The Federation of Indian Chambers of Commerce & Industry (Ficci) has said that foreign participation should be allowed in the insurance sector and the extent of foreign equity that can be held by the Indian private sector should be specified at the earliest.
According to the chamber, there was widespread expectation among foreign insurance companies that India's insurance sector will be opened up to foreign investment and an announcement would be made in the Budget.
"The vagueness about the participation of foreign companies in the insurance sector is causing concern and a large number of economic analysts are of the opinion that one of the major reasons for the steady withdrawal of the foreign institutional investors from the capital markets is because of non-fructification of this assured objective," Ficci said in a statement yesterday.
The volatile changes that have taken place in the last few days in the stock markets and in the exchange rate of the rupee, says Ficci, are due to a number of factors, including net sales by FIIs which shot up to about Rs 600 crore in the fortnight ending on June 15.
There appears to be no let-up and net sales by FIIs continues, which has cast its shadow on the stock market and exchange rate parity.
Pointing out that the government has announced direct uplinking norms for the private broadcasters, allowing Indian companies to have 20 per cent equity, Ficci says specific measures have to be spelt out in the case of the insurance sector as well. The quantum of foreign equity investment that can be allowed should be decided amicably, drawing experience from other countries, says the chamber.
According to Ficci, the opening up of the insurance sector serves two objectives at "this critical juncture following sanctions". First, it can signal that India is on the path of reforms, which will send the right signal to not only the investors in insurance sector but also to investors in other sectors. Secondly, such a measure can act as a cushion for absorbing the shock created by the withdrawal of FIIs.
