FDI in the Indian pharmaceutical industry has grown significantly in recent years. The government has undertaken initiatives like tax reductions for R&D spending to encourage growth. While India has a strong manufacturing base and skilled workforce, it lacks investment in research. FDI allows foreign companies to set up manufacturing facilities through greenfield investments or purchase existing plants through brownfield investments. Joint ventures also provide opportunities for technology transfer and skills development. Mauritius is a major source of FDI in the Indian pharmaceutical sector.

1. FDI An Economic Reform
K-MART

2. FOREIGN DIRECT INVESTMENT
FDI inflow plays a predominant role in
economic development
Its seen as a means of supplement to
domestic investment for achieving a higher
level of growth development

3. Introduction
 According to IMF, FDI or Foreign Direct Investment is that
category of international investment that reflects the
objective of obtaining a “lasting interest” by a resident entity
in one economy in an enterprise resident in another economy
 There is no specific definitions on FDI as such owing to the
presence of many authorities like IMF,IBRD,OECD, and
UNCTAD.

4. The commitment of money or
capital to purchase financial
instruments or assets in order to
gain profitable returns.

5. Investment done by citizens and
government of one country (home
country) invest in industries of
another country (host country).
Foreign
Investment
through
Foreign Direct
Investments
Foreign
Institutional
Investors

6. Inflow from Investors point of view
• Market seeking : The investors are attached by the size
of the local market , which depends on the income of
the country and its growth rate.
• Lower cost : Investors are most cost-conscious . They are
influenced by infrastructure facilities and labor costs.
• Location and other factors : Technology status of a
country , brand name , goodwill enjoyed by the local
firms , favorable location , openness of the economy ,
policies of the government and intellectual property
protection granted by the government are some of the
factors that attract investors to undertake investments

7. WHAT F.D.I REQUIRES ?
Important factors which foreign investors take into
consideration when entering a country are:
 Reliable access to economic information.
 The level of corruption.
 Stability of political and business environment .
 Ability to meet and comply with internationality
acceptable standards and norms .
 Character of local market (size , growth , potential) or
the distance and the access to neighboring markets.
 The existence of good and quality infrastructure.

8. Permit Non Permit
Electrical equipments (including computer
software and electronic
Areas and ammunition .
Telecommunication(Radio Paging, Cellular
Mobile, basic telephony service
Atomic energy .
Service sectors (Financial &non financial )
Fuels (Power+ Oil Refinery
Railway transport.
Chemical (other than fertilizers)
Drugs &Pharmaceuticals
Coal and Lignite.
Metallurgical Industries Mining of iron , manganese , chrome , gypsum
, gold , diamonds , copper , and zinc .

9. FDI ATTRACTERS FDI DISCOURAGERS
India has a well developed network and
financial institutions and an organized capital
market open to foreign institutional investors
that attracts activities and export to neighbor
countries.
 High rates of taxation
 For the last few years there has been
political stability in the country.
 India enjoy good reputation among other
countries as a honoring of its
commitments about repayment hem to
undertake investments.
 Indian skills and competence is used as a
base for carrying out production
obligations , remittance of dividends etc
 India has vast potential of unskilled labor
available at cheap rates as compared to
other countries, and vast natural
resources that attract foreign investors.
 Lack of infrastructure facilities
 Favoritisms in the selection of investment
 Complicated legal framework of rules,
regulations, procedures for foreign direct
investment into India.
 Lack of transparency.

10. SECTORS ATTRACTING HIGHEST FDI
EQUITY INFLOWS:
Ranks Sector 2010-11
(April-March)
2011-12
(for April2011)
1 SERVICES SECTOR
(financial & non-financial)
15,776
(3,353)
2,922
(658)
2 COMPUTER SOFTWARE & HARDWARE 3,571
(784)
425
(95)
3 TELECOMMUNICATIONS
(radio paging, cellular mobile, basic telephone services)
7,546
(1,665)
205
(46)
4 HOUSING & REAL ESTATE 5,149
(1,127)
167
(38)
5 CONSTRUCTION ACTIVITIES
(including roads & highways)
5,077 (1,125) 1,381
(311)
6 POWER 5,709
(1,252)
1,136
(256)
7 AUTOMOBILE INDUSTRY 6,008 (1,331) 1,182
(266)
8 METALLURGICAL INDUSTRIES 5,055
(1,105)
229
(52)
9 PETROLEUM & NATURAL GAS 2,621
(574)
28
(6)
10 CHEMICALS
(other than fertilizers)
1,810
(398)
152
(34)
Amount Rupees in crores (US$ in million)

