CPM against FDI hike in insurance

The CPI(M) has nixed the proposed FDI hike in the insurance sector arguing that it will give control of domestic savings to MNCs.

The party has also rejected the government's argument that the incremental increase in FDI will bring investment for infrastructure development.

In a note to be sent to the government shortly, the CPI(M) says that it sees "no justification" for FDI hike in insurance sector as the existing limit has neither hampered nor expanded private life insurance companies in India.

According to the Left note, apparently prepared to pre-empt the government's move to increase FDI limit from 26 to 49 per cent, further opening of the insurance sector has been necessitated citing LIC's foreign operations.

But the Left's argument is that LIC is primarily serving expatriates in the Gulf and has no presence in industrialised countries, except a marginal presence in the UK, which control 88 per cent of the world life insurance premium.

Referring to a letter (dated July 27, 2005) from insurance majors and financial corporations of the US, UK, Japan, France etc to Commerce Minister Kamal Nath, the CPI(M) note adds that the letter itself said the incremental increase in the FDI would bring $ 500 million, whereas the PM, the FM and others say that they need $ 150 billion for infrastructure development in the next 10 years and profess that if FDI in insurance is raised, they will get this investment.

As against this, the LIC is poised to generate around $21.5 billion per annum from premium income and can bring the needed $150 billion in seven years, says the Left note asking the government to do everything to strengthen the LIC and public sector general insurance companies.

The CPI(M) note further says that the impact of increase in FDI coupled with Narasimhan Committee recommendation for investment of premium outside India would be that instead of investment coming into India, even the native capital generated from the savings of the people may go out.

CPI(M) Politburo member and MP Sitaram Yechury told Business Standard on Thursday that the Left would oppose any FDI hike in insurance sector. Promoters of private insurance companies have huge financial strength and are not dependent on FDI.