India is putting forth various reforms to allow more foreign investment, including opening up the insurance and aviation sectors, as it tries to reinvigorate its economy.
Finance Minister Nirmala Sitharaman in her maiden Budget speech said that India's FDI inflows in 2018-19 grew by 6% to $64.37bn.
"I propose to further consolidate, the gains in order to make India more attractive FDI destination. The government will examine suggestions of further opening up of FDI in aviation, media, AVGC (Animation, Visual effects, Gaming and Comics) and insurance sector in consultation with stakeholders," she said.
I propose to further consolidate, the gains in order to make India more attractive FDI destination"
She added that 100% foreign ownership will be permitted for insurance intermediaries. Currently, foreign entities can only own a maximum of 49% in insurance companies. Foreign participation in the Indian insurance industry, which is worth billions of dollars, has been tightly guarded by the government out of fear of backlash from the strong workers unions.
"It is high time India gets fully integrated into the global value chain of production of goods and services but also becomes part of the global financial system to mobilise global savings mostly institutional in insurance, pension, and sovereign wealth funds," said Sitharaman.
The move has evoked mixed reactions from insurers. The American corporate sector hailed minister Nirmala Sitharaman, noting that it is not only inclusive but also attractive for foreign investments.
The head of US India Strategic and Partnership Forum (USISPF) Mukesh Aghi said the budget is inclusive and policy decisions are encouraging for American companies.
It's "good news" for companies like Apple, Aghi told PTI. The Budget opens up the Indian market, and encourages US companies to invest more, at the same time it ensures prosperity and growth for the lower sections, he said.
However, Supriya Rathi, Promoter Director, Anand Rathi Insurance Brokers, said, "This move will likely benefit just the top two to three global insurance brokers already present in the country and will increase foreign dominance in the insurance intermediary space," she said, adding that it may also increase outflows from the country as foreign players tend to repatriate their profits."