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FDI AND ITS IMPACT ON
YASHICA JAIN (A008)
1. Introduction to FDI
2. Importance of FDI
3. FDI in INDIA
4. Factors attracting FDI in India
5. Overview of Indian pharmaceutical industries
6. FDI in Indian pharmaceutical sector
7. Inflow of FDI in Indian pharmaceutical industries.
A Foreign direct investment is an acquisition or construction of
physical capital by a firm from one country in another (host)
Besides providing capital inflow, the FDI can offer foreign
technology, managerial skills and improvement of the
international competitiveness of domestic firms.
Foreign Direct Investment (FDI) is often seen as a major
element in the host country’s industrial development and
India is one of many developing countries that have started an
economic liberalization reform in the recent decade.
Promotion of FDI forms an integral part of India’s new
economic policies and the inflow of FDI has increased since it
started to liberalize its economy in the beginning of the 1990s.
TYPES OF FDI
IMPORTANCE OF FDI
FDI is often seen as a catalyst for a country’s development and
Foreign direct investment allows company to accomplish
1. Integration into global economy.
2. Technology advancement.
3. Increased competition.
4. Improved human resources.
Reasons for the importance of FDI is not only the fact that the
foreign investor finances the “hardware” such as investment in
new plants and equipment, but FDI can be a major transfer of
technology, knowledge and capital for the host industries. With
FDI comes financial and managerial resources, access to
larger markets, technical assistance and strategic assets, for
instance; Brand name, which can give the host firms, domestic
and international, comparative advantage.
Inflation may increase.
Domestic firms may suffer if they are
If there is a lot of FDI into one industry e.g.
the automotive industry then a country can
become too dependent on it and it may
turn into a risk
That is the real danger of the 100 per cent
FDI and the selling/takeover of Indian
DISADVANTAGES OF FDI
FDI IN INDIA
The policy initiative taken by the government of India in the 1990s
helped to transform the country from a restrictive regime with regard
to foreign direct investment to a liberal one.
Sectors attracting highest FDI inflow
Factors attracting FDI in India:-
Apart from this, India’s huge market base and fast-
developing spending habits of middle-
class, favorable business environment, good
administrative setup, attractive foreign
policies, available, abundant skilled workforce, and
attractive incentives for investors, have contributed
to India becoming one of the preferred destinations
Furthermore, India has an advantage over other
countries, including China, in terms of being an ideal
destination for investments, mainly due to its vibrant
democratic setup, a broad legal framework and
independent judicial system.
THE INDIAN PHARMACEUTICAL INDUSTRY
India is one of the few developing countries with a large
production base in pharmaceutical products. India’s trade in
pharmaceutical products has increased a lot since the
liberalization reforms and it has comparative advantages in
trade with pharmaceutical products, both bulk drugs and
The Indian pharmaceutical industry ranks very high among
developing countries, in terms of technology and quality, and is
today in the front rank of India’s science based industries
FDI IN INDIAN PHARMACEUTICAL SECTOR
The inflow of FDI into India has increased a great deal in the last
fifteen years. The pharmaceutical industry attracted 2.11 % of
total FDI inflows during these years. In diagram we can see the
industries that attract most FDI in India. The pharmaceutical
industry was the 8th largest sector attracting FDI inflows
factors such as; skilled/ semi-skilled labor, well- developed local
supply chains, well-functioning infrastructure and knowledge
producing institutions are important for a firm to consider. Some
of these factors are reasons why pharmaceutical multinationals
have invested in India.
India’s large population and wide disease
pattern make the country attractive for
Relatively cheap manpower and skilled labor
are other factors that attract foreign investors.
India has an exceptional advantage in
pharmaceuticals due to its good human
resources and highly skilled work force. English is
widely spoken, which makes communication
easy for foreign investors.
The production of pharmaceuticals is also
relatively cheap in India and there is a strong
production base in the country.
FDI Inflow in Indian Pharmaceutical
100% foreign direct investment (FDI) is allowed
under automatic route in the drugs and
pharmaceuticals sector, including those involving
use of recombinant technology.
Also, FDI up to 100% is permitted for brownfield
investments in the pharmaceuticals sector, under
the Government approval route. The drugs and
pharmaceuticals industry attracted foreign direct
investment to the tune of US$ 9.17 bn for the period
between April 2000 and January 2012.
48.4 90.7 52.3 60.7
341.4 116.3 216.1 72 213
Recently the government released a comprehensive FDI policy
document effective from 1 April 2010, consolidating all prior policies and
regulations on FDI which are contained in FEMA, RBI Regulations and
press notes, press releases and clarifications, into one document. THIS
LEAD TO SUDDEN INCREASE IN FDI INLOW IN INDIAN PHARMA SECTOR
AFTER 2010 YEAR.
Pharmaceutical industry plays a very
crucial role in implementing the welfare
state of the people.
Economic growth of the industry along
with the availability of generic goods
and healthy competition is the need of
the hour for India.
After analyzing the impact of the FDI in
the Indian pharmaceutical industry, it is
established that India needs adequate
FDI and its spillovers for the growth of
the industry 14