Budget impact: FDI cap in insurance sector may be raised to 74%

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The government is planning another round of overhaul of the foreign direct investment (FDI) policy with changes across sectors including insurance, contract manufacturing, digital media, and information utilities, besides single-brand retail trade, in line with the Budget announcements.  

The insurance sector could be opened up to 74 per cent FDI under the approval route to bring parity with the banking sector, according to proposals under consideration. The current 49 per cent foreign investment limit through the automatic route in insurance is likely to be maintained. “Banking is a more sensitive sector compared to insurance. There should be parity here,” said a government official. 

For insurance intermediaries like brokers, insurance repositories, third-party administrators, etc, 100 per cent FDI may be permitted.

Digital media, which has been in the grey area as far as regulations go, may be capped at 26 per cent FDI for uploading of news and current affairs under the approval route. For streaming news and current affairs content, FDI up to 49 per cent could be permitted, again under the approval route.

The proposal of the Department of Promotion of Industry and Internal Trade comes amid government concerns over an increasing circulation of fake news with penetration of internet. 

“There has been a rise of news provided over internet. Fake news is detrimental to national security. It is pertinent to have specific provisions for digital media,” said a government official. 

Currently, the FDI policy allows 49 per cent FDI in TV channels and 26 per cent in print media. 

The government is also looking to allow FDI in information utilities at 100 per cent through government approval route and up to 49 per cent under automatic route. Currently, there’s no FDI rule for this category. “Information utilities are of key importance for the Insolvency & Bankruptcy ecosystem. With a large amount of data storage, there is a risk of data theft. Hence, government approval should be there for over 49 per cent,’’ said the official. 

In the plantation sector, 100 per cent FDI may be considered for sandalwood and bamboo, besides tea, coffee, rubber and cardamom allowed currently.

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