The Confederation of Indian Industry (CII) in an urge to the Government to fast-track financial sector reforms to enable financing of the high growth in the economy, advocated for enhanced foreign direct investment (FDI) in insurance and banking sectors besides steps for creating a deep and vibrant corporate debt market.
CII pointed out that there have been very little progress made on the insurance FDI front and the Bill providing for enhanced FDI limit of 49% was still pending before Parliament.
The bill has been presented to the floor many times before but no progress has been made rather it’s been rejected or postponed for next meeting.
At present FDI in insurance is only 26% and demand is to raise it to 49%. Some of the economists argued that lower FDIs in financial sector saved India from going into recession. But I don’t think this is the solution. Indian insurance industry needs reforms. Insurance penetration is still very low in India, to increase this we need to invest more. Financial reforms are necessary for growth in the economy and this cannot be done without making investments. To safeguard India’s interest and check any sudden plight of money out of country, the capital account convertibility can come handy. The law maker should use their other tools to save plight of money from economy and to insure a proper financial system.
So raising FDI won’t bring threat to economy but mismanagement of money flow can.