But is there a possibility of foreign direct investment as a result of foreign firms adopting this route? Firstly, nothing prevented these companies from setting up capacities here in the first place through their listed subsidiaries, especially with an EMR and patents regime in place. Secondly, none of the companies that set up 100 per cent subsidiaries have brought in any meaningful amount of FDI. Pfizer itself is making a small $1-million investment. The reality is that the pharma industry does not require large investments in manufacturing capacities and most of them outsource their requirements in any case. The expertise and physical infrastructure already exists, as the other MNCpharma companies have shown.

The reality is that MNCs owe loyalty not to their local shareholders, but to their overseas owners. And the question is ultimately one of corporate governance. The interest of minority shareholders needs to be protected. Just as in joint ventures, the foreign company needs to take the permission of his existing partner before starting another subsidiary, so too the permission of minority shareholders needs to be taken. These firms should offer their Indian shareholders an option. Shareholders should have a choice between benefiting from the introduction of new products and paying out a royalty, or being bought out of the company entirely, i.e., take the Indian arm private. And this choice should be voted upon only by the minority shareholders in order to make the process fair.