11. Ranks Country 2010-11 (April-
March)
2011-12
(for April 2011)
1 MAURITIUS 31,855
(6,987)
4,332
(976)
2 SINGAPORE 7,730
(1,705)
5,214
(1,175)
3 U.S.A. 5,353
(1,170)
80
(356)
4 U.K. 3,434
(755)
19
(4)
5 NETHERLANDS 5,501
(1,213)
172
(39)
6 CYPRUS 4,171
(913)
754
(170)
7 JAPAN 7,063
(1,502)
1,043
(235)
8 GERMANY 908
(200)
231
(52)
9 U.A.E. 1,569
(341)
91
(21)
9 FRANCE 3,349
(734)
977
(220)
Total 88,520
(19,427)
13,846
(3,121)
SHARE OF TOP INVESTING COUNTRIES FDI EQUITY INFLOWS
(Financial year-wise):

12. IMPACT OF FDI IN VARIOUS SECORS
• RETAIL
• PHARMA
• EDUCATION
• INSURANCE

14. Retail (CONTD
• As per the current regulatory regime or say Policy
Foreign Direct Investment (FDI) up to 51% is allowed with
prior Government approval, in retail trade of ‘Single Brand’
products. Guidelines notified, vide Press Note 3 (2006
Series), require:
i. Products to be sold should be of a ‘Single Brand’ only.
ii. Products should be sold under the same brand
internationally.
iii. ‘Single Brand’ product-retailing would cover only
products which are branded during manufacturing.

15. Automatic Route Government
No permission required Approval /License required.

16. Barter
system
Weekly
market
Village
melas
Kirana
Stores
Conveni
ence
store
Government
Stores
Super
markets
Hyper
markets
Malls
Brand
outlets

17. • 51%Single Brand
Retailing
• 100%Cash and
Carry Model

18. Incentives attract FDI.
Market size and potential are sufficient inducers.
 Tax breaks, import duty exemptions, land and power
subsidies, and other enticements.

20. Format Description Retailers
Hypermarkets Offering basket of product Spencers, Big bazaar
Cash and Carry Bulk-buying requirement Bharti-wal-mart
Departmental stores Large layout, Wide merchandise
mix
Lifestyle , Globus
Supermarkets Household product as well as food
as integral part of the service
Apna bazaar , food
bazaar
Shop-in-shop Shops located in shopping malls Navras ( big bazaar)
Specialty stores Focus on individual product type Brand Factory
Category killers Particular segment The LOFT
Discount stores Branded product at discounted
prices
Subhiksha, levi’s
outlet
Convenience stores Small Retail stores In and out

21. Retail Segment Percentage holding
in sector
Major retailers
Food and grocery 63% Reliance fresh, Café
brio, food bazaar
Clothing, textile and
fashion
9% Westside, shoppers
stop, globus
jewellery 5% Tanishq
Catering services 5% IRCTC
Consumer durable 4% Viveks, vijay sales,
Croma
pharmaceuticals 4% Piramal group
Entertainment 3% Bowling co.,
Furnishing, utensils 3% Hometown, Tangent
Concept
Mobile handsets 2% The mobile store,

22. 20%
8%
14%
6%
12%
USA
China
Japan
Brazil
India
Contribution Respective
to GDP

23. US
Sales:
$374.5 bn
Earnings:
$12.9
billion
Stores:
6,800
worldwide
France
Sales: $130
bn
Earnings:
$5.2 billion
Stores:
87,422
worldwide
UK
Sales:
$102.6
billion
Earnings:
$5.5 billion
Stores:
3,729
worldwide
Germany
Sales: $101
billion
Earnings:
$1.5 billion
Stores:
2,221
US
Sales: $77.3
bn
Earnings:
$4.2 billion
Stores:
2,258

