The Government has eased investment rules for the medical devices industry by allowing 100 per cent foreign direct investments (FDI) under the direct route for both new and existing projects, Finance Minister Arun Jaitley announced on Wednesday.

While 100 per cent FDI was already allowed in the sector, foreign investors had to seek permission of the FIPB for investing in or taking over existing companies. By allowing both greenfield and brown field investments under the direct route, FIPB scrutiny will now not be required even for investment in existing projects.

Foreign investors will, however, continue to go through the FIPB route for investing in existing pharmaceutical companies.

“Domestic capital market is not able to provide much needed investment in the sector. 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,” an official statement said.

The medical devices industry is governed by the same rules as the pharma sector, where 100 per cent FDI in new projects is allowed under the automatic route but Government approval is needed for acquiring an existing company.

Domestic industry unhappy

However, the announcement has left domestic manufacturers unhappy. Rajiv Nath, Joint Managing Director, Hindustan Syringes and Medical Devices, said the FDI norms have already been misused by multinational companies which entered India but did not set up manufacturing facilities, instead focusing on setting up marketing and warehousing facilities only.

“There is no motivation to manufacture in the country. When these companies can import at negligible duties of zero to five per cent, why would they manufacture in the country,” Nath said.

He drew a parallel with the soft drinks sector, saying easing of FDI norms would make small Indian medical device manufacturers more vulnerable to acquisitions by foreign companies.

India’s medical devices industry is pegged at about ₹30,000 crore, of which over 70 per cent is import-dependent.

However, not all industry members view this as a negative. Himanshu Baid, Managing Director, Polymedicure, said relaxing the procedures would help the sector, which needs strong infusion of international technology as well as finances to grow.

Baid said India’s medical devices industry accounts for only one per cent of the global market, as compared to the pharma segment which accounts for seven per cent.

Chandrajit Banerjee, Director General, Confederation of Indian Industry, said the move would help bolster local manufacturing of medical devices.

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