February 15, 2010 by akhilendra
Break the shackle
Foreign direct investment in India has gradually in increased last decades. India has emerged as one of the favorite destination for FDI’s. FDI has played a pivotal role in Indian success story. They have served the purpose of source of huge amount of money which has been used on various government initiated development activity. There are government norms and regulation FDI in various sectors. FDI is allowed by financial collaborations, private equity or preferential allotment. It is not allowed in all sectors like arms, railways etc.
India has also played the role of a huge wealth creator for these FDI firms. Today trade minister Anand Sharma said that by March 2010, FDI in India would be around $ 18 billion. FDI has gone down this year due to the last year’s catastrophic slowdown. Recently US administration has said that US wants India to raise FDI cap on defense and insurance sector. The organization of economic cooperation and development (OECD) today also expressed their concerns about FDI cap in banking and insurance sector. They have said that today India is a great destination and source of FDI.
They have appreciated the way environment for FDI have changed in the country. India has definitely made huge progress from the days of license raj, which they have also said. But Indian administrative structure still remains a challenge for FDI. Central government have worked considerably well in this direction. They are also trying to raise the FDI cap in insurance sector, a favorite among FDIs.
The current limit for FDI in insurance sector is 26 per cent; they are trying pushing it to 49 per cent. Government has expressed their willingness to do it. It will be a very significant step in reforming Indian insurance sector. In august, government has said that raising FDI will not result in automatic change of the company, which was being said by those who were opposing the move. It can significantly help the local player in expanding and taking their business to next level.
The insurance Laws (amendment) Bill, 2008, which was introduced by the government in Rajya Sabha in December 2008, advocated the raise in FDI cap to 49 per cent from 26 per cent through its subsidiary firms or its nominee or by itself. It will be a very significant move to help local players who looking for funds to raise their capital. Insurance is very crucial sector for economical reform and it is attracting a lot attraction. It is very important for government to break the shackle and move forward.
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