RBI issues new rule of FDI in pharma sector

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RBI issues new rule of FDI in pharma sector
Taking another on issue of foreign direct investment (FDI), but in the pharma sector, the Reserve Bank of India (RBI) Friday notified new rules doing away with automatic approval in existing pharmaceutical companies. "FDI, up to 100 per cent, would be permitted for brownfield investment (i.e. investments in existing companies), in the pharmaceutical sector, under the Government approval route," RBI said in a notification.

Meanwhile, following the new rules, the overseas investors are required to seek permission from the Foreign Investment Promotion Board (FIPB) in case of any merger or acquisition. Further, the deal would be reviewed by monopoly watchdog, Competition Commission of India (CCI), after six months.

For the new investment, 100 percent FDI will be allowed under the automatic route, under which investors only inform the Reserve Bank about the inflows and no specific government nod is required.

"FDI, up to 100 per cent, under the automatic route, would continue to be permitted for green field investments in the pharmaceuticals sector," added RBI. However, following the same, many concerns were raised regarding the acquisition of te domestic companies by the foreign investors.

The recent acquisitions include Ranbaxy Laboratories buy out by Daiichi Sankyo of Japan, Shanta Biotech by Sanofi Aventis of France and Piramal Health Care by Abbott Laboratories of the US.

The affordability factor has so far been the hallmark of the Indian generic drugs all over the world, thanks to robust growth of the homegrown players.

Dion Global Solutions Ltd

Read more about: rbi, fdi, pharma, government
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