This action might not be possible to undo. Are you sure you want to continue?
In order to curb the trend of falling Foreign Direct Investment (FDI) in the country, government recently increased the FDI limit in various sectors, latest being the insurance sector. • The need for larger FDI exists because India is at a stage where it needs not just investments, but also technology, and management policies to sustain and enhance its economic growth. The latest decision to increase the FDI cap to 49 percent in insurance sector received mixed reactions from various sectors, for obvious reasons, was opposed by the employees of public sector insurance companies. • Insurance industry, suffering from muted growth and undergoing consolidation, needs a major breather in the form higher investments. According to Insurance Regulatory and Development Authority (IRDA), insurance sector requires big investments for growth and may attract Rs 30,000 crore that the industry requires over the next five years. Unless FDI cap is raised from 26 percent to 49 percent, the industry will not have the required capital to underpin the growth of the insurance industry. Moreover, when 74 percent FDI is allowed in the banking sector, 100 percent in Asset Management Companies, just 26 percent FDI is unjustified. • Currently, there are 24 players in the life insurance industry, including 22 joint ventures with foreign participation to the extent of 26 per cent. ICICI Lombard has Fairfax Financial a Canadian company as 26 percent partner, HDFC Standard Life has Standard Life Plc a UK based company, MaxBupa Health Insurance Company is a joint venture between Max India Limited and Bupa Finance plc UK, India First Life Insurance is a joint venture between two of India's public sector banks: Bank of Baroda (44 percent) and Andhra Bank (30 percent) and UKs financial and investment company Legal & General. • The benefit of this step will go to the private sector insurance companies which require huge amount of capital. At the operational level, foreign joint-venture partners are already very involved in the industry and they bring the product and risk-related expertise. Generally, such arrangements have worked well. Along with bringing capital for future growth, FDI will bring a degree of comfort to the foreign partner. • Another advantage of increasing FDI limit will be to grow the industry by increasing customer penetration with a range of products that are focused on today’s uninsured population. The life insurance industry is long term in nature and requires years of capital infusion before it can sustain itself. Arrival of more foreign players will induce more product and channel innovate
Harminder singh bal