Govt approves eight foreign pharma investments

New Delhi: India has approved eight foreign investments in drugmakers worth $333 million in total, signalling the finance ministry may be winning a battle to open up the country's fast-growing markets and giving a boost to global drugmakers hungry for growth.

As a condition of its approval, however, the government said the foreign companies including US-based Pfizer and Germany's B-Braun would have to continue producing cheap drugs and maintain spending in ongoing research and development projects run by their Indian partners for five years.

Since becoming finance minister last month, P Chidambaram has directed officials to fast-track foreign direct investments (FDI) as part of a drive to revive investor confidence after India's economy grew at its slowest pace in nearly three years.

Proposals had been delayed for months due to a lack of clarity over government policy, with some government bodies expressing concerns that medicine prices might rise after a few Indian drugmakers sold businesses to overseas rivals.

In all, Chidambaram approved 21 foreign direct investment proposals totalling 24.1 billion rupees on the recommendation of the Foreign Investment Promotion Board (FIPB).

The proposals were cleared after the government decided to allow up to 49 percent foreign direct investment in domestic companies with conditions, two government sources said.

The present rules allow 100 per cent foreign investment for new companies being set up in India while overseas investment in existing companies needs FIPB approval.

The government did not give details of the investments.

A McKinsey report earlier this year projected India's pharmaceutical market would triple to $20 billion by 2015 and move into the world's top-10 pharmaceutical markets.

"The absolute growth of $14 billion will be next to the growth potential of the US and China, and in the same league as the growth in Japan, Canada and the UK," it said.

Abbott Laboratories bought Mumbai-based Piramal Healthcare's Indian business for $3.72 billion in 2010 while Ranbaxy founders sold a controlling stake in the company to Japan's Daiichi Sankyo Co for $4.2 billion in 2008.

Global drugmakers such as Pfizer, GlaxoSmithKline, Sanofi also have a significant presence in the country and are looking to expand their businesses there.

Abbott has the largest market share followed by Cipla and GlaxoSmithKline.