon India Pvt Ltd, also welcomed the move and said since.

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