Full FDI not enough for medical devices sector: Experts

The recent Cabinet decision to allow 100 per cent foreign direct investment (FDI) in medical devices may not be enough to kick-start their production, as most companies focus on “trading and distribution”, and require more sops to make India a manufacturing hub.

“Apart from 100 per cent FDI in the medical devices sector, the government should create the right ecosystem for manufacturing, which presently has pro-import policies with inverse duty structure, lack of control on imports and no coordinated effort between the academia and the industry in research and development initiatives,” said GSK Velu, managing director of Trivitron, one of the largest medical technology companies in India.

Companies with majority Indian ownership should be given special preference in the government, as is the case in China, Turkey, Brazil and Russia, he said. Barring a few low-end items like syringes and catheters, most medical equipment like cardiac stents, prosthetics for orthopaedics and dental implants, are imported.

The Rs 35,000-crore industry imports 80 per cent of its content. More than a decade ago, the Department of Science and Technology had launched an attempt to start indigenous production of medical devices. It did not bear fruit.

“The FDI decision would help foreign companies use India as a manufacturing base to produce items for the international market,” former World Health Organisation consultant and pharmaceutical industry insider C M Gulhati told Deccan Herald.

The FDI inflow to the medical device sector was low due to the foreign investment promotion board.

The Department of Industrial Policy and Promotion figures indicate that between April 2000 to June 2012, when drugs and pharmaceuticals witnessed FDI inflow of nearly $9.66 billion, medical and surgical appliance had FDI inflows of only $523 million.

With FDI now being allowed, there may be a surge in the interest in the medical devices sector, provided the market space stays attractive enough for investment from multinational companies through consistent policies on export, pricing and the manufacturing front, said Pavan Choudary, chairman of the Confederation of Indian Industries’medical technology division, and managing director of Vygon India Pvt Ltd.

The sector, still nascent in India, accounted for as little as $2.5 billion, 1 per cent of the world market ($250 billion), while the country's drugs and pharmaceuticals market, which stood at $ 20 billion, accounted for 7 per cent of the $300-billion global market.

“This sector needed strong infusion of international technology and deep pockets,” said Polymedicure Ltd managing director Himanshu Baid.

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