R&d in India Case
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There are four different parameters which determine the specific procedure that a prospect FDI inflow follows upon entering India. These parameters are the Industry/ Sector that the FDI intends to be invested in; the FDI Equity Cap, which is the percentage of foreign equity in the investment; the Entry Route that the investment is required to follow; and the need or not for Industrial License for the investment
Examination of Indian policy in FDI in R&D –
there is a consistency between the technological sectors that Indias general S&T policy lists as priorities and the industrial sectors promoted by its FDI policy. On the one hand, almost all industries that enhance human welfare enjoy FDI under the Automatic Route, allow for 100% Equity and include fiscal incentives. In India, where more than three hundred million people live on a US dollar per day, the promotion of these industries is well understood. 74 On the other, the importance given to knowledge intensive industries, such as information technology biotechnology and, of course, education–all made explicit in the TFYP– is proved here as well, especially by the use of tax incentives. All in all, this consistency reveals that these two different parts of the Indian public administration do communicate.
a. Firstly, although the two R&D references–one in DIPPs website and another in the FDI Manual–apply to different application procedures, in their very meaning they actually contradict each other. It comes as a surprise that FDI in R&D in the Industry/Sector scheme falls under the Automatic Route whereas FDI in R&D under Special schemes requires Government approval. After all, the very meaning of both investments is the same.
b. Secondly, although the DIPP website officially belongs to the Ministry of Industrial Policy and Promotion, the R&D reference that was found there could not be found in the official publications of the Ministry as well. Since the guidance about the applicable rules for the investment is not clear the prospect R&D investor is left, in effect, at a loss of how to proceed.
For sure, keeping official information channels inconsistent to one-another, does not help prospect R&D investors understand the applicable policy for their investments.
IBEF performs well in terms of presenting India as an investment destination for FDI, in general, and FDI in R&D, in particular
Indias policy to modernize and secure its IPR status has done wonders to the intellectual activity within the country.
Effectiveness –
the ultimate measure for the success of these policies or not is the amount of investment that India actually attracts in the R&D sector and, if possible, how this is distributed among industries. Here, a problem arises, namely the difficulty to obtain accurate data.
the three sectors of Biotechnology, Pharmaceuticals and Computers (both Software and Hardware) receive some additional incentives by the Indian government to further promote their FDI in R&D. A comparison between what is promoted and the findings of Figure 5 reveal that international companies do respond to these incentives.
it is also of interest to examine how FDI in R&D responds to the Special Schemes of the FDI policy. Biotechnology, Software, and Computer Hardware, with the BTPs, the STPs, and the EHTPs respectively, are the sectors that enjoy special treatment here as well. Not surprisingly, the lions share belongs to IT and ITES, followed by Biotechnology (5%); Multi-product sector (5%); Pharmaceuticals (4%); Aeronautical (4%); Textiles (4%) and others. Thus, it can be argued that here too the market responds to the benefits provided by the Indian government. IT and its related industries, together with Biotechnology sum up to 67 % of all approvals. If the close to Biotechnology sector of Pharmaceuticals is added, an impressive 71% of all approvals come just from these industries
All in all, the numbers behind the policies that India employs to attract FDI in R&D show that the market responds positively to them. Indias preferred industries are the ones