Finance minister P Chidambaram on Monday underlined the need to increase foreign direct investment (FDI) in the insurance sector to 49% from the current 26% as recently approved by the Union Cabinet, since the sector required an immediate capital infusion of $5-6 billion (R26,250-31,200 cr) to expand operations and increase penetration.
“Every citizen must have insurance, there must be faster spread of insurance and we need huge amount of capital for that,” Chidambaram said at the Economic Editors’ Conference on Monday.
The current penetration of the life insurance sector stands at 4.4%, and for the non-life segment at 0.8%.
The government would reach out to all other political parties including the BJP, seeking their support to increase the FDI limit in the sector, said the finance minister. He added that he was hopeful of presenting the Insurance Laws (Amendment) Bill, 2008, proposing to increase the FDI limit, in the forthcoming winter session of Parliament.
Except for the clause pertaining to increasing FDI in the insurance sector, most other provisions of the insurance bill were by and large on the lines of the recommendations of the Standing Committee on Finance, said Chidambaram. “The disagreement is only pertaining to one clause, which is related to FDI. On that clause, I expect a vigorous debate and I hope I will be able to convince the Opposition parties”
Last week, the Cabinet approved the proposal to amend the bill and to raise FDI in the sector to 49% from 26%.
The Standing Committee on Finance headed by senior BJP leader Yashwant Sinha had recommended maintaining the FDI ceiling at 26% in the sector.Increasing the FDI ceiling has been a long-standing demand of the industry.