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ABSTRACT

Indian insurance industry is one of the sunrise sectors with huge growth potential and occupies a considerable importance as its contribution to GDP is quite significant. FDI in insurance increases the penetration of insurance in India and can meet India's long term capital requirements to fund the building of infrastructures. Foreign direct investment is released into the insurance sector as foreign Investors are watching India as a place for their investment with revenue growth potential and as it is the only avenue where people can put in money for as long as 30 years or even more. Government has gradually taken steps to open the sector with economic liberalization and has started bringing in new investments from global giants and the government was hard pressed to facilitate global integration by lowering trade barriers for the free flow of technology, intellectual and financial capital. And initially FDI in insurance was permitted only up to 29% and now was extended to 49%.But there are still plethora of uncertainties, restrictions and potential socio-economic risks. This paper includes genesis of FDI into the insurance sector, also a study on trends of FDI from the year 2005 to 2015 of all Life Insurance and non-life insurance companies including the benefits derived and also the drawbacks. This paper also studies the benefits of the increased FDI limit in insurance up to 49% during the recent time and also the issues.

Keywords: Foreign Direct Investment, Trend of FDI in Life Insurance Companies, Trend of FDI in Non-life Insurance Companies, Benefits of increased FDI Limit.

Introduction

Foreign direct investment (FDI) is a major source of non-debt financial resource for the economic development of India. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges such as tax exemptions, etc. For a country where foreign investments are being made, it also means achieving technical know-how and generating employment. A milestone was achieved when the nation decided to privatize the insurance industry along with requisite regulations. The industry functioned under a monopoly for several decades thereafter. However, other problems surfaced such as limited reach and penetration of enterprise and deteriorating servicing standards. Indian insurance sector was liberalized in 2001. Liberalization has led to the entry of the largest insurance...

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