“The government’s move to hike the FDI limit to 100 per cent from the current 74 per cent will be instrumental in attracting fresh capital from overseas insurers, thereby securing robust growth for the insurance sector over the next two decades.
According to government data, since 2015, when the government liberalised the foreign direct investment, or FDI, norms, and allowed at first 49% FDI in 2015 and increased it to 74% in 2021 the sector has received close to Rs 54000 crore as FDI. The hike in FDI limit to 100 per cent announced by the Union Finance Minister, Nirmala Sitharaman, in her Budget speech on Saturday, will help provide a huge fill up to the sector.
Both the Indian economy and the insurance market hold immense appeal for international insurers. However, we have too few players for a country and economy of our size. The number of players servicing the Indian market currently is comparable to much smaller emerging markets such as Malaysia and South Africa. Developed markets on the other hand have a much broader and deeper insurance market – the United States has over 5,000 insurers, the United Kingdom around 400, and Singapore over 200.
This scarcity is partly due to the challenge that global insurers face in finding suitable local partners. With just over 60 insurers operating in both life and general insurance sectors, and many of them functioning as joint ventures, the shortage of capable and willing local partners is evident. Permitting 100 per cent FDI would be a game-changer, given its potential to address this issue”.
