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Govt allows FDI in pharma

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It has been decided to permit up to 74 per cent FDI under automatic route in brownfield pharmaceuticals

With the objective of providing major impetus to employment and job creation in India, the government made changes to the FDI policy at a meeting chaired by Prime Minister Narendra Modi. According to a government release, Monday’s amendments to the FDI Policy are meant to liberalise and simplify the FDI policy so as to provide ease of doing business in the country leading to larger FDI inflows contributing to growth of investment, incomes and employment. The significant announcements are in the sectors of defence, civil aviation, pharmaceuticals and broadcast carriage services.

The extant FDI policy on pharma sector provides for 100 per cent FDI under automatic route in greenfield pharma and FDI up to 100 per cent under government approval in brownfield pharma. With the objective of promoting the development of this sector, it has been decided to permit up to 74 per cent FDI under automatic route in brownfield pharmaceuticals and government approval route beyond 74 per cent will continue.

Says Chandrajit Banerjee, Director General, CII, “Liberalisation of the FDI regulations reflects the Government’s commitment to reforms and openness, and reassures investors that ease of doing business remains high priority. Taken together, the FDI rules announced today will attract big new investments across key sectors such as food processing, defense production, pharmaceuticals and civil aviation, among others, thereby adding to growth and employment.”

“A sticky issue for M&A deals has been the non-compete issue as non-compete proposals were not permitted without approval. The press release is silent, but one would hope that every aspect of the deal, including non-compete clauses, should be under the automatic route so long as the investment is 74 per cent or below,” said Rajat Mukherjee, Partner, Khaitan & Co.

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