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Do you manufacture your medical devices in India? Would you?
In late December, the Indian government allowed 100 percent Foreign Direct Investment (FDI) under automatic route for medical devices to encourage investors to manufacture in the country.
For the first time, a foreign investor will not have to seek the permission of the Foreign Investment Promotion Board (FIPB) to acquire 100 percent of an existing company or set up a new manufacturing unit in the medical devices sector.
See http://bit.ly/Times-of-India-FDI for the full article.
Does this policy change affect your view of manufacturing in India?
Please share your thoughts and experiences with us in today’s comments.
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I am not involved directly in the manufacture of medical devices, but I have written about several high quality indigenous medical devices that have been manufactured in India. Umashankar already mentioned the TTK Chitra Heart Valve. There’s also the Kalam-Raju stent as another good example of a Class III medical device made in India. Both of these products crashed import prices to about 30% of what they were before.
Then there are devices like GE Healthcare India’s Vscan (handheld ultrasound machine) and Discovery IQ (CT/PET scanner) that are made in India, and now being sold around the world. These products are of the highest possible quality.
From my perspective, what’s important to keep in mind is that it’s neither possible nor desirable to ‘avoid’ local partnerships when setting up R&D / manufacturing operations in India. As Tarun Khanna and Krishan Palepu write in their book on doing business in emerging markets, taking a ‘Get Rich Quick’ approach to India or China is foolish and dooms a project to failure. Success in these markets requires COMMITMENT, PRESENCE, and PATIENCE as well as a host of local partnerships, and lots of training. In other words, it requires the same thing success requires anywhere else. ‘Email management’ won’t cut it.
My articles on the above companies are located in this database, which contains nearly 50 examples of indigenous medical device innovations that may succeed around the world: [http://www.globalhealth.care/p/running-list-of.html|leo://plh/http%3A*3*3www%2Eglobalhealth%2Ecare*3p*3running-list-of%2Ehtml/uw38?_t=tracking_disc] . Message me if you know of others!
No investor will place a penny in India (including the Melinda and Bill Gates Foundation) without a return on investment. Currently the Modi government is having trouble with the opposition that controls the Upper House to get any meaningful reform through. He will have to wait 2 years by which time the people of India, who have become used to handouts may elect another party. If Indians do not give a crap, why would a foreign investor?
A company who is going to invest in India has to think long term versus an investor who puts money through mutual funds. The company in my opinion will only do this if it provides market penetration in the region or needs a cheaper manufacturing advantage or needs the labor and technical personnel.
As for India. I believe it has access to everything (1) the money (2) the technology (3) training facility (4) the labor, including technical labor. What it does not have is the correct work attitude and a will to do right.
Money: There is just too much, it is tucked away in mattresses. Trust me on this, I have personally seen too many of those mattresses with my very own eyes.
Technology: It built nuclear products – both civil and military (it lacked the raw material resources) , Tata’s built the first indigenous car in 1986 (which Congress did not allow to be manufactured for another 10 plus years) – Look no farther than North Korea’s beautiful cities, built with all the opposition from the world. If they can build 3, India can build 30.
Training Facilities: My experience is that the high school, the engineering school and the first company training I received (International General Electric), were far better than what I have experienced in the USA. We just have too few of them.
Labor: Look around the USA, Indian technical labor has been successful and the Indian labor has been even more successful financially.
Attitude/Work Ethic: It will be another generation or two to beat the US work ethic and its attitude to the future of mankind. This is the single thing that will keep USA as the World Leader while Indians looking at PM Modi to give them everything while the local governments and state governments sleep.
Bottom Line: Invest in the USA unless you will loose out on business elsewhere, forcing you to work there. I have personally brought back manufacturing from Mexico to Orange County, California (probably one of the highest cost of living area in USA) resulting in savings and dramatic improvement in quality.
– Labour costs are roughly one-tenth of those in Canada.
My professional experience is within the Med Device industry, the above info I shared is from doing very little amount of research. In regards to Med Device manufacturing in India, it will be interesting to see how it evolves. I suspect it will be similar to the $15-Billion generic industry.
In regards to the pharma sector, I do hope that India improves on their drug-regulation laws which date back to the 1940’s when it was still a British colony.
