Jayalalithaa slams Centre's plan to hike FDI in insurance

Tamil Nadu chief minister J Jayalalithaa has slammed the central government’s move to increase foreign direct investment (FDI) in insurance and pension funds.

Terming it as “a gimmick and at worst an unworthy risk,” she said in a statement, “The UPA’s latest FDI flag is diversionary ... more to anesthetise the mammoth corruption charges against the UPA government, especially when elections seem imminent. The Cabinet’s approval on these issues, toting these as big ticket reforms which would accelerate unprecedented growth and boost a sagging economy, is premature.”

Increasing FDI from 26 per cent to 49 per cent in the insurance sector and opening up FDI up to 26 per cent in pension funds will be operational only if the relevant Bills — Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011, and Insurance Law (Amendment) Bill, 2008 — are passed by both the Houses of Parliament where the UPA faces a number crunch, the chief minister said.

 

“Twenty six per cent FDI in the insurance sector was permitted, but nothing appreciable has come out of it. Hiking it to 49 per cent against a Parliamentary Committee recommendation will prove disastrous,” she said.

On the capital requirement, she said, limiting it (capital) to Rs 50 crore for insurance companies will result in the mushrooming of small companies lacking experience and capability and will be fraught with danger. This will unnecessarily expose our public to the risk of uncertainty, she said.

Allowing FDI into pension funds and channelling the domestic savings of elderly persons into the highly-risky and unpredictable capital market would place the future of senior citizens at tremendous risk.

FDI in the insurance sector would lead to the emergence and dominance of private insurance companies whose motives will be totally commercial, the statement said.

Consequently, public sector insurance companies like LIC, which participate actively in the developmental process, will suffer. As a result, the developmental process of the nation itself will be adversely and severely affected, it said.

“This move at best is a gimmick and at worst an unworthy risk. The act of disguising harmful decisions and promoting them under the name of grand reforms amounts to deceiving the people of the country. No amount of rhetoric will change the truth. I strongly oppose these moves as they are detrimental to the future of the common people of this country,” Jayalalithaa said.