FDI Liberalization To Boost India's Medical Device Sector

By Jof Enriquez,
Follow me on Twitter @jofenriq

India should follow through on recent policy changes, designed to open up the local medical device industry to 100 percent foreign direct investment (FDI), in order for the country to realize its potential as a medical device production hub, a recent industry association study recommends.

In particular, the government should enforce "specific tax incentives and soft loans for setting up manufacturing plants in line with competing destinations such as Malaysia, rationalization of the inverted duty structure for raw material and components, to make indigenous manufacturing more attractive," states the Confederation of Indian Industry (CII) and the Boston Consulting Group (BCG) report titled 'Medical Technology: Vision 2025', according to the Times of India (TOI).

Despite allowing since last year 100 percent FDI in the medical device sector, that sector accounted for less than 0.5 per cent of the total inflow of FDI, stated joint secretary in the ministry of commerce Sudhanshu Pandey in the report. He noted that 0.5 percent is a dismal performance, since the policy change allowed FDI liberalization both in brownfield (acquisitions) and greenfield (manufacturing) segments.

However, according to a ValueWalk report, recent data from Goldman Sachs indicate that India's overall FDI pipeline remains promising. It reports FDI inflows increased in 2014 to $41 billion, and FDI inflows in the first half of 2015 were $26 billion.

A report from Beroe, Inc., via MyPurchasingCenter.com, states that India received $693 million of FDI in the medtech sector between 2000 and 2014, which is less than the local pharmaceutical sector.

According to TOI, Pandey says that increasing FDI inflow to the medtech industry is crucial to making India a hub for medical device production, not only to meet domestic demand, but to enhance exports.

The WHO previously said ongoing underinvestment and dependence on imports continues to curtail the India medtech industry's potential for growth. Opening up the device industry to more FDI could help reverse the trend.

For the country to realize its $50 billion potential in the medtech sector by 2025, the CII report recommends that authorities "take steps in the next twelve months to boost the medical technology industry, increase spending on healthcare and provide a platform to participate in government purchasing across schemes and states," according to the TOI article.

In its report, CII also supports a "single window authority for the regulation of medical technology manufacturing and enhancing the capability of designated manufacturing hubs."

The Indian government, through the 'Make in India' campaign, recently introduced policy changes consistent to what the CII report listed as recommendations.

In April, it announced the building of two new industrial parks dedicated to medical device manufacturing of high-end products to help counter imports that currently dominate the Indian healthcare market. Foreign companies are also boosting local production. For example, Philips' local unit earlier this year launched its fifth medical equipment product that is made in India.

Then, in May, the government announced plans to create a nationwide safety and surveillance program for medical devices, part of an overarching effort to rationalize India’s regulatory environment. A chief component of that overhaul is a new standalone regulatory agency called the National Medical Device Authority (NDMA), tasked to promote the local device sector, enforce stricter safety and manufacturing standards, and install price controls for medical devices, equipment and supplies.