When it comes to foreign direct investment (FDI) reforms, the Union Budget 2021 has only blessed the insurance sector this time. Although this reform comes with some caveats, nonetheless, the Budget proposal is welcome as it allows the sectoral cap in insurance to be increased from 49% to 74%. Going by the Budget announcement, irrespective of this increase in shareholding limit, the majority of directors and key management persons of Indian insurance companies will still have to be resident Indians.
Nevertheless, this is a good move for insurance and should attract FDI in this sector. While insurance has been the beneficiary this time, a few other crucial sectors continue to crave for more such reforms. For example, in another major financial services sector—the pension sector—the FDI cap continues to be at 49%. In the healthcare sector, which is one of the favourites in the Budget this time with large allocations made for it, the FDI cap in brownfield pharmaceutical projects continues to be 74%. Any FDI beyond 74% still requires government approval.
Please click here to read the full article by Lalit Kumar published in Fortune India.
Lalit is a Corporate, M&A and Private Equity lawyer with over twenty years of experience.