The long-awaited insurance Bill, which will raise the overseas investment limit in the sector to 49% from 26%, looks set to become law before the year is out with a majority on the parliamentary select committee ready to give its assent. The Chandan Mitra-headed committee has given the green signal to the Insurance Laws (Amendment) Bill. Also, there is agreement on this limit being a composite one, which means it doesn’t bar portfolio investors. That would make it more attractive for insurers as it opens up the options when it comes to raising capital or exiting. The government plans to stick to the proposed formulation of capping total foreign investment at 49.
Along with the goods & services tax (GST), this is one of the reform measures most closely watched by international investors and, if passed, will be read as an affirmation of the Narendra Modi government’s resolve to speed up economic liberalisation.
Insurance penetration in the country declined to 3.96% of GDP in 2012–13 from 5.2% of GDP in 2009-10. The insurance industry is hopeful that the government will be able to pass the Bill in the current session of Parliament.
Most Indian partners holding a 74% stake in their insurance venture with foreign partners are unable to infuse the funds needed to expand. The government has already opened up the railways to FDI and raised the overseas investment limit in defence to 49% from 26%.