Policy promises, reality disappoints – bloomberg quint

A foreign investor can now own up to 74 percent of an existing (brownfield) pharmaceutical company, without seeking the government’s approval. Devalue currency definition To exceed this limit, the foreign investor needs approval from the Foreign Investment Promotion Board (FIPB). Term currency definition There is no limit currently on foreign investment in new (greenfield) projects, nor does it need FIPB’s approval.

While this may seem like a substantial opening up of limits, the changes are in fact, a partial return to an earlier position.


Currency fluctuation definition Prior to 2011, 100 percent FDI was permitted in existing pharmaceutical companies without government approval. Definition of foreign currency A series of foreign acquisitions of Indian pharmaceuticals, Mylan – Matrix, Daiichi – Ranbaxy, Sanofi – Shantha Biotechnics and others, prompted the government to turn protectionist and mandate government approval for any foreign investment in an existing Indian pharmaceutical company. Home currency definition In 2014, the government also disallowed the signing of non-compete agreements between foreign investors and exiting Indian promoters in brownfield pharma deals.

The June 2016 change in FDI limit is therefore, in effect the restoration of an earlier limit, but only upto 74 percent. Foreign currency exchange definition And the bar on non-compete agreements continues.

Yet it is a welcome and significant liberalisation by the government, said Vaibhav Kakkar, partner at Luthra and Luthra law offices. Transaction currency definition “The dispensation from the requirement to seek an FIPB approval for investments up to 74 percent would significantly reduce the timelines for foreign investment, and give necessary fillip to foreign investment in this sector,” he told BloombergQuint in a telephone interview.

Regarding the continuing bar on non-compete agreements and whether it will discourage foreign investment, Kakkar said, “While everybody in the pharma sector understands the government’s rationale for this non-compete restriction, I think the government ought to handle the pharma sector by streamlining the drug price control regulations, and not by controlling foreign fund flows in the sector. Exchange rate volatility definition The colour of the money that comes in as investment should not matter.”

But the colour of money continues to matter, not just to the government but also to the industry lobby. Currency conversion definition The Indian Drug Manufacturers’ Association, a group that represents Indian pharmaceutical companies, has welcomed the increase in FDI limit but wants more riders. Meaning of devaluation of currency In an interview to BloombergQuint, IDMA spokesperson Daara Patel said “We have made certain suggestions to the government for cases where new deals take place. Meaning of currency devaluation For example, the staff should not be re-trenched, the product mix should not be changed for at least 5 years to protect the interests of Indian patients. Exposure to currency risk definition and measurement We want those clauses to be added. Foreign exchange account definition The control on pricing should be reduced and there should be more monitoring.”

In the civil aviation sector, the 74 percent limit on foreign investment has been lifted, but any investment beyond 49 percent still requires government approval. Currency account definition Foreign airlines though, are limited to 49 percent ownership. Currency rate definition Nonetheless, raising the foreign portfolio limit to 100 percent suggests that an Indian airline company can be owned entirely by foreign financial investors, or in a combination of 49 percent FDI and 51 percent FPI (foreign portfolio investment).

But that’s just on paper. Currency depreciation definition The regulations governing scheduled commercial airlines’ operations mandate that substantial ownership and control of the airline remain with an Indian promoter. Presentation currency definition The government recently said it will amend the licensing regulation to bring it in line with the FDI policy, according to a Financial Express report, but that has yet to happen.

That’s not the only hurdle. Fx risk definition Mark Martin, founder and chief executive officer at Mark Martin Consultancy LLC and former vice president, SpiceJet told BloombergQuint that while the foreign investment changes are well-intentioned, they may not produce the desired results.

Pravakar Sahoo, associate professor, Institute of Economic Growth and visiting Fellow, Bruegel agrees. Paper currency definition “Earlier, 49 percent FDI had been largely ineffective as foreign vendors hesitated to transfer technologies without ownership and management control. Currency spread definition With 100 percent FDI in equity, original equipment manufacturers (OEMs) may share ‘state-of-the-art’ technology with their Indian ventures. Foreign currency definition This would help India leverage critical technologies to shore up domestic capability in the defence industry, thereby creating jobs in the country, by setting up joint ventures,” he told BloombergQuint in an e-mail interview.

But even this incremental liberalisation has found opposition, in quarters close to the government. Currency risk definition RSS affiliate, Swadeshi Jagran Manch, is not very impressed. Foreign currency risk definition “The government should tell us how we will gain access to modern technology as there are patent regulations involved. Convertible currency definition We also want the government to release a white paper with details of the result foreign direct investment has had till now. Definition of currency in economics They must give details of how much employment has been generated and lost due to foreign investment,” Deepak Sharma, Akhil Bharatiya Prachar Pramukh of the Swadeshi Jagran Manch told BloombergQuint over the phone.

The June policy changes brought little cheer to the single brand retail sector. Devalue currency meaning Foreign investors were permitted to invest 100 percent but on the condition that 30 percent of the goods are sourced locally. Exchange rate definition wikipedia The government could exempt a foreign investor from this clause if the investment was ‘state of the art’ products. Exchange rate definition pdf The way the policy was worded suggested a lifelong exemption, but in June that was limited to exemption for up to three years and relaxed sourcing norms for next five years. Currency ratio definition And ‘state of the art’ remained undefined.

It isn’t clear how this will impact technology products companies Apple and Xiaomi. Definition of currency risk Both companies had applied for a relaxation of the 30 percent local sourcing requirement. Currency exchange definition But Apple’s application was rejected and Xiaomi withdrew their application, saying they are already manufacturing in India.

“The FDI policy in the SBRT sector is a classic example of the pitfalls resulting from multiple government bodies having oversight over the FDI policy, with the DIPP under the ministry of commerce making the policy, and the FIPB under the ministry of finance involved in its implementation by granting approvals to foreign investment proposals. Currency fluctuations definition The involvement of different agencies creates much confusion, and that is exactly what has happened here, with DIPP requiring satisfaction of conditions of ‘state of art’ and ‘cutting edge technology’ for dispensation from sourcing norms, and FIPB having no clarity on what may amount to ‘state of art’ and ‘cutting edge technology” said Vaibhav Kakkar.

“The amended policy notified by the press note limited the number of years for which relaxation from sourcing norms could be granted, on satisfaction of the conditions relating to ‘state of art’, ‘cutting edge technology’ and ‘local sourcing not possible’, to three years, which is a considerable departure from the unamended FDI policy which allowed for complete waiver of sourcing norms on satisfaction of these conditions,” he added.

Pravakar Sahoo explained what he believes are the ambiguities in the policy. Currency of information definition “The definition of ‘state of the art’ and ‘cutting age technology’ are not clearly defined. Euro currency definition I am not sure whether the companies will have to attend 30 percent local sourcing on an average over eight years or 30 percent on an average in the next five years after the three-year waiver.”

Confusion persists for the single brand retail sector. Third currency definition Couple that with the need for further clarity in aviation, and the changes billed as big ticket reforms seem less substantial.

All materials are found on open spaces of a network the Internet as freely extended and laid out exclusively in the fact-finding purposes. If you are what lawful legal owner or a product and against its placing on the given site, inform us and we will immediately remove the given material. The administration of a site does not bear responsibility for actions of the visitors breaking copyrights. abuzesite@bigmir.net