New Delhi,Feb 01:
In a major development,Finance minister Nirmala Sitharaman, in her Budget 2021-22, has announced hiking the FDI(foreign direct investment) limit in the Insurance sector from the current 49 per cent to 74 per cent with the management control of the company to be excercised by the majority shareholders..
“The government will amend the Insurance Act, 1938 to allow 74 per cent of FDI in the insurance sector,’’ said Sitharaman while presenting the Budget 2021-22 on Monday.
Outlining some of the features of a company with the proposed FDI of 74 per cent, Sitharaman said in such an insurance company, 50 per cent of the board will be consisting of independent directors, and all key person in the company will be Indians..
Sitharaman also announced government's intention to privitise one of the state owned general insurance companies along with two PSU bank and listing of the Life Insurance Corporation(LIC).
She hasn't named which of the state owned general insurance company will be privatised and in what ways.
“We will amend LIC Act, 1956 to facilitate the listing of LIC this year,'' said Sitharaman.
Explaing further Ajay Bhusan Pandey, finance secretary, Ministry of Finance, has said the government is yet to decide the names of two banks and insurance companies which will be privatised.
“Privitisation of a public sector banks or an insurance company depends upon a lot of processes which will begin now. We will examine which of the PSU banks and insurnace comoany is ready or to made ready. It will be a time consuming process. We will announce names once we identify these companies'' he said.
However, the government's target of Rs 1.75,trillion out of the disinvestment of PSU companies is realistic and will be met. Whether it would include the resources raised by privitising two PSU banks and one general insurance is yet be seen,'' explained Pandey.
Unveiling an annual budget aimed at reviving an economy that plunged into deepest recorded slump amid the coronavirus pandemic, Sitharaman proposed doubling healthcare spending to Rs 2.2 trillion ($30.20 billion).
The government will launch a new federal health scheme with an outlay of around Rs 641 billion ($8.80 billion) over the next six years, she told parliament kicking off her budget speech.
Sitharaman also provided Rs 35,000 crore towards COVID-19 vaccination in 2021-22 fiscal.
"I have provided Rs 35,000 crore for Covid-19 vaccine in this year 2021-22. I'm committed to provide further funds if required. The Budget outlay for health and well being is Rs 2.23 lakh crore in 2021-22 as against BE of Rs 94,452 crore and marks an increase of 137 per cent," she said while presenting 2021-22 Budget in the Lok Sabha.
India, which has the world’s second highest coronavirus caseload after the United States, and currently spends about 1 per cent of gross domestic product on health, among the lowest for any major economy.
“The investment on health infrastructure in this budget has increased substantially,” said Sitharaman as lawmakers thumped their desks in appproval.
The world’s second-most populous country has begun a huge vaccination drive and a steep fall in new coronavirus cases over the past few months is supporting an economic recovery.
“There are signs that the political, economic and strategic relations in the post COVID era are changing and … India is well well-poised to be the land of promise and hope.”
Sitharaman, announced that in case a bank fails or withdrawals from the bank are stopped due to financial pressure on the bank, the depositors will be able to get immediate access to their deposits upto the deposit insurance amount of Rs 5 lakh, i.e., the amount to which deposits are insured under the 'The Deposit Insurance and Credit Guarantee Corporation Act, 1961' (DICGC Act).
This will greatly help depositors in meeting immediate financial needs.The FM said in her budget speech that she will bring in an amendment to allow this in the current budget session.
The economy is projected to contract 7.7 per cent in the current fiscal year ending in March but then gather steam in 2021/2022 to hit 11 per cent, which would make it the world’s fastest growing major economy ahead of China’s estimated 8.1 per cent pace.
Still, it would take the economy two years to reach pre-pandemic levels, the government said.
India’s blue-chip NSE Nifty 50 and S&P BSE Sensex indexes extended gains to around 1.4 per cent each as Sitharaman laid out her proposals. The Indian rupee was marginally stronger at 72.86 against the dollar, while the 10-year bond yield slipped to 5.89 per cent.
Rs 20,000 crore Development Finance Institution to be set up
The government will set up a Rs 20,000 crore with a view to mobilise Rs 111 lakh crore required for funding of the ambitious national infrastructure pipeline.
The government proposes Rs 20,000 crore to capitalise this institution and aims to have lending portfolio of at least Rs 5 lakh crore in three years, she said.
In her Budget 2019-20 speech, Finance Minister Sitharaman had proposed a study for setting up DFIs for promoting infrastructure funding. About 7,000 projects have been identified under the National Infrastructure Pipeline (NIP) with projected investment of a whopping Rs 111 lakh crore during 2020-25.