Illustration of FDI Policy related to Pharmaceutical Sector
The government have accelerated some changes in FDI policy especially to open doors for global economy, One of the change in the said decisions were taken related to Pharmaceutical sector and FDI policy for the same. The modifications on 20th June 2016 clearly indicating the view of current government to liberalise the FDI rules carefully and making Pharmaceutical sector as one of the powerful sector for the growth
Pharmaceutical sector is considered as one of the competitive and important sector looking out to global economy. PM have also commented that, the current decisions are taken for making India as one of the most open economy
According to modifications, Brownfield FDI is allowed up to 74% of investment in pharmaceutical sector via automatic approval route which was earlier only 49% and was one of the major hurdle in the FDI, Greenfield FDI are already to its full limit of 100%
What is Greenfield Foreign Direct Investment?
It is a kind of investment done on the new plant where an Investor or Company try to establish a new production capacity. The investment by an investor has to be in a fresh production facilities
Greenfield investment refer to new developments.
Since mostly these type of investments are with MNC, they try to create new ventures resulting into new production facilities
• New Physical assets are developed like Plant, Machineries etc.
• Greater opportunities to create fresh employments
• Increased production of Concerned goods
• Generally adopt superior technology in the field by MNC
What is Brownfield Foreign Direct Investment?
The investment done by FDI on existing plan is called as Brownfield Foreign Direct Investment. This type of investment can be in already existing plant or facility. This type of investment cannot be in the new plant or developing new production capacity.
Brownfield projects refer to development of existing infrastructure
Investment in this type can be made through Merger or by acquisition by foreign company or investor in India. The domestic firms are preferred having existing production arrangements. This type of investment involve transfer of ownership from domestic enterprises to foreign enterprises or investor
• Lesser chances of creating new assets as the investment done by investor looking out existing facilities of domestic firms
• Rare chances of expansion of production facilities at least in the early stages
• Generally decreased in in the competition of MNCs may take place during the of domestic firm by MNC
• MNC may pursue their own policies rather than following the domestic firms policies
The Foreign Investment Promotion Board (FIPB) offers a single window clearance for applications on Foreign Direct Investment (FDI) in India that are under the approval route. The sectors under automatic route do not require any prior approval from FIPB and are subject to only sectoral laws
This may reduce the competition for MNCs to takeover Indian firms while these companies may influence the domestic market by continuing their own policies. This is a welcome change by Indian Government but will have to wait for the actual press note for more details