FOREIGN DIRECT INVESTMENT IN INSURANCE SECTOR IN INDIA
VINAY V. MISHRA AND HARSHITA BHATNAGAR
I INTRODUCTION
There is hardly a facet of the Indian psyche that the concept of ‘foreign’ has not permeated. This term, connoting modernization, international brands and acquisitions by MNCs in popular imagination, has acquired renewed significance after the reforms initiated by the Indian Government in 1991.
Generally speaking FDI refers to capital inflows from abroad that invest in the production capacity of the economy and are “usually preferred over other forms of external finance because they are non-debt creating, non-volatile and their returns depend on the performance of the projects financed by the investors. FDI also facilitates international trade and transfer of knowledge, skills and technology.”1
India's foreign investment policy is fairly liberal, allowing up to 100% foreign investment in most sectors. However, some sectors have caps on FDI. The government also imposes caps on portfolio investments, within the FDI caps or separately, to cap total foreign equity in certain sectors. These caps apply mainly in areas considered strategic or sensitive, as well as to any investments considered to have national-security implications. In most sectors, investment up to the caps is permitted on the "automatic route", meaning that companies need only file papers with the central bank after investing. In areas that the government wants to monitor more closely, prior approval is necessary from the Foreign Investment Promotion
Board.2
* Gujarat National Law University, Gandhinagar, India.
1 Planning Commission of India.2002. Report of the Steering Group on Foreign Direct
Investment: Foreign Investment India.[Government Report]. p 11. New Delhi: Planning
Commission, Government of India. Accessed from http://planningcommission.nic.in.aboutus/committee/strgrp/stgp_fdi.pdf. on 5th
September, 2008 at 10:34 pm.
2 Foreign