The Insurance Bill that has recently been passed in the upper house of Indian parliament must be seen as another step towards surrendering economic sovereignty. The limit of foreign investment in the insurance sector has been raised from 26 to 49 percent. It plainly implies that the insurance companies and corporations owned by the corporate sector will be weakened and the private companies, mostly allied with foreign multinationals, will be strengthened. The Government of India has expressed the hope that this will bring inflow of investment worth 500 billions of rupees. The history of the period 1999-2011 tells a different story. During that period, the foreign companies operating in the insurance sector brought only 66.5 billions. In other words, they brought only what was necessary for their business.
There is a propaganda campaign, started by the Congress-led UPA government and now taken over by Narendra Modi and his acolytes that the foreign companies will provide higher quality services. This claim is dubious in view of the fact that in their parent countries, these companies have done miserably. For example, the AIG (American International Group) went bankrupt after the global meltdown and the bulk of its shares were purchased by the US government in order to enable it to survive. One may ask the customers who had deposited their hard-earned savings with the Tata-AIG or the Bajaj-Allianz about their experience. It is the practice of such companies to invest the premium money paid by customers in speculative share markets and the vicissitudes of these markets ruin many customers.
It should be further noted that regarding claim settlements and lapsation ratios, the record of the state-owned Life Insurance Corporation of India is as yet much better than that of private sector companies. Regarding investments in infrastructure, the participation of domestic and foreign insurance companies is negligible compared with that of the LICI. Then why try to weaken the LICI and the state-owned general insurance companies?
In the western world, the insurance companies have lost the confidence of customers, because their investments in 'derivatives' have ruined millions. They need investment outlets and hence are trying to capture the large Indian market. Red carpet treatment to these vultures will in the final analysis lead to large outflows of funds from India. It is an irony that when the UPA government first introduced the same Insurance Bill in the wake of the global meltdown, it tried to persuade the BJP which, however, refused to budge. Now the BJP has performed a somersault. The Congress, however, has obliged it, true to its earlier position.
Barring some fools and some paid apologists of western business interests everybody knows that foreign saving is an imperfect substitute for domestic saving in a developing economy. But Narendra Modi and the corporate lobby refuse to recognize it. The attitude of the corporate lobby is understandable, because the insurance companies run by them are not in a happy position, and need insulin in the form of foreign capital The 'nationalist' Narendra Modi is only too willing to fulfill their desire.
Vol. 47, No. 38, Mar 29 - Apr 4, 2015