The Hindu Business Line : `FDI cap is no entry barrier for insurers'

The Finance Minister, Mr P. Chidambaram, today invited more foreign insurance companies to come to India, which he said was the most untapped market in the world.

Addressing a conference on `Indo-US economic cooperation', Mr Chidambaram made it clear that the 26 per cent foreign direct investment (FDI) cap in the insurance sector could not be viewed as an entry barrier.

"Many insurers (the world over) have told me that the 26 per cent FDI cap is not an entry barrier, it's perhaps a barrier for expansion. There are no barriers to entry and as we go along, I am confident that I can persuade Parliament to amend insurance laws to provide opportunities for growth," Mr Chidambaram said.

He highlighted that there were many foreign insurance companies that had so far not entered the Indian market.

Terming the Indian insurance market as the most untapped market, Mr Chidambaram said that barely 10 per cent of the population has any type of insurance.

The Finance Minister had already said that a Bill to amend insurance law would be introduced in the ongoing Budget session of Parliament.

Likewise, in the banking sector, Mr Chidambaram said the first phase of roadmap unveiled by the Reserve Bank of India gave ample opportunities for people to enter the banking sector, grow organically as well as inorganically.

"Come 2009, phase-II would be rolled out when India could confidently open the sector even more," he said.

FDI inflows

Stating that the cumulative FDI inflows in the last 15 years have been about $37 billion, with the US accounting for about $5 billion, Mr Chidambaram said that both the numbers are not impressive.

"Both numbers conceal the true potential of the investing community and the opportunity in India," he said.

Forex controls

Asked whether one could expect abolition of foreign exchange controls in the next couple of years, Mr Chidambaram said this depended on the economy achieving the parameters set out in the Tarapore Committeethat made its recommendations some years ago.

"Unless the economy achieves those parameters (set out in Tarapore Committee report), we cannot move forward. We have come a long way, but I think there is some distance to go before we can achieve those parameters, which relate to foreign exchange, fiscal deficit, level of inflation, NPAs of banks," Mr Chidambaram said.

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