Truncated Increase In Insurance FDI On Cards

New Delhi, July 28 | Updated: Jul 29 2004, 06:20am hrs
The government may reduce the proposed hike in foreign direct investment (FDI) to a via media level of 35-40 per cent. Finance minister P Chidambaram had proposed to increase the existing FDI cap in the sector from 26 per cent to 49 per cent.

According to an official, this is a part of the compromise formula being worked out by the government in consultation with the supporting parties. It is expected that the FDI cap would be brought down from the proposed 49 per cent to about 35 to 40 per cent, he said requesting not to be named.

Senior Communist Party of India leader D Raja didnt confirm this version. We will soon have a meeting with the ruling coalition to sort out the FDI issue. We will study all pros and cons and take a final decision. However, at present, we have got no proposal from them which suggests that FDI limit would be capped at between 35 and 40 per cent.

In the Budget speech, Chidambaram had announced an increase in FDI caps in civil aviation, telecom and insurance. The minister proposed to increase FDI cap in telecom from 49 per cent to 74 per cent and in aviation from 40 to 49 per cent.

The FMs proposal was welcomed by private sector insurance players, but it evoked sharp reaction from Left parties. While Chidambaram explained that he hadnt crossed any on the Rubicons of company law, Left MPs urged him to refrain.

Various trade unions have also demanded that the FDI cap in insurance sector be restored at 26 per cent.