Budget Provisions

The finance minister proposes to further consolidate the gains in the strong growth foreign direct investment inflows (FDI) in order to make India a more attractive FDI destination. The Government will examine suggestions of further opening up of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders. The finance minister has announced 100% Foreign Direct Investment (FDI) for insurance intermediaries.

Pension Fund Regulatory and Development Authority (PFRDA) implements and regulates the National Pension System (NPS) and Atal Pension Yojana through various intermediaries including, inter-alia, the NPS Trust. Keeping in view the wider interest of the subscribers and to maintain arm's length relationship of the NPS Trust with PFRDA, steps will be taken to separate the NPS Trust from PFRDA with appropriate organizational structure.

To facilitate on-shoring of international insurance transactions and to enable opening of branches by foreign reinsurers in the International Financial Services Centre, it is proposed to reduce Net Owned Fund requirement from 5,000 crore to 1,000 crore.

It is proposed to provide that tax shall be withheld on taxable payout of life insurance companies on net basis at 5%, instead of 1% on gross as at present.

It is high time India not only gets integrated into global value chain of production of goods and services, but also become part of the global financial system to mobilise global savings, mostly institutionalized in pension, insurance and sovereign wealth funds. The Government is contemplating organizing an annual Global Investors Meet in India, using National Infrastructure Investment Fund (NIIF) as the anchor, to get all three sets of global players-top industrialists / corporate honchos, top pension / insurance / sovereign wealth funds and top digital technology / venture funds.

Stocks to watch

ICICI Prudential Life Insurance, SBI Life Insurance, ICICI Lombard General Insurance, HDFC Standard Life Insurance

Outlook

The Union Budget 2019-20 has increased FDI from existing 49% to 100% in insurance intermediaries, which will help to attract the global insurance distribution companies to expand their operation into India. The regulator and policymaker are also looking to enable innovation in the insurance distribution and the capital infusion in insurance intermediation, while the move may rejuvenate the insurance distribution and enable some of global expertise in this area. Increase in FDI in insurance intermediation will also keep the discussion warm on the increase percentage FDI in insurance companies also and there will be hope that the government increases the FDI in insurance companies.