Foreign Direct Investment (FDI) in Pharmaceutical Sector in India: Striking Balance Between Indigenous Needs and Foreign Investors’ Interest

Abstract

Indian pharmaceutical industry is predominantly driven by the private sector and the public sector has negligible role. Notable factor is that Indian pharma industry is ranked 3rd globally in terms of volume, and 14th in terms of value. This growth is attributed to changes made in the Patents Act, 1970, which replaced the Product Patent Act, 1911 which allowed process patent (product patent introduced again in 2005), changes in the Foreign Exchange Regulation Act, 1973 (now, Foreign Exchange Management Act) which compelled foreign companies to reduce their equity to 40% thereby reducing the number of subsidiaries of MNCs from ten (10) in 1973 to two (02) by 1985, among others. Indian pharmaceutical sector is one such sector that not only caters to domestic requirements but also exports to more than 200 countries/territories including highly regulated markets, e.g., USA. The present paper discusses various measures undertaken to protect indigenous pharmaceutical industry or consumers/patients but has implications for FDI. It also throws light on major developments in last one decade that had direct implications on the FDI in Pharmaceutical Sector in India, apart from considering the concerns of foreign investors.