Foreign Direct Investment in drugs and pharmaceuticals was at $580 million during April-October 2012

FDI in the pharmaceutical sector jumped by 86.5% to $1.08 billion during April- October period of the current fiscal amid concerns over continuous mergers and acquisitions of domestic drug makers by multinationals.

Foreign Direct Investment (FDI) in drugs and pharmaceuticals was at $580 million during April-October 2012, according to the data of the Department of Industrial Policy and Promotion (DIPP).

Although, the DIPP had proposed tightening of norms for foreign investors in existing Indian pharmaceutical companies, including reducing FDI cap to 49% in critical verticals from 100%, the Union Cabinet has rejected the proposal.

The department had proposed the norms to arrest the spurt in pharma MNCs taking over domestic firms that make “rare and critical” medicines.

This demand was strongly opposed by the Finance Ministry.Planning Commission also had reservations on the proposal. On the other hand, Ministries such as Health and Family Welfare had supported it.

As per estimates, over 96% of the total FDI in the sector between April 2012 and April 2013 has come into brownfield pharma.

“The DIPP proposal was aimed at enhancing FDI in the greenfield area as the continuous acquisition of Indian pharma companies will severely impact the availability and affordability of generic medicines in the country,” a source said.

The government had recently cleared a Rs 5,168 crore proposal of US-based pharma firm Mylan Inc’s to acquire Indian generic drugs company Agila Specialties.

India allows 100% FDI in pharma sector through automatic approval route in the new projects, but foreign investment in the existing companies are allowed only through the FIPB (Foreign Investment Promotion Board) approval.

Other sectors which received high FDI during the period include services (USDD 1.36 billion), automobile ($784 million), construction ($699 million) and chemicals ($433 million).

Overall FDI into the country has declined by 15% during the seven month period of the fiscal to $12.6 billion.

The government has liberalised foreign investment norms in several sectors to attract more and more foreign players.

Prime Minister Manmohan Singh has said yesterday that India provides a “hospitable” environment for foreign direct investments (FDI) and will continue to improve the situation.Business Standard