Union Finance Minister P. Chidambaram Saturday expressed confidence that he would be able to "convince" the main opposition and other parties to support the recently-announced policy allowing 49 percent FDI in the insurance sector.
Chidambaram said that there have been broad agreements over most recommendations of the Standing Committee. "Only on FDI, the Standing Committee has recommended to keep the limit at 26 percent," he said, emerging from a series of high-level meetings with financial regulators and investors here Saturday, on his first visit to Mumbai after taking over as finance minister.
He pointed out that the insurance sector needs a huge influx of money and if the FDI limit is kept at 26 percent, no additional funds are going to flow in the sector.
"Most insurance companies promoted by public sector banks are in need of massive capital infusion. When the banks themselves are facing a funds crunch for their own capitalization, how can you expect them to pump in funds?" Chidambaram asked.
However, raising the FDI limit to 49 percent would attract foreign funds which would benefit the Indian insurance industry, he pointed out.
In this context, Chidambaram said that the Insurance Regulatory Development Authority and all insurance companies, including life and general, have endorsed the proposal for 49 percent FDI.
The finance minister said that he will discuss the entire issue with other political parties and expressed confidence that he would be able to convince them to extend their support to the proposal.
He added that that with the passing of the Insurance Bill, even the Pension Fund Bill would have a smooth sailing.
On the ticklish question of spiraling inflation, Chidambaram admitted that some measures initiated by the government, including hike in diesel prices would result in inflation in the short run, but said that it would come down over the next couple of months.
Earlier Saturday morning, he met the Reserve Bank of India Governor, followed by SEBI Board Members, Association of Mutual Fund Investors and FIIs during the day.