1. IRJMST Vol 6 Issue 1 [Year 2015] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)
International Research Journal of Management Science & Technology
http://www.irjmst.com Page 306
By Vipan Dewan
Foreign direct investment has been a controversial issue in international economics.
Foreign direct investment (FDI) is an investment in a business by an investor from another country for
which the foreign investor has control over the company purchased.
Advantages of FDI
In the context of foreign direct investment, advantages and disadvantages are often a matter of
perspective. An FDI may provide some great advantages for the MNE but not for the foreign country
where the investment is made. On the other hand, sometimes the deal can work out better for the foreign
country depending upon how the investment pans out. Ideally, there should be numerous advantages for
both the MNE and the foreign country, which is often a developing country. We'll examine the
advantages and disadvantages from both perspectives, starting with the advantages for multinational
enterprises (MNES).
 Access to markets: FDI can be an effective way for you to enter into a foreign market. Some
countries may extremely limit foreign company access to their domestic markets. Acquiring or
starting a business in the market is a means for you to gain access.
 Access to resources: FDI is also an effective way for you to acquire important natural resources,
such as precious metals and fossil fuels. Oil companies, for example, often make tremendous
FDIs to develop oil fields.
 Reduces cost of production: FDI is a means for you to reduce your cost of production if the
labor market is cheaper and the regulations are less restrictive in the target foreign market. For
example, it's a well-known fact that the shoe and clothing industries have been able to drastically
reduce their costs of production by moving operations to developing countries.
FDI also offers some advantages for foreign countries. For starters, FDI offers a source of external
capital and increased revenue. It can be a tremendous source of external capital for a developing
country, which can lead to economic development.
Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven
FDI in Indian Medical Devices Industry

2. IRJMST Vol 6 Issue 1 [Year 2015] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)
International Research Journal of Management Science & Technology
http://www.irjmst.com Page 307
by then finance minister Manmohan Singh. As Singh subsequently became the prime minister, this has
been one of his top political problems, even in the current times. India disallowed overseas corporate
bodies (OCB) to invest in India.India imposes cap on equity holding by foreign investors in various
sectors, current FDI in aviation and insurance sectors is limited to a maximum of 49%.
Starting from a baseline of less than $1 billion in 1990, a 2012 UNCTAD survey projected India as the
second most important FDI destination (after China) for transnational corporations during 2010–2012.
As per the data, the sectors that attracted higher inflows were services, telecommunication, construction
activities and computer software and hardware. Mauritius, Singapore, US and UK were among the
leading sources of FDI. Based on UNCTAD data FDI flows were $10.4 billion, a drop of 43% from the
first half of the last year.
FDI Investment in India
Financial Year 2014-15
( April-March )
Amount of FDI Equity inflows
(In Rs. Crore) (In US$ mn)
1. April, 2014 10,290 1,705
2. May, 2014 21,373 3,604
3. June, 2014 11,508 1,927
4. July, 2014 21,022 3,500
5. August, 2014 7,783 1,278
6. September, 2014 16,297 2,678
7. October, 2014 16,288 2,655
8. November, 2014 9,486 1,537
9 December, 2014 13,562 2,161
2014-15 ( from April, 2014 to December, 2014) # 127,609 21,045
2013-14 (from April, 2013 to December, 2013) # 99,813 16,560
%age growth over last year ( + ) 28 % ( + ) 27 %

3. IRJMST Vol 6 Issue 1 [Year 2015] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)
International Research Journal of Management Science & Technology
http://www.irjmst.com Page 308
Medical device manufacturers in India will be able to bring in foreign direct investment (FDI) up to
100% through the automatic route, the Reserve Bank of India (RBI) said on Monday, formalizing a
government decision taken in this regard in January.
Until now, the medical devices industry has been considered part of the overall pharmaceutical sector,
where 100% FDI is allowed through the automatic route in new projects; however, existing companies
can do so only with permission from the Foreign Investment Promotion Board (FIPB), in what is called
the approval route. The RBI clarification essentially carves out the devices industry from the
pharmaceutical sector for regulatory purposes and opens it for 100% FDI through the automatic route.
In 2014, the government had reviewed the FDI policy for the pharma industry to restrict the 100%
automatic approval route only for greenfield or new units and insisting on FIPB approval for existing
units. This review was prompted by concerns that 100% foreign investment though automatic route in
existing units would lead to increased inbound mergers and acquisitions in the sector, driving
pharmaceutical manufacturing to the control of foreign companies.
Allowing 100% FDI in the medical devices sector is aimed at promoting local manufacturing of these
products, as currently India meets at least 70% of its requirements through imports.
Importing Medical Devices
Accessing India’s medical devices industry through an indirect route remains attractive to foreign firms.
India is heavily reliant on foreign imports: 70 percent of its medical devices and equipment are
outsourced from other countries, particularly from the U.S.
Medical device companies that have already been approved in the U.S., Europe, Canada, Japan or

