NEW DELHI: Finance Minister Nirmala Sitharaman, in her Budget 2025 speech, announced an increase in Foreign Direct Investment (FDI) limits for the insurance sector from 74% to 100%, but with restrictions. This move aims to attract more foreign capital while ensuring domestic investment in the sector.
Conditions for 100% FDI
The enhanced limit will be available only to insurance companies that invest the entire premium collected in India.Additionally, the existing regulations on foreign investment will be reviewed and simplified, Sitharaman said.
“The FDI limit for the insurance sector will be raised from 74% to 100%. This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified,” she stated.
Government’s push for insurance reform
The move follows the Centre’s November 2024 proposals for amending key insurance laws, including:
- Raising the FDI cap to 100%
- Allowing insurers to operate multiple insurance businesses under a single entity
The government had sought industry feedback on proposed amendments to the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority (IRDAI) Act, 1999.
‘Insurance for all’ by 2047
Insurance sector regulator IRDAI has set an ambitious target of ‘Insurance for All’ by 2047. A large portion of India’s population and insurable assets remain uncovered, leading to high out-of-pocket expenses and increased financial strain on public funds. The FDI reform is expected to bring in capital, expand coverage, and reduce financial vulnerabilities.
India’s growth targets
The Budget comes amid economic projections that India’s GDP will grow between 6.3% and 6.8% in FY 2025-26, as per the Economic Survey 2024-25. However, the survey notes that to achieve the Viksit Bharat vision, India needs sustained 8% growth over the next two decades.
With this announcement, Sitharaman has presented her eighth consecutive budget, further shaping the country’s financial and economic roadmap.