Sandeep Kumar Goyal
With reference to the medtech FDI initiatives, to explain its application I will use an analogy, recently the same government initiated a Clean India initiative, lot of media attention but if we see closely you wont find a single bin for miles in public places, and India depends on people and to a large extent the private sector to take actions on most of the case..they did the same way for Polio, for women education, for hygienic sanitation..and they did achieve success…regardless of ruling parties. This initiative helps people to think that government has an open ear on this aspect, and will encourage to look into that direction, with more responses start coming in from local and intl firms and individuals and with support from existing but distributed sprites of brilliance, India can very soon see a thriving Medtech ecosystem, given that the promotion does not stop, and that is where Advocacy will play an important role.. same happened for example with Biodiesel and such, there was good promotion happening earlier, and DST and DBT had (still have) some amazing offers and frameworks for firms and individuals who want to research further, but the promotion reduced and comparatively investment reduced, …India is largely Media Driven country..
Overall: for any intl investor thinking of India should consider:
Please excuse me as my opinion is limited to my experience, and request you to add / correct this opinion where you feel it may be obsolete or wrong. Hope it helps…
In answer to that question, I would have to say; no, not yet. Although there are ten-year-old device registration and surveillance regulations, there is not any type of domestic manufacturing regulatory scheme. Conformity assessment is outsourced to notified bodies. As mentioned by others, a reliable supply chain simply does not yet exist. The country has made great educational and economic strides but, as of now, infrastructure and workforce development are still lagging far behind. As with many rapidly-developing nations, India has not yet overcome a deep and ineffective bureaucracy that contributes to a culture of nepotism and corruption.
This state of affairs does not foster nor support a culture of compliance, something essential for critical/precision product manufacturing. These issues have been proven, across the globe, to be the greatest sources of risk for device manufacturing. All the financial incentives and cost savings in the world do not make up for these deficiencies. Just ask Boeing, Medtronic, Stryker, GE or any other corporation that has faced massive recall costs and damaged marketplace reputation due to quality failures from their offshore suppliers or contract manufacturers.
Surely, there are many in India trying hard to overcome these challenges, perhaps even some folks posting here. And of course, it is important to forge ahead with both advocacy for a full regulatory scheme and opportunities for lower-risk projects to build up these capacities.
Sandeep Kumar Goyal
Now we have a Great Leader with Long Range Vision and Purposefulness at the centre.
So that will stay in the way of all progress towards your factory.
Here is what I personally can offer if anyone wants to build on farmland in Gujarat: Land for your factory. If you are a serious player, contact me. I will charge you a down payment just to talk to me to avoid wasting time. Down payment to be returned if you do not get the land you want. You can buy the land outright or lease it from me (or the person I choose). And the contract can be made with me (or the person I choose) in the USA to protect you.
Only serious parties should contact me! And be prepared with a down payment. I am serious and not joking on the issue.
1) I need to expand into the Indian Market and local manufacturing is cheaper
A case for 100% FDI is best justified only when you want to protect your intellectual property (which is only as good as that one engineer who walks out with it). Or you need to support your brother-in-law. Or you are located in a Free Trade Zone and product leaves the shores like you were in the Mexican Maquiladora.
The case I have made for 3 and 4 is pretty weak. These are also better achieved with a local business house as a partner. The bigger, richer and more politically connected, the better. And of course your brother-in-law with average intelligence, is still a better partner along with a connected local business house.
The strongest business case is # 5. A Union Carbide Chemical Plant that we will not allow a 100 miles from our home in the USA.
My personal experience in 3 greenfield project suggest that, not only can you produce high quality Medical devices in India at competitive cost, you can also improve quality of life of Indian employees and be gentle on the environment.
What is that then makes India attractive for shifting manufacturing bases from around the globe and creating job losses in the developed world…. the Indian PEOPLE and why? Because you don’t need to pay as much for the same operation in India as you would do in your existing operations overseas.
An established global manufacturers desire to shift to ,a BCC Best cost country (don’t like LCC Low cost country)is to maximise profits and increase market share’s CSR is an after thought or compulsion.
An established global manufacturer already has proven process and should when shifting to BCC not compromise to find a cheap way or a Jugaad..,
– Build a State of the art Plant, should be better than the one that exist overseas.
These are my personal opinions expressed from my experience in working together with international organisations and multicultural professionals.
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