The Modi government set the ball rolling on its first major economic reform on Thursday with the Cabinet Committee on Economic Affairs (CCEA) approving the raising of Foreign Direct Investment (FDI) cap in insurance from 26 per cent to 49 per cent through the Foreign Investment Promotion Board route.
The government will bring a Bill before Parliament in the current session in this regard. The Bill for the same proposal that was moved by the UPA government, lapsed after the last Lok Sabha's dissolution.
Finance Minister Arun Jaitley had in his budget speech proposed the raising of the FDI cap in insurance firms while insisting that full management control would remain with Indian investors.
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The insurance industry has been demanding a hike in the FDI limit for long. As the insurance business grows, so do capitalisation needs. But insurance firms are restricted by the existing FDI cap from tapping overseas investors for capital while Indian investors don’t always have deep pockets.
The UPA government had originally proposed raising the FDI cap in 2008 when it introduced the Insurance Laws (Amendment) Bill. However, because of the opposition from political parties, the Bill could not be taken up in the Rajya Sabha.