The Indian government has decided to raise FDI cap in the insurance sector from 26% to 49% to help it recovers looses from unit-linked products and make it more competitive.
At last, the Indian government has decided to raise FDI (Foreign Direct Investment) limit from 26% in the insurance companies to 49%, as reported by timesofindia.
The government approval to raising FDI limit in the life insurance sector will elevate the total FDI by 2.5 times from Rs 2,500 Crore at the current level. The paid-up capital of both life and non-life players (state and private) are totaled at nearly Rs 8,500 Crore in which around Rs 2,000 Crore is contributed by the foreign partners, said Watson Wyatt Insurance Consultancy Pvt. Ltd.
Increasing the FDI limit for the Indian insurance sector is essential as it has been clamoring for more funds and capital to sustain growth. Insurance companies desperately needed capital as they had experienced losses on unit-linked products. Moreover, being a capital intensive industry, the insurance industry needs huge investment.
Besides, the industry experts are confident that the FDI inflow will surge with cap lifting as several foreign players have shown high interest in the Indian insurance sector. The government has taken this decision with an objective of raising investment in the private sector. Further, the rise in the investment limit is expected to boost FDI inflow in the country at a time when financial market is striving to hold the fort.
Furthermore, the proposed FDI hike will not only help or support the Indian insurance sector to expand from length and breadth of the country, but also raise the foreign share in the Indian economy.
According to a Research Analyst at RNCOS, “Insurance players are curiously waiting for the bill because it will help the insurance sector to flourish. In addition, increased FDI will also support the Indian insurance industry to further expand, upgrade technology, improve the current product portfolio, launch new distributive channels and introduce global best practices.”
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