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