Doubts have been expressed if allowing 100% foreign direct investment (FDI) in the pharmaceutical sector has made for good policy.
In recent years, foreign firms have acquired Indian companies in the sector. By itself, this is a normal state of affairs.
So, what is different in this case? It has been pointed out that between 2011 and 2013, a large number of drugs are likely to go “off patent” in the US, making it possible for local firms to produce cheaper generic versions. With foreign ownership of companies, it is feared, this may not happen.
The fears are real: India does depend a lot on generic versions and any sudden change in their availability will have large consequences. But instead of a knee-jerk reaction, it is better to tweak existing policy. Instead of disallowing FDI, foreign firms need to be told why whittling the supply of generics will be unaccpetable. Otherwise, they should be welcomed to invest