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India to consider more foreign investment for insurance: reports

14th January 2020 - Author: Matt Sheehan

India has proposed easing foreign investment rules for its insurance and aviation sectors as part of a push to help stimulate the economy, according to reports from Bloomberg.

india-map-flagSources said the Finance Ministry has considered increasing the limit on foreign direct investment in insurance and pension companies from 49% to 74%.

The aim is to increase the amount of foreign direct investment to as much as 6% of gross domestic product, people familiar with the matter told Bloomberg, up from less than 2% currently.

The proposals would support Prime Minister Narendra Modi’s ambition to double the size of India’s economy to $5 trillion by 2025, which has come into question amid an economic slowdown.

World Bank data shows that foreign direct investment inflows into India increased by 15% to $26 billion during the six months ending September 2019.

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However, the ratio to gross domestic product has progressively declined to 1.5% in 2018.

In August last year, the Indian government significantly lowered the required volume of Net Owned Funds (NOF) for foreign insurers and reinsurers looking to establish a branch in the Gandhinagar International Financial Services Center (IFSC).

It was hoped that the move would attract foreign insurance and reinsurance companies that operate in global financial centres to open a branch in the IFSC in India.

And last month, the Insurance Regulatory and Development Authority of India (Irdai) looked to further protect state assets against catastrophes with a proposal for a state-backed insurance scheme in certain states.

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