4. IRJMST Vol 6 Issue 1 [Year 2015] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)
International Research Journal of Management Science & Technology
http://www.irjmst.com Page 309
Australia are able to legally sell in India. Prior to starting the import process, firms must prepare and
submit a technical dossier; documents that clearly detail the type of devices intended for import and their
associated risks. Devices with higher levels of risk to patients, and which necessitate greater control for
safe use, will require a longer dossier and will further be subject to stricter checks. Should the dossier be
found to lack all relevant information, it will likely be rejected.
If a company does not have a branch office in India, it will have to contract an importer that possesses a
valid import license. Doing so is often a difficult process for companies that have not sourced a
consultant, and should not be completed without first conducting a thorough due diligence of the
prospective candidate.
This would bring technology to India and we need new technology to make the devices. This will also
lead to co-investments in brownfield projects and import substitution," Poly Medicure managing director
Himanshu Baid told PTI.
While welcoming the development, Association of Indian Medical Device Industry (AIMED) Forum
coordinator Rajiv Nath, however, said the government needs to make domestic manufacturing more
competitive against cheaper imports by hiking customs duty.
STATEMENT ON SECTOR-WISE FDI EQUITY INFLOWS FROM APRIL, 2000 TO DECEMBER, 2014
S.No Sector Amount Of Fdi Inflows %Age Of
Total Inflows
(In Rs
Crore)
(In Us$
Million)
1 Services Sector (Fin.,Banking,Insurance,Non
Fin/Business,Outsourcing,R&D,Courier,Tech. Testing And Analysis,
Other)
199,572.03 41,755.46 17.50
2 Construction Development: Townships, Housing, Built-Up Infrastructure
And
Construction-Development Projects
112,821.03 24,012.87 10.06
3 Telecommunications 82,689.99 16,832.83 7.05
4 Computer Software & Hardware 65,599.12 13,788.56 5.78
5 Drugs & Pharmaceuticals 63,361.88 12,813.02 5.37
6 Automobile Industry 57,840.84 11,393.60 4.77
7 Chemicals (Other Than Fertilizers) 48,524.63 10,210.87 4.28
8 Power 46,135.92 9,476.19 3.97
9 Metallurgical Industries 39,904.58 8,347.02 3.50
10 Hotel & Tourism 39,791.05 7,708.57 3.23
11 Trading 38,416.02 7,194.80 3.02
12 Petroleum & Natural Gas 31,626.66 6,515.73 2.73
13 Food Processing Industries 36,144.22 6,180.77 2.59
14 Information & Broadcasting (Including Print Media) 19,138.20 3,887.98 1.63

