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Government mulls 100 per cent foreign direct investment in pharma R&D

President K R Narayanan said on Monday the government was considering increasing the foreign direct investment limit for research and development in pharmaceuticals to 100 per cent through the automatic route.

The government currently allows 74 per cent foreign direct investment (FDI) in pharmaceuticals R&D (research and development) without the Foreign Investment Promotion Board's (FIPB) approval.

"India enjoys a significant competitive advantage in chemicals and pharmaceuticals," the president told parliament at the start of the budget session.

"To encourage R&D and investment...it is proposed to raise the FDI limit through the automatic route to 100 per cent from the present 74 per cent," the president said.

He said the government was also preparing a new drug policy to help the country's pharmaceutical sector become a world leader.

Industry has been seeking a full tax exemption for 10 years, only on revenues from royalties and licencing of intellectual property provided they are invested in R&D.

Currently, 50 per cent of the foreign exchange pharmaceutical companies earn from international licencing of any patent is tax exempt.

Industry officials have said in the past that tax breaks would encourage multinational pharmaceutical companies to conduct clinical trials in India taking advantage of the country's low labour costs.

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