By: Agencies/New Delhi
Source: http://www.gulf-times.com
Category: Foreign Investment In India
India has approved eight foreign investments in drugmakers worth $333mn in total, signalling the finance ministry may be winning a battle to open up the country’s fast-growing markets and giving a boost to global drugmakers hungry for growth.
As a condition of its approval, however, the government said the foreign companies including US-based Pfizer and Germany’s B-Braun would have to continue producing cheap drugs and maintain spending in ongoing research and development projects run by their Indian partners for five years.
Since becoming finance minister last month, P Chidambaram has directed officials to fast-track foreign direct investments (FDI) as part of a drive to revive investor confidence after India’s economy grew at its slowest pace in nearly three years.
Proposals had been delayed for months due to a lack of clarity over government policy, with some government bodies expressing concerns that medicine prices might rise after a few Indian drugmakers sold businesses to overseas rivals.
In all, Chidambaram approved 21 foreign direct investment proposals totalling Rs24.1bn ($433.5mn) on the recommendation of the Foreign Investment Promotion Board (FIPB).
The proposals were cleared after the government decided to allow up to 49% foreign direct investment in domestic companies with conditions, two government sources said.
The present rules allow 100% foreign investment for new companies being set up in India while overseas investment in existing companies needs FIPB approval.
The government did not give details of the investments.
A McKinsey report earlier this year projected India’s pharmaceutical market would triple to $20bn by 2015 and move into the world’s top-10 pharmaceutical markets.
“The absolute growth of $14bn will be next to the growth potential of the US and China, and in the same league as the growth in Japan, Canada and the UK,” it said.
Abbott Laboratories bought Mumbai-based Piramal Healthcare’s Indian business for $3.72bn in 2010 while Ranbaxy founders sold a controlling stake in the company to Japan’s Daiichi Sankyo Company for $4.2bn in 2008.
Global drugmakers such as Pfizer, GlaxoSmithKline and Sanofi also have a significant presence in the country and are looking to expand their businesses there.
Abbott has the largest market share followed by India’s Cipla and GlaxoSmithKline.
Meanwhile, news reports said yesterday that the government is to propose watered down legislation later this month to open up the retail sector to foreign supermarkets.
The Mail Today tabloid and Hindustan Times reported that the government would propose allowing groups such as US giant Wal-Mart or French multinational Carrefour to own up to 49% of local subsidiaries.
The legislation would also include provisions for state governments to set local conditions for the groups, a move designed to head off opposition to the highly controversial legislation.
Last December, the government, which has struggled to pass reforms, was forced to withdraw a proposal to allow foreign supermarkets to own up to 51% of their local subsidiaries.
Shopkeepers, opposition parties and even the Trinamool Congress, ally of the Congress-led United Progressive Alliance coalition came together to oppose the change in the law, saying it would destroy the livelihoods of small business owners.
The government sees foreign supermarkets as a way to improve the food supply chain and bring down prices, but the proposed legislation as reported yesterday might not be enough to attract them.
Allowing state governments to set conditions locally would increase the complexity of the regulatory environment and the 49% ownership cap would mean the groups would not have control over their Indian operations.
Any proposed legislation would also need to pass the parliament, which was disrupted almost every day of the last session which ended last Friday.
Foreign retail groups are already allowed in India, but they must run single-brand shops.
Source: http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=530707&version=1&template_id=40&parent_id=22
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