5. IRJMST Vol 6 Issue 1 [Year 2015] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)
International Research Journal of Management Science & Technology
http://www.irjmst.com Page 310
15 Electrical Equipments 18,258.82 3,779.86 1.58
16 Non-Conventional Energy 18,327.82 3,490.21 1.46
17 Industrial Machinery 17,443.45 3,358.69 1.41
18 Cement And Gypsum Products 14,620.89 3,084.89 1.29
19 Construction (Infrastructure) Activities 14,416.72 2,860.85 1.20
20 Consultancy Services 13,735.80 2,758.82 1.16
21 Miscellaneous Mechanical & Engineering Industries 12,915.86 2,717.71 1.14
22 Hospital & Diagnostic Centres 13,243.59 2,581.30 1.08
23 Fermentation Industries 11,217.19 2,116.39 0.89
24 Agriculture Services 8,602.99 1,740.46 0.73
25 Rubber Goods 9,328.41 1,703.90 0.71
26 Mining 8,460.61 1,668.50 0.70
27 Ports 6,730.91 1,637.30 0.69
28 Textiles (Including Dyed,Printed) 7,503.94 1,522.51 0.64
29 Electronics 6,726.72 1,413.23 0.59
30 Sea Transport 6,544.56 1,368.56 0.57
31 Prime Mover (Other Than Electrical Generators) 6,299.69 1,200.91 0.50
32 Education 5,086.45 980.97 0.41
33 Paper And Pulp (Including Paper Products) 4,325.83 910.05 0.38
34 Medical And Surgical Appliances 4,537.47 875.75 0.37
35 Soaps, Cosmetics & Toilet Preparations 4,422.68 847.56 0.36
36 Machine Tools 3,460.15 703.23 0.29
37 Ceramics 3,234.52 685.53 0.29
38 Railway Related Components 3,425.97 634.20 0.27
39 Air Transport (Including Air Freight) 2,717.77 562.22 0.24
40 Fertilizers 2,915.52 543.12 0.23
41 Vegetable Oils And Vanaspati 2,701.82 516.05 0.22
42 Diamond,Gold Ornaments 2,325.22 476.00 0.20
43 Glass 2,267.76 443.99 0.19
44 Printing Of Books (Including Litho Printing Industry) 2,290.39 440.28 0.18
45 Agricultural Machinery 2,122.83 413.16 0.17
46 Commercial, Office & Household Equipments 1,509.24 308.13 0.13
47 Retail Trading (Single Brand) 1,549.92 275.38 0.12
48 Earth-Moving Machinery 1,137.87 234.65 0.10
49 Scientific Instruments 958.21 171.53 0.07
50 Leather,Leather Goods And Pickers 692.43 135.12 0.06
51 Tea And Coffee (Processing & Warehousing Coffee & Rubber) 489.53 107.08 0.04
52 Timber Products 446.09 87.31 0.04
53 Dye-Stuffs 417.28 74.38 0.03
54 Photographic Raw Film And Paper 273.76 67.29 0.03
55 Industrial Instruments 310.86 67.11 0.03
56 Boilers And Steam Generating Plants 314.80 63.33 0.03
57 Sugar 301.27 61.30 0.03

6. IRJMST Vol 6 Issue 1 [Year 2015] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)
International Research Journal of Management Science & Technology
http://www.irjmst.com Page 311
58 Glue And Gelatin 205.75 36.91 0.02
59 Coal Production 119.19 27.73 0.01
60 Mathematical,Surveying And Drawing Instruments 39.80 7.98 0.00
61 Defence Industries 24.36 4.94 0.00
62 Coir 22.05 4.07 0.00
63 Miscellaneous Industries 40,914.88 8,737.58 3.66
Sub Total 1,171,505.77 238,626.32
64 Rbi’s- Nri Schemes (2000-2002) 533.06 121.33 -
Grand Total 1,172,038.83 238,747.65
* Services sector includes Financial, Banking, Insurance, Non-Financial / Business, Outsourcing, R&D, Courier, Tech.
Testing and
Analysis
FDI inflows data re-classified, as per segregation of data from April 2000 onwards.
‘+’ Percentage of inflows worked out in terms of US$ & the above amount of inflows received through FIPB/SIA route
RBI’s automatic route & acquisition of existing shares only.
 FDI Sectoral data has been revalidated / reconciled in line with the RBI, which reflects minor changes in the FDI figures
(increase/decrease) as compared to the earlier published
sectoral data.
It is evident from above data that FDI flow in Hospital sector is ranked 22 and it is just 1% of total FDI
flow in India . So lot of things can be done in this area and with government focus on Medical devices
sector it is expected to increase.
Besides, appropriate regulations for medical devices independent of drug must also be in place, he said.
Mr Nath also cautioned that by making 100 per cent automatic approval for brown field investment,
battered surviving Indian manufacturers would be easy picking for MNCs.
AIMED is an umbrella association of Indian manufacturers of medical devices.
In a move aimed at boosting the medical devices sector, the government earlier on Wednesday eased
norms by carving it out from the policy that governs FDI in pharmaceuticals sector and allowed up to
100 per cent FDI under the automatic route.
"This move should give the medical devices industry much required impetus and capital to focus on
capacity building and product development, and set the foundation for India to become a significant
player in the global medical devices market just like pharmaceuticals," said Vrinda Mathur, director of
tax and business consultancy firm, Grant Thornton India LLP.
References
1. http://www.livemint.com/Industry/RFpbUUbDdYzkB6XmUMdJUN/RBI-formalizes-automatic-100-
FDI-in-medical-devices-sector.html?ref=newsletter
2.http://profit.ndtv.com/news/industries/article-medical-devices-sector-welcomes-100-fdi-71774