While the Standing Committee on Finance led by former finance minister and BJP leader Yashwant Sinha had advised against hiking the foreign direct investment cap in the insurance sector to 46 per cent, the BJP along with Left parties had also opposed any such move way back in 2004.
Hum virodh karenge (we will oppose it), former Prime Minister Atal Bihari Vajpayee had said in July 2004 when former finance minister P Chidambaram had announced in his Budget speech for 2004-05 that the UPA would amend increase the FDI cap in insurance sector to 49 per cent from the existing 26 per cent.
While in later years the party had once again expressed tacit support to the plan, its stance changed after Sinha had in December 2011 in its report on the Insurance Laws (Amendment) Bill, 2008, opposed a higher limit for foreign investments in the sector.
The Committee are of the considered view that in the present global economic scenario, any further hike in FDI at this juncture may not be in the interest of the Indian insurance industry, whereby the common man too would not stand to gain through insurance, particularly as a means of social security, said the report, adding that insurers should instead raise capital from the markets. On being contacted by The Indian Express, Sinha declined to comment on the issue.
But with the dissolution of the 15th Lok Sabha, the report seems to have been set aside. Finance minister Arun Jaitley is expected to table a fresh Bill in Parliament to raise the FDI limit in the insurance sector.
Justifying the decision by the Cabinet Committee on Economic Affairs to hike the FDI cap, Jaitley had on Thursday pointed out that a higher cap on FDI in insurance was originally proposed by the NDA.
The idea of 49 per cent was first conceived by the NDA government. When we consulted the Congress Party, we were told that the Congress Party was only prepared for 26 per cent. So, we stepped back on our 49 per cent proposal because we needed your support and you were only agreeable to 26 per cent, he had said during his reply to the Appropriation Bill in the Rajya Sabha.
Though some headway in reaching a consensus on the issue was made in December 2013, Jaitley said it could not be taken up due to the upcoming elections.
The insurance sector was opened up for private sector in 2000 after the enactment of the Insurance Regulatory and Development Authority Act, 1999 (IRDA Act, 1999).