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Interview of Stuart Purdy,
Managing Director,
Aviva Life Insurance Company
On Budget 2004-05
The Budget has raised the foreign direct investment
limit to 49%. What will be the implications and how beneficial
will it be to your company?
We welcome the increase in FDI limit. The Indian insurance
industry has a huge untapped potential. Insurance as a business
requires regular capital infusion. The raising of the equity
cap will not only bring more money but also help in expanding
the industry. Currently of the Rs 3,179 crore capitalisation
of private life insurance companies only Rs 827 crore is
FDI.
By making it 49% the figure would be Rs 1,558 crore. It
will also allow the foreign shareholders to demonstrate
an even higher level of commitment to India. Insurance has
a long gestation period to break even. It requires a long-term
commitment on the part of the players as well as a significant
investment.
With the increase in the equity limit, many more foreign
insurers would be interested in entering the market, resulting
in further expansion of the life insurance market along
with offering a wider choice of products and services to
the customer.
Has the Budget addressed the issues that the insurance
industry was looking forward to?
The FDI limit is a welcome move. However, the industry
was hoping to get the tax benefit on single premium restored
and the tax benefit on contributions to a pension scheme
U/S 80ccc increased from Rs.10000 to Rs. 30000-40000. We
are disappointed that it has not happened.
What more benefits has it brought for the insurance
sector?
For the Life Insurance industry, the only good news is the
