NewZNew (Chandigarh) : The Government is expected to soon take a decision on liberalizing FDI Policy for the cash- starved medical devices sector. Association of Indian Medical Device Industry (AIMED) welcomes 100% FDI for Manufacturing but not for Trading. Over the past few months, the government has eased FDI rules in defence and construction to promote domestic manufacturing as PM Narendra Modi made a pitch for “Make in India” and boost investment and economic activity.
On the same, Rajiv Nath, Forum Coordinator, AIMED says” We (AIMED) welcome 100% FDI for Medical Devices for manufacturing but not for trading. It is ok for Green Field Project but it should not be for Brown Field. Hardly 50 manufacturers are there in India with over 50 crore turnover in Medical Devices. By making 100% auto approval for brown field investment, these battered surviving Indian manufacturers would be easy picking for MNC’s; what is more important in making manufacturing viable in India so that even Indian investors can invest in their field. Unless the inverted import duty structure is corrected by raising basis import duty from 0% to 10% as earlier and reimposition of 4% SAD appropriate regulations for Medical Devices independent of drug. Why will there be a shift from importing and trading by Indian investors & MNC’s to manufacturing.
There is need to review the FDI policy which allowed 100% equity to put mfg unit for Medical Devices. There needs to be a stipulation to ensure at least 60% of the Turnover would need to be from manufacturing operations in India. For MNC’s wishing to do mainly trading i.e. over 40% of Turnover they should be allowed to put up subsidiaries with restrictive shareholding e.g.to 40% as is case in Insurance and Branded Retail sector and minimal 20% shareholding for Indian Public / Indian F.I’s.
While Indian Entrepreneurs have got access to Manufacturing Joint Ventures but usually can not avail this opportunity and compete with the Importers from Multinational Companies (who were one of the first sectors to be invited for Foreign Direct Investment (FDI) but only used this opportunity to setup 100% owned subsidiaries for holding marketing and warehousing activities rather than for Manufacturing). While in Japan, Europe & ASEAN Countries there is a thriving environment for small and medium size Industry, India is seemingly following the US Model where the MNC’s are inadvertently being allowed to dominate and grow by Mergers & Acquisitions. This may ultimately harm the interests of Indian consumers.