24. •A large emerging market .
Increase in disposable income of a family.
70 mn Indians – salary of $18,000.
Rise to 140 mn by 2011.
Consumer spending power increased by 75% in
last 3 years.
The per capita income in 2009–2010 has more
than doubled to US$ 849 from US$ 348 in 2000–01.
INDIA

25. •Increase in consumer class.
Consumer class will grow
from 50 million at present to
583 million by 2025.
With more than 23 million
people taking their place
among the world’s
wealthiest citizens.
Upper class
Middle class
Lower class

26. •Wide demographics -- average age of 25 yrs.
•Brand consciousness.
60 % of population below age of 30.
Awareness through World Wide Web.
•Changing consumer mindset.
Focus shifting from low price to convenience, value
and a superior shopping experience.
•Small Basket Size Shaping of Consumption

27. •Easy consumer credit.
EMI & loan via credit cards --
easy for Indian consumers to
afford expensive products.
For instance, Casas Bahia’s-
Brazil.
Upper class
Middle class
Lower class
Note: BOP C.K.Prahalad.

28. •Employment generation.
Second-largest employer after
agriculture.
Retail trade employing 35.06 million.
Wholesale trade generating an
additional employment of 5.48 million.
Additional
1.6 mn jobs .

29. •Technology Better use of resources and
goods.
Wastage and Storage problems will be
resolved.
Efficient logistics, production, and
distribution channels.
Digital records.

30. •Rural market.
Robust Consumption.
70% Indian households.
2/5 of the country’s total consumption pie.
Accounts to 45% of GDP.

31. •FDI in Retail sector will resolve problems
regarding foreign exchange in India.
•The life-long basic needs will keep on
driving the Retail Industry.

32. SKILLED
WORKERS
COMPETITION
REAL
ESTATE
PROBLEM
MARKET
POWER
SUPPLY CHAIN
MANAGEMENT
PROBLEM IN
RAISING
FUNDS
TAXATION
POLICIES
INFLATION

33. • Indian retail sector :
 Employs 8% (35 million)of the working population.
 Could yield 12 to 15 million retail jobs in the coming
five years.
• Out of which organized segment is about 0.3 million.
• Retail sector grew at 9.4% on real terms & 15.4% on
nominal terms.

34. Demand
• Communication Skills
• Multi Tasking
Supply
• Limited Retail Training
Opportunities
• Higher Level Skills

36. 0
0.2
0.4
0.6
0.8
1
1.2
1.4
2008 2011 2013 2018
0.35
0.59
0.83
1.3
Expected Growth
CAGR
10%
• In the last four year, the
consumer spending in India
climbed up to 75%.
• By the year 2013, the
organized sector is also
expected to grow at a CAGR of
40%.
• The total number of shopping
malls is expected to expand at
a CAGR of over 18.9 per cent
by 2015.

37. PHARMA

38. • The pharma industry generally grows at about 1.5-1.6 times the
Gross Domestic Product growth
• Globally, India ranks third in terms of manufacturing pharma
products by volume and thirteenth by value
• The Indian pharmaceutical industry is expected to grow at a rate of
9.5 % till 2015
• In 2009-2010, India exported drugs worth US$7.2 billion in to the US
and Europe followed by Central and Eastern Europe, Africa and
Latin America
• The Indian vaccine market which was worth US$800 million in 2010-
11 is growing at a rate of more than 20%
• The retail pharmaceutical market in India is expected to cross US$
12-13 billion by 2012

39. Indian Pharmaceutical Evolution
Phase II
Government Control
•Indian Patent Act –
1970
•Drug prices capped
•Local companies begin
to make an impact
Phase III
Development Phase
•Process
development
•Production
infrastructure
creation
•Export initiatives
Phase IV
Growth Phase
•Rapid expansion of
domestic market
•International market
development
•Research orientation
Phase V
Innovation and Research
•New IP law
•Discovery Research
•Convergence
1970 1980 1990 2000 2010
Phase I
Early Years
•Market share
domination by
foreign companies
•Relative absence
of organized Indian
companies

