Industry hails insurance bill to raise FDI cap, Left sulks
Saturday 27, December, 2008 NEW DELHI: The government's move to table the insurance bill in Parliament may not have gone down well with the Left, but the industry welcomed the
move saying higher Foreign Direct Investment would help the sector.
"We welcome this announcement. A simple calculation shows that raising the FDI limit to 49 per cent (currently 26 per cent) may increase the total FDI in the Life Insurance industry by almost 2.5 times from the current level of approximately Rs 2,500 crore," said Aviva India Managing Director T R Ramachandran.
The proposed hike in FDI would add to the inflow of foreign funds into the Indian economy giving it a boost and would enable the sector to grow and reach out across the length and breadth of the country, he said.
It would also help the sector to launch innovative distribution channels, upgrade technology and enhance the current product portfolio, he added.
According to Max New York Life Managing Director and CEO Rajesh Sud, the introduction of the bill is a welcome move for the insurance industry.
Any reform in terms of increase in foreign ownership limit for the insurance industry is directionally desirable said ICICI Prudential Life Executive Director N S Kannan.
Given that life insurance is a capital intensive industry, this step would help insurers access larger foreign capital over a period of time, Kannan said, adding this FDI would be long-term foreign capital and not volatile money.
Reliance Life Chief P Nandagopal said life business needs lot of capital in the growth phase. The move would help players to get much needed capital.
However, the bill was strongly opposed by the Left and AIADMK members when Minister of State for Finance P K Bansal was introducing the legislation in the Rajya Sabha.
The government, which had kept insurance reforms in cold storage for almost four years in view of strong objections from the Left, introduced the Insurance Laws (Amendment) Bill, 2008, after a high drama.
As Minister of State for Finance P K Bansal rose to introduce the bill, CPI(M) member T K Rangarajan attempted to snatch the copy of the bill from him, while External Affairs Minister Pranab Mukherjee and Minister for Social Justice and Empowerment Meira Kumar intervened on behalf of their colleague.
Meanwhile, employees public sector life and non-life companies have called for nation-wide strike against the government's decision.
All India Insurance Employees Association, a body comprising the staff of public sector insurance companies, said nation-wide strike is to protest government's intention to raise FDI limit from 26 per cent to 49 per cent.
"It is beyond imagination as to how the companies which are struggling in their own countries are being allowed to increase stake in India," said All India Insurance Employees Association Joint Secretary A K Bhatnagar.
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