IMPACT OF FDI ON INSURANCE SECTOR

COMMERCE AND MANAGEMENT

ABSTRACT FDI (Foreign Direct Investment) in Insurance sector inculcates the saving habits, which in turn generates long term ingestible funds for infrastructure. India is no doubt a growth economy and many consider it as an attractive country to invest in, particularly in its rapidly growing and changing insurance market. After a decade of strong growth, Indian insurance industry is facing severe headwinds owing to slow growth, rising costs, stalled reforms, worsening distribution structure. FDI is a better alternate to reduce such problems. So government of India has taken liberalized steps by lowering trade barriers and removing certain restrictions. Government has raised FDI in insurance sector from 26% to 49%. This increment in FDI has two sided effects on our Indian economy. In this paper we have attempted to discuss the positive and negative impacts of FDI on insurance sector. Positive impact is in the form of more capital inflow, entry of new players, advanced technology, innovative ideas, employment opportunities and growth of insurance industry. Flow of FDI in insurance sector is a welcome measure but we should also consider the negative impact of FDI in the form of repatriation of profits resulting negligence of social responsibility, also harmful to development of indigenous players. An unwarranted increase in the size of foreign holding in the insurance sector will inevitably expose the country to risks not commensurate with those that an emerging market economy such as ours is equipped to grapple with. Key Words: FDI, Insurance sector, Inflows, Employment, Growth, Infrastructure etc.

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