40. Strength
Cost Effective
Strong Manufacturing Base
Availability of high quality skilled
workforce.
Excellent marketing and distribution
network
Diverse ecosystem
Weakness
Less investment in research and development
Lack of coordination between industry and
academia.
Negligible expenditure on healthcare in the
country.
Manufacture of fake and low quality medicines
Opportunities
Increased export potential
Marketing tie ups with multinational companies to
sell their products in domestic market.
Immense scope to position India as a centre for
international clinical trials.
Key player in global pharmaceutical R&D.
Export of generic drugs to developed markets
Threats
Product patent regime is a major threat to
domestic industry unless the industry takes up
R&D initiative aggressively.
Drug Price Control Order puts undue pressure on
product prices, affecting the profitability of the
pharmaceutical companies.
The new MRP based excise duty regime threatens
the business of smaller pharmaceutical companies
SWOT Analysis
SWOT Analysis

41. • The government of India has undertaken several including policy initiatives
and tax breaks for the growth of the pharmaceutical business in India. Some
of the measures adopted are:
Pharmaceutical units are eligible for weighted tax reduction at 150% for the
research and development expenditure obtained.
• Two new schemes namely, New Millennium Indian Technology Leadership
Initiative and the Drugs and Pharmaceuticals Research Program have been
launched by the Government.
• The Government is contemplating the creation of SRV or special purpose
vehicles with an insurance cover to be used for funding new drug research.
• The Department of Pharmaceuticals is mulling the creation of drug research
facilities which can be used by private companies for research work on rent.
Government Initiatives

42. Types of FDI
• Setting up new plant
• Involves large risk
• Set up cost is high
Green Field
Investment
• Purchase of existing plant
• Set up cost is less due to existing network
Brown Field
Investment
• Equity & management partnership between foreign &
local entity.
• Foreign partner provides technology & capital and
Local partner provides the skills & knowledge to run
the firm in host country.
Joint Venture

43. FDI statistics in India
• 100% FDI is allowed under the automatic route.
• 100% FDI in Green Field Project
• In Brownfield projects, there is a great scrutiny by Competition Commission of India
(CCI) and trying to reduce it to upto 49%
• Reasons:- In order to reduce collusion and predatory pricing.
• The pharmaceutical industry attracted @2.11% of the total FDI inflows.
• The pharmaceutical industry was the 8th largest sector attracting the FDI inflows
• The Drugs and Pharmaceutical sector has attracted FDI inflow worth US$ 1,825.43 million
between April 2000 and September 2010
• The FDI stock in Pharmaceutical Industry is 4.0% of the total FDI in India

44. FDI by Country
The largest source of FDI in
Indian pharmaceutical
industry is Mauritius. Many
global investors in India
route their FDI through
Mauritius to take advantage
of the India-Mauritius
bilateral tax treaty.

45. Impact of Foreign
Investment
Indian drug industry has in the last five years seen half a dozen big takeovers by
foreign companies.
• $3.6 billion acquisition of promoters’ stake in Ranbaxy Laboratories in 2008
by Japan’s Daiichi Sankyo Co. Ltd.
• US drug maker Mylan Inc. paid $734 million to acquire Hyderabad-based
Matrix Laboratories in 2006.
• German health care group Fresenius SE spent $219 million to take over Dabur
Pharma in 2008.

46. Impact of Foreign
Investment
• US drug and nutrition firm Abbott Laboratories paid $3.72 billion to acquire
Piramal Healthcare Ltd’s domestic drug formulation business and spent $726
million to buy out Ahmedabad-based consumer health company Paras
Pharmaceuticals.
• French drug multinational Sanofi-Aventis SA acquired a majority stake in
Indian vaccines company Shanta Biotech in 2009 for €550 million

