All of us are well aware of the recent debate about FDI and whether it should be allowed in India and to what extent! Many experts have many suggestions about the positive and negative effects of foreign direct investment in various business sectors in India. Amongst all the debate and heated discussion, Indian government has just approved 49% of foreign direct investment (FDI) in insurance. Some sectors welcomed this decision with whole heart while the rest have their pensive views about the same. Truly, FDI will definitely going to impact in both positive and negative ways on various sectors in India.
Owing to the steady and fast growing Indian economy, India has become one of the most famous destinations for foreign direct investments. The rapid growth in all the business sectors in India is reciprocated by liberal trade policies, development in telecommunication and technology, expansion of markets and loosened restrictions from FDI. Indian FDI that started with less than one billion dollar baseline has now become the second most wanted foreign direct investment destinations in the world, after China. This is revealed in the recent survey performed by UNCTAD (United Nations Conference on Trade and Development)
Benefits of FDI in insurance
According to the experts, the benefits of all kinds of FDI investments are likely to be seen only in the future. FDI and its results is a long term process and it will reap the benefits after a few years of initiating it. As we know, the government has approved as much as 49% of foreign direct investments in the Indian insurance sector from 26%. This is an extremely positive sign! Now more and more key players on global insurance market will make their debut in the very active Indian insurance market. Present foreign companies will increase their shareholding, benefiting the investors all the more.
Indian insurance sector, especially the life insurance sector is totally dominated by the government owned insurance company - Life Insurance Corporation, General Insurance Corporation and several of its subsidiaries. However, with the increased percentage of FDI various private insurance companies are likely to benefit the most. These companies include Max, Reliance Life, Aegon Religare, Birla Sunlife, etc. But the companies like Bajaj Allianz are likely to benefit less due to their previous agreement that allows their partner to increase their stakes at predefined prices.