Govt proposes FDI norm relaxation in aviation, insurance, single brand retail, animation media

The government Friday proposed relaxation in the FDI norms for sectors such as aviation, insurance, animation media and single brand retail with a view to attracting more overseas investment. Finance Minister Nirmala Sitharaman in her Budget speech said that India's FDI inflows in 2018-19 grew by 6 percent to USD 64.37 billion.

"I propose to further consolidate, the gains in order to make India more attractive FDI destination. The government will examine suggestions of further opening up of FDI in aviation, media ( AVGC - Animation, Visual Effects, Gaming, and Comics) and insurance sectors in consultation with all stakeholders," she said. The minister said 100 percent foreign direct investment (FDI) will be permitted for insurance intermediaries, and local sourcing norms will be eased for FDI in the single-brand retail sector.

Insurance intermediaries include broking, third party administrators, surveyors and loss assessors. The announcement has paved the way for the entry of foreign firms in these intermediary services to operate in India.

Currently, as per the FDI policy, 49 percent foreign investment is allowed in the insurance sector, which includes insurance broking, insurance companies, third party administrators, surveyors and loss assessors. Representations have been made to the government that insurance brokers should be treated on par with other financial services intermediaries, where 100 percent FDI is permitted.

Insurance penetration in the country was 3.4 percent in 2015 against the world average of 6.2 percent. In 2014, it was 3.3 percent in India. There is no mention of animation and gaming media in the current FDI policy.

According to sources, generally, it is perceived that sectors which are not mentioned in the policy can attract 100 percent foreign inflows. Now, as the finance minister has announced to examine opening up of FDI in AVGC (animation, visual effects, gaming, and comics), the commerce and industry ministry would work out the modalities in consultation with stakeholders to give effect to the announcement.

In the insurance sector, 49 percent FDI is permitted through automatic route subject to approval from the Insurance Regulatory & Development Authority of India. Foreign investments are considered crucial for India, which needs around billions of dollars for overhauling its infrastructure sector such as ports, airports, and highways to boost growth.

FDI helps improve the country's balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.