In a major move to boost the insurance sector, Finance Minister Nirmala Sitharaman announced an increase in the Foreign Direct Investment (FDI) limit for insurance companies from 74% to 100%, with certain conditions attached.
“The FDI limit for the insurance sector will be raised from 74% to 100%. This enhanced limit will apply to companies that invest the entire premium in India. The existing guardrails and conditionalities surrounding foreign investment will be reviewed and simplified,” Sitharaman said in her Budget speech.
This decision follows proposals made by the government in November to increase the FDI limit in Indian insurance companies and allow insurers to handle multiple classes of insurance business. The government had also sought public comments on proposed amendments to the Insurance Act of 1938, the Life Insurance Corporation Act of 1956, and the Insurance Regulatory and Development Authority Act of 1999.
The Insurance Regulatory and Development Authority of India (IRDAI) has set an ambitious goal of achieving “Insurance for All” by 2047. With a large portion of India’s population and insurable assets still uninsured, the government hopes this FDI increase will address this gap and reduce the financial strain caused by high out-of-pocket expenses, which in turn places pressure on public finances.
The ongoing budget session of Parliament, which started on January 31, will run until April 4. Sitharaman’s eighth budget presentation also highlighted India’s projected economic growth of 6.3% to 6.8% for the 2025-26 fiscal year, as detailed in the Economic Survey 2024-25. The survey further emphasized that India needs to sustain growth of around 8% for a decade or two to realize its “Viksit Bharat” vision, even as growth showed signs of slowing in the first two quarters of the current financial year.
