Asking India to liberalise its foreign investment policy, particularly in the financial services sector, the US today said opening up these areas further can add about 1.5 per cent to the country’s economic growth.
“India imposes substantial FDI caps in the financial services sector, particularly in the insurance sector...insurance penetration is very low (in India)...
“You should understand the central role insurance plays in commerce, trade and economic activities. Planes don’t fly, ships don’t sail in global commerce without insurance,” a senior official in the US Commerce Department said here at a CII function.
Mr Michael Camunez, Assistant Secretary for Market Access and Compliance in the US Commerce Department, said liberalising foreign direct investment (FDI) policies will also help create funds to invest in the infrastructure sector.
Mr Camunez said India is going to invest about $1.2 trillion in the infrastructure sector in the coming years.
“ ...if India wants to substantially liberalise FDI cap in its financial services sector, generally it should contribute as much as 1.5 per cent to the country’s GDP growth, that’s remarkable statistics,” he added.
The US business houses want India to increase the FDI cap in the insurance sector to 49 per cent from 26 per cent.
The Insurance Laws (Amendment) Bill, 2008, is pending in Parliament. The Bill, when enacted, would allow raising the FDI cap for the industry to 49 per cent. However, it has been awaiting approval since 2008, as it was delayed by strong opposition from the Left parties.
He said that according to a study, India is going to be one of the top insurance markets in the world and opening up the sector further “will be a win-win for both India and the US”.
Mr Camunez added that protectionist policies are increasing in India in areas such as foreign technology transfer, intellectual property rights and manufacturing.
“ ...these policies are hampering India’s domestic competitiveness...,” he added.