47. Comparison with emerging economies China and Brazil
Patent protection started
in 1990s but strictly
regulated from 2005
Share of Patent protected
drugs is 5% in total market
Share of MNCs in total
market is 25-30%
China
1
India
patent protection started
since 1994 and is strictly in
line with countries like US.
Share of patent protected
drugs is 15% in total
market.
Share of MNCs in total
market is 65-70%.
Brazil
Patent Protection started
from 2005.
Share of patent protected
drugs is 9% in total market.
Share of MNCs in the total
market is almost 24%
11
2 2 2
3 3 3

48. Future Outlook :
Pharmaceutical Industry

49. • With several companies slated to make investments in India, the future
scenario of the pharmaceutical industry in looks pretty promising. The
country's pharmaceutical industry has tremendous potential of growth
considering all the projects that are in the pipeline. Some of the future
initiatives are:
According to a study by FICCI-Ernst & Young India will open a probable
US$ 8 billion market for MNCs selling expensive drugs by 2015
• The study also says that the domestic pharma market is likely to reach US$
20 billion by 2015
• The Minister of Commerce estimates that US$ 6.31 billion will be invested in
the domestic pharmaceutical sector
Future Scenario

50. • Public spending on healthcare is likely to raise from 7 per cent of
GDP in 2007 to 13 per cent of GDP by 2015
• Dr Reddy's Laboratories has tied up with GlaxoSmithKline to
develop and market generics and formulations in upcoming markets
overseas
• Lupin, a Mumbai based pharmaceutical company is looking to tap
opportunities of about US$ 200 million in the US oral contraceptives
market
• Due to the low cost of R&D, the Indian pharmaceutical off-shoring
industry is designated to turn out to be a US$ 2.5 billion opportunity
by 2012
Future Scenario

51. Predicted Future Growth

52. EDUCATION

57. INSURANCE

58. The Insurance Bill was introduced in the Rajya Sabha in March 2008
under the first UPA government, as part of its financial sector
reforms.
The Union Cabinet on September 1, 2008, approved the Bill for
Comprehensive amendment of insurance laws which proposes to
raise the FDI ceiling in insurance sector from 26% to 49 %.
The Bill also covers the following;
1. To allow foreign reinsurers like Lloyd’s of London, to open
branches in India.
2. To lower the capital requirement of standalone health insurance
companies to Rs. 50 crore from 100 crore.
3. To allow insurance companies to appoint insurance
agents, surveyors and loss assessors
The Insurance Amendment Bill

59. The Government has decided to review the guidelines
for foreign direct investment and has proposed
extensive changes in the guidelines. Proposals include;
1. Investment by Indian Companies in which foreign
firms have beneficial investment will be counted as
direct FDI
2. Investments by companies that are owned and
controlled by foreign entities to be considered in
calculating indirect foreign investment.
3. Investment by non-resident entities to be counted as
FDI.
Changes in FDI Rules

60. A well-developed and evolved insurance sector is a boon for
economic development as it provides long-term funds for
infrastructure development at the same time strengthening the
risk taking ability of the country.
Nearly 80% of the Indian population is without life, health and
non-life insurance
The insurance sector in India is a colossal one and is growing at a
rate of 15-20%. Together with banking services, insurance
services add about 7% to the country’s Gross domestic product
(GDP).
Insurance Industry in India is worth US$ 30 billion, consisted of
Life insurance worth US$ 25 billion and non-life insurance
worth US$ 5 billion.
Interesting Statistics

61. The Indian Insurance market is expected to be around
US$ 60 billion by the end of 2011.
Investment opportunities exist both in Life and non-life
segments as strong economic growth with increase in
affluence and rising risk awareness leading to rapid
growth in insurance sector.
The expected inflow is likely to create 3 lakh jobs in the
sector as more companies are planning to use the
additional funds mainly to execute their expansion plans

62. OUTLOOK
•FDI may provide better access to technologies for the
local economy.
•FDI can also lead to indirect productivity gains through
spill overs.
•Multinational firms may increase the degree of
competition in host-country markets which will force
existing inefficient firms to invest more in physical or
human capital.
•MNCs may also provide training of labour and
management which may make them become available to
the economy in general.
•The increased flow of FDI in a country has given a major
boost to the country's economy
•Hence measures must be taken in order to ensure that the
flow of FDI in both these countries continues to grow.