Skip to content
Search

Latest Stories

India proposes opening up insurance, aviation wider to help revive growth

PRIME minister Narendra Modi's government on Friday (5) proposed giving foreign investors a bigger role in India's giant insurance and aviation sectors to help reverse weakening growth and investment that threatens to take the shine off its recent landslide election victory.

Finance minister Nirmala Sitharaman unveiled the proposals while presenting the budget for the fiscal year ending March 31, 2020 to parliament, the first since the government was re-elected in a vote in April and May.


Modi has set a target of growing India into a $5 trillion economy by 2024-2025 from $2.7 trillion that a government report on Thursday (4) said will be done on the back of higher investment, savings and exports in the way China's growth was propelled.

"The government will examine suggestions of further opening up FDI (foreign direct investment) in aviation, media, and insurance sectors in consultations with stakeholders," Sitharaman said.

She said 100 per cent foreign ownership will be permitted for insurance intermediaries and local sourcing norms will be eased for FDI in retailers selling a single brand.

India currently allows foreign direct investment in single-brand retail but mandates investors to source locally 30 per cent of the value of good purchased.

At present, India allows 49 per cent foreign ownership through the automatic route in the insurance sector, which is worth billions of dollars and has been tightly controlled for decades for fear of a backlash from the unions.

"It is high time India gets fully integrated into the global value chain of production of goods and services but also becomes part of the global financial system to mobilize global savings mostly institutional in insurance, pension, and sovereign wealth funds," she said.

But economists say scaling up Asia's third-largest economy in rapid fashion will need bold reforms including freeing up land and labour markets, which Modi shied away from in his first term for fear of political backlash.

Capital Economics said in a note on Friday that reaching that target "is dependent in large part on achieving real GDP growth of 8 per cent a year, which we think is unlikely."

Land and labour reforms are difficult in a democracy like India and it seems unlikely Modi will risk drawing the ire of his Bharatiya Janata Party voters that re-elected him with a huge mandate.

During the budget speech, Indian markets were down.

The broader NSE index was down 0.37 per cent while the benchmark BSE index was trading 0.29 per cent lower at 39,793.46.

The 10-year benchmark government bond yield was at 6.72 per cent, compared to 6.75 per cent pre-budget.

The rupee had weakened to 68.73 from its 68.70 pre-budget.

"Nothing concrete has been announced so far, that disappointment is reflecting in markets," Saurabh Jain, assistant vice-president research, SMC Global Securities said.

India's economy is also running into global headwinds with growth weighed down by trade wars and protectionism.

Asia's third-largest economy grew at a much slower-than-expected 5.8% in the last quarter, the weakest growth in five years and far below the pace needed to generate jobs for the millions of young Indian's entering the labour market each month. And the unemployment rate rose to a multi-year-high of 6.1 per cent in the 2017-18 fiscal year.

New investments proposals in 2018-19 fell to Rs 9.5 trillion, the lowest investment proposals recorded in 14 years, according to Centre for Monitoring Indian Economy (CMIE), a Mumbai based think tank.

(Reuters)

More For You

Prudential to list Indian asset management venture

Prudential chief executive Anil Wadhwani

Prudential to list Indian asset management venture

INSURER Prudential plc announced that it is considering a partial listing of its stake in ICICI Prudential Asset Management, one of India's leading investment firms. The news sent Prudential's shares soaring by 5.8 per cent to close at 722p on the London Stock Exchange.

The FTSE 100 company currently holds a 49 per cent stake in the Indian joint venture, which market analysts estimate to be worth around £4 billion. ICICI Bank, which owns the remaining 51 per cent, has confirmed its intention to maintain its majority shareholding, emphasising its "long-term commitment" to the partnership that began in 1998, reported the Times.

Keep ReadingShow less
NatWest-Reuters

The bank has set a new performance target, aiming for a return on tangible equity of 15-16 per cent in 2025 and above 15 per cent by 2027. (Photo: Reuters)

What’s driving NatWest’s better-than-expected profit growth?

NATWEST reported higher-than-expected annual profit on Friday, supported by its growth strategy, improved productivity, and capital management efforts.

The bank, which once had assets worth 2.2 trillion pounds—more than twice the size of the British economy—has undergone years of restructuring to focus mainly on domestic consumer and mortgage lending.

Keep ReadingShow less
London business district
A general view shows the London's financial district from an office window in Canary Wharf. (Photo: Getty Images)

Economy grows 0.1 per cent in fourth quarter, defying expectations

THE UK economy expanded by 0.1 per cent in the final quarter of 2024, contrary to forecasts of a contraction, according to official data released on Thursday.

The growth, supported by a stronger-than-expected 0.4 per cent rise in December, offers some relief to chancellor Rachel Reeves as she navigates broader economic challenges.

Keep ReadingShow less
BP-Reuters

Fourth-quarter profit dropped 61 per cent compared to the previous year, marking BP’s weakest results since Q4 2020, when the pandemic reduced global oil demand. (Photo: Reuters)

BP reports lowest quarterly profit in four years, plans strategy reset

BP reported a quarterly profit of £943 million on Tuesday, falling short of expectations and marking its lowest in four years.

The company said it plans a "fundamental reset" of its strategy, days after reports that Elliott Management had taken a stake in the oil major.

Keep ReadingShow less
Shein-Reuters

Shein had aimed to go public in London in the first half of this year, subject to regulatory approvals in the UK and China. (Photo: Reuters)

Shein cuts valuation to £40 billion for London listing

SHEIN is preparing to lower its valuation to around £40 billion for a potential initial public offering (IPO) in London, according to three Reuters sources familiar with the matter.

This is nearly 25 per cent lower than the company's 2023 fundraising valuation as it faces increasing challenges.

Keep ReadingShow less