INDIA — India remains one of the world’s most attractive market opportunities for medical device manufacturers internationally. India outsources 70 percent of its medical devices and equipment, mostly to the United States. This year, the medical device industry is being opened up to 100 percent foreign direct investment (FDI). India has the potential to be a domestic manufacturing base but has never expressed much interest in doing so. The new FDI cap will increase the foreign investment in India’s medical device industry and potentially other markets.
This change comes after years of underperformance by India in the pharmaceuticals and medical devices industry. The hope is that the FDI will spur domestic growth, and with the growing middle class, the industry is expected to grow tremendously. The new strategy is meant to help India step up in the global medical devices sector, which is predicted to reach 400 billion dollars this year. The changes to the market and the population demographic are predicted to contribute to massive growth resulting in a 50 billion dollars industry by 2025.
There are two FDI routes that foreign investments will go through, the government route and the automatic route. The government route needs prior government approval and the automatic route does not. The investment route change had almost instantaneous effects on the shares of domestic medical device manufacturers such as Opto Circuits, which saw a 16 percent rise, and Siemens India, rising by 2.2 percent. The trend is expected to continue and the new policy is expected to improve the medical device sector, but foreign investors have several reasons to be hesitant. Firstly, domestic manufacturers face high tax rates and so foreign firms often access India’s market by building factories in neighboring countries such as China, and exporting the goods to India.
While the strategy is a big step toward getting India where it should be in terms of the global medical device industry, to create the amount of investment that they predict, further changes in policy are needed. Under current policy, many foreign investors would still rather import medical devices to India from neighboring countries to avoid lengthy governmental procedure and high taxes. India is going to have to create a type of incentive program to entice big companies to invest directly in India’s medical devices sector. Once these companies do begin to invest and set up shop in India, the results will likely be astounding. India’s rapidly growing population, especially the middle class, which makes for an excellent workforce and a growing market. As India sees more prosperity and medical devices become more accessible, the spending on healthcare and the health of the people can be expected to increase. The strategy is a very important first step toward the type of progress that can be made in India, but it needs a more comprehensive strategy for foreign investment for it to maximize rewards on all sides of the agreements.
– Emma Dowd
Sources: Forbes, India Briefing, OIFC,
Photo: Karuna-Shechen