New Delhi, July 10: The Modi-government budget proposed to raise the foreign direct investment (FDI) cap in the insurance sector to 49 per cent from current level of 26 per cent with certain riders.
“The insurance sector is investment starved. Several segments of the insurance sector need an expansion. 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 route,” finance minister Arun Jaitley said.
Anish Thacker, tax partner, EY said, "The insurance bill will have to be considered by Parliament. These may not exactly be in line with industry expectations but the attempt to provide funds for the capital intensive industry needs to be acknowledged".
The Insurance Laws Amendment Bill, which seeks to raise the cap, has been pending in Parliament since 2008.
The BJP had opposed any move to raise the cap in the insurance sector and had blocked the UPA's attempt to move ahead with this vital reform.
A parliamentary panel headed by senior BJP leader Yashwant Sinha had said that the policy stance of enabling a greater role for foreign capital in the insurance sector would not necessarily have the desired impact.
"Increased role of foreign capital may lead to the possibility of exposing the economy to the vulnerabilities of the global market,...flight of capital outside the country and also endangering the interest of the policy holders," it had said.