The government decision to hike the FDI cap to 49 percent in the insurance sector will inject "volatility and vulnerability of the deregulated financial system" into India, the CPI-M has said.
The cabinet's approval of the raising of the FDI cap from 26 percent is the Narendra Modi government's "welcome gift to John Kerry, the US Secretary of State who is visiting India", it said.
An amendment to the insurance laws will be placed in this session of parliament, the CPI-M said in an editorial in "People's Democracy", its weekly journal.
"This will fulfill a long-standing demand of the US as voiced repeatedly by the India-US business forum which was set-up during the UPA-1 government.
"The opening up and liberalisation of the financial sector has been a key reform advocated by the neo-liberal circles.
"These have involved deregulation of capital flows, entry of private sector in banking and insurance; foreign capital investment in these sectors and opening up to financial flows and financial innovation."
The CPI-M said the "well worn arguments for more FDI in insurance" could be easily countered.
It said the record of the foreign insurance companies do not inspire any confidence.
It pointed out how the 2008 global financial crisis "starkly exposed the vulnerability of the financial sector in the US and how the people were defrauded by these companies".
The editorial said: "Refusing to learn from this sobering experience, the volatility and vulnerability of the deregulated financial system is being imported into India's insurance and financial sector."
The CPI-M said that India's life insurance sector was nationalised in 1956 after a series of failures and scandals in the private insurance companies.
"We are going back to those days. The risk of the entry of profit-seeking foreign companies, investing in high risk ventures and jeopardising the savings and interests of the people is real."
