Soon after rolling out foreign direct investment (FDI) in multi-brand retail and aviation in a renewed surge of reforms, Finance Minister P. Chidambaram, on a fast-forward mission mode, is keen on raising the FDI cap in the insurance sector to 49 per cent from the existing 26 per cent.
While work is in progress in this regard at a feverish pitch and a Cabinet note is under preparation for approval of the higher FDI limit in the insurance sector, the UPA government is also engaged in assessing the political fall-out of the financial sector reform.
Such as exercise, according to government sources, is essential as though the Bill on the insurance sector was tabled in the Rajya Sabha with a proposed higher FDI limit of 49 per cent, the Parliamentary Standing Committee on Finance had suggested retention of the investment cap at 26 per cent. Even in May, the government was forced to postpone a decision on hiking the FDI limit following pressure from its own coalition partners.
However, with the Trinamool Congress out of the way and the Samajwadi Party lending outside support, the minority government appears to be ready in trying to push the insurance sector reforms through, just as the Narasimha Rao government had succeeded in initiating the reform measures in 1991-92 when Prime Minister Manmohan Singh was the then Finance Minister.
The move assumes significance as at the insurance summit in Mumbai earlier this week, Insurance Regulatory and Development Authority (IRDA) Chairman J. Hari Narayan had stressed the need for larger investments for growth of the sector while noting that a hike in FDI limit would be welcome.
Faster approval of policies
Alongside, IRDA is also working on developing a mechanism for faster clearance of insurance policies aimed at encouraging companies to roll out low premium products as that would increase insurance penetration throughout the country.
Speaking to reporters after a meeting here on Wednesday between the Finance Minister and the IRDA chief, Financial Services Secretary D.K. Mittal said: “Roadmap has been agreed upon for faster approval of products [by the insurance regulator]…The meeting discussed how to increase insurance penetration, how insurance companies can do more business, how better products can be introduced at lower premium, and how more investments can flow into infrastructure sector”. Some decisions are expected by today or tomorrow, he said.