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000 BU SI N E SS TO D AY N O V E M BE R 3 0 2 0 0 8
A bird s eye view of what s hot and what s not on the government s policy radar.
A
FTER A FOUR-YEAR DELAY, THE
Government paved the way
for 49 per cent foreign direct
investment in insurance compa-
nies by clearing a comprehensive
insurance Bill last fortnight. The
Government plans to table the Bill
in Parliament in December, after
which it will have to be referred to
the Standing Committee on
Finance for its views. Foreign
investors could infuse Rs 3,750
crore into the capital-intensive
sector, Aviva Life Insurance, India
has forecast. An increase in the
limit may increase the total FDI in
the life insurance industry by
almost 2.5 times from the current levels of Rs 2,500
crore, the company said. The total capital base of the
industrylife and non-life insuranceis Rs 8,500
crore, at present.
The ensuing capitalisation, if it is permitted, will
be a much needed shot in the arm for a number of
Indian insurance companies, many of which are
unable to expand business owing to the inability of
the Indian partners to inject the required funds. For
every policy they sell, insurance companies must
shore up their capitalisation in line with regulations.
The Indian insurance sector is bigger than com-
monly understood to be. It accounts for 7 per cent of
the GDP. The life insurance industry is growing at the
compounded annual growth rate of more than 30 per
cent. Still, barely 20 per cent of the population is cov-
ered. The paucity of funds is one of the biggest con-
straints to deepening the penetra-
tion. The proposed increase in FDI
will add to the foreign inflow into
the Indian economy, giving it a
boost, and will enable the insur-
ance industry to grow and reach
out to the length and breadth of
the country, says T.R. Rama-
chandran, MD & CEO, Aviva India.
Increasing FDI will also help the
insurance sector to further expand,
launch innovative distribution cha-
nnels, upgrade technology, enh-
ance the current product portfolio
and bring in global best practices.
Other provisions cleared by the
government include opening the
doors to foreign reinsurers, such as Lloyds of London,
for setting up branches here and lowering the floor
capital requirement for standalone health insurance
companies to Rs 50 crore from Rs 100 crore.
The euphoria seems somewhat premature, how-
ever, since it is anybodys guess on the time the global
finance industry will take to recover from the set-
back of the su prime disaster that is still unfurling. In
fact, the US government has seized control of insur-
ance giant American International Group (AI G),
which sells insurance in India in collaboration with
the Tatas via an unprecedented $85-billion bailout.
Indian policy makers, it seems, dilly-dallied on the
decision for a bit too long. The money bags Indian
insurance companies were banking on, in the mean-
while, have gone bust.
PUJA MEHRA
Tapping Dried Up Sources
P-WATCH
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Because of the employment boom across
the country, we are actually getting many
more homebuyers. So, we have not seen any
drop on the residential front at all. With
office space, and IT and BPO service
booming, we have also seen a
northward movement in rentals
Business Line, May25, 2006
How Times Have Changed
NOW THEN
The prime issue is of affordability.
Its not about per sq. ft. rate, but about the
overall price tag of a house. We are reducing
the ticket size. We now offer three-bedroom
flats, which are much smaller in size than we
earlier used to sell, thereby bringing down
the price of a flat
The Times of India, October 30, 2008
Sanjay Chandra
MD, Unitech
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