Finance Minister Arun Jaitley, on Thursday, proposed hiking the foreign direct investment limit in insurance and defence sectors to 49 per cent.
Agreeing to a long-pending demand from the insurance companies, the Minister said, “The composite cap in the insurance sector is proposed to be increased up to 49 per cent from the current level of 26 per cent, with full Indian management and control, through the FIPB (Foreign Investment Promotion Board) route.”
He added that the sector was investment starved and several segments of the insurance sector needed an expansion.
Commenting on the move, Manasije Mishra, CEO, Max Bupa, said, “The hike in FDI limit will boost industry growth and deepen health insurance penetration in the country. The opening up of the sector will pave way for greater innovation and better quality healthcare.”
The Minister also proposed to up the FDI in the defence sector to 49 per cent from 26 per cent at present.
“Currently, we permit 26 per cent FDI in defence manufacturing.
“The composite cap of foreign exchange is being raised to 49 per cent with full Indian management and control through the FIPB route,” Mr. Jaitley said.
He added that India was the largest buyer of defence equipment in the world, and the domestic manufacturing capacities were still at a nascent stage.
In right direction“We are buying substantial part of our defence requirements directly from foreign players.
“Companies controlled by foreign governments and foreign private sector are supplying our defence requirements to us at a considerable outflow of foreign exchange,” he explained.
Commenting on the move, Ganesh Raj, National Leader — Policy Advisory, EY, said it was definitely a step in the right direction.
“However, this will be viewed by most foreign OEMs and some Indian companies as a limited step and for a real change, this limit should have been enhanced to 51 per cent,” he added.
Likewise, Sidharth Birla, President of FICCI, welcomed the move, saying the announcement to enhance the composite cap of foreign investments in defence and insurance sectors will send a strong message to the global investor community.
