The government's decision to liberalise FDI policy for the cash-starved medical devices sector will lower imports, encouraging MNCs to set up manufacturing facilities in the country, according to industry body EEPC India.
Significantly, the move will help reduce cost of medical devices benefiting patients as at present the country imports about 70% of its requirement of medical devices. The estimated $7 billion market is dominated by multinationals.
Medical devices include a wide range of products such as sutures, implants and surgical instruments.
"Since the demand for medical devices is projected to grow at 19% annually, the advantage would have accrued to global firms exporting to India, rather than the domestic players, who are in the low-end products. But things would now change for better," EEPC India Chairman Anupam Shah said.
The government recently permitted FDI up to 100% under the automatic route for manufacturing of medical devices, exempting the sector from the restrictive conditions imposed on the pharmaceuticals.
The 100% FDI has been 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 green field (new project) as well as brown field projects (existing units) of this industry.
"What this means is that the global giants will be able to pour in strategic investment in several medium scale enterprises in India through the automatic route. This would really help the domestic SME-dominated industry grow in their technological capabilities through investment and strategic partnerships with multinationals," Shah said.
At present, the Indian medical devices industry remains largely unregulated and fragmented with more than 700 manufacturers focused on mid to low-end devices and surgicals, he added.