Cabinet okays 100% FDI in medical devices sector

In a major decision aimed at giving a fillip to medical devices manufacturing sector, the Cabinet headed by Prime Minister Narendra Modi has allowed 100 per cent FDI in the sector under automatic route. The new decision will also be applicable for diagnostic kits and other devices used in 

pharma sector.

“Easing of norms for medical devices industry by creating special carve out in the extant FDI policy on pharma sector will encourage FDI inflows in this area,” said an official statement. The 100 per cent FDI, it added, will be permitted under the automatic route, meaning a foreign investor will not have to seek the permission of Foreign Investment Promotion Board (FIPB) to acquire an existing company or set up a new manufacturing unit in the medical devices sector.

“The condition of ‘non-compete clause’ would also not be applicable to greenfield (new project) as well as brownfield projects (existing units) of this industry.  Earlier FDI up to 100 per cent was permitted, subject to certain conditions,” the official release said.

While FDI in new projects is under automatic route, brownfield projects are placed under the government approval route. The policy on pharmaceutical sector covers medical devices since this area is not separately covered.

“Now, the Union Cabinet has given its approval to amend the existing policy to carve out medical devices segment.  So far both in greenfield and brownfield projects, 100 per cent FDI is allowed. Within the same category, a distinct new sub-category has been carved out with regard to medical devices,” Finance Minister Arun Jaitley told mediapersons after the Cabinet meeting. Medical devices include any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes. It also includes a device which is a reagent, calibrator, control material, kit, equipment or system whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes.

“Since medical devices are part of the Drugs & Cosmetics Act, 1940 and fall under the pharmaceutical sector, all the conditions of the FDI policy on the sector, including the condition relating to ‘non-compete clause’, apply on brownfield investment proposals of medical devices industry,” the statement from the commerce ministry said.