Higher FDI to boost inflows

New Delhi: The government on Thursday cleared the proposal to raise FDI in the insurance sector through FIPB route from the current 26 percent to 49 per cent. The decision was cleared at a Cabinet meeting on Thursday. As per the Cabinet decision, the management control over insurance companies would continue to be in the hands of Indian promoters.

This will thus pave way for inflow of Rs 25,000 crore foreign funds. The approval to hike the FDI limit from the current 26 per cent, a proposal which has been pending since 2008, is expected to attract long term capital, besides improving the overall investment climate.

After this, the Bill is expected to be taken up by parliament. According to KPMG, the higher cap could fetch investments up to Rs 25,000 crore. “Once there is proper clarity on the interpretation of control by Indian promoter, the additional foreign capital expected across life, health and general insurance companies is between Rs 20,000 to Rs 25,000 crores,” KPMG (India) Partner Shashwat Sharma said.