The Hindu Business Line : Survey favours liberalising FDI in insurance, retail

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Survey favours liberalising FDI in insurance, retail

100% FDI in pvt rural agricultural banks urged

Foreign direct investment into India during April-November 2007 grossed Rs 45,098 crore against Rs 33,030 crore during April to September 2006.

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New Delhi, Feb 28 Barely a month after the Centre relaxed foreign direct investment (FDI) norms for sectors such as civil aviation, petrochemicals and commodity exchanges, the Economic Survey on Thursday advocated raising foreign equity cap in insurance, new private rural agricultural banks, and the retail sectors.

The Survey – which is a report card on the Indian economy ahead of the Union Budget – has suggested allowing a share for foreign equity in all retail trade, and mooted 100 per cent foreign equity in foreign branded, specialised retail chains like luxury brands, consumer durables, and semi-durables.

In case of insurance sector, the Survey recommended raising foreign equity share to 49 per cent, while prescribing 51 per cent foreign equity in a special category of insurance companies – those providing all types of insurance such as health and weather, to rural residents and for all agricultural related activities including agro-processing.

In the banking sector, the Survey favoured allowing 100 per cent FDI in greenfield private rural-agriculture banks. As an incentive such a bank could be allowed expansion into small towns when the general FDI policy on banks is liberalised.

FDI inflows

Foreign direct investment into India during April-November 2007 grossed Rs 45,098 crore against Rs 33,030 crore during April to September 2006. Between April 2000 and November 2007, Mauritius remained the predominant source country for FDI into India (44.24 per cent share), followed by the US (9.37 per cent), the UK (7.98 per cent), and The Netherlands (5.81 per cent).

However, between April-November 2007, while Mauritius still held on to its lead (42.77 per cent), the share of the US (5.45 per cent), the UK (2.19 per cent) and The Netherlands (4.51 per cent) were lower, even as Japan (5.72 per cent) and Singapore (8.73 per cent) were higher.

Seen sector-wise, the financial and non financial services accounted for about 29 per cent of the cumulative inflows between April 2000 and November 2007, with computer software and hardware chipping in 23 per cent, and telecom and construction accounting for about 12 per cent and 7.5 per cent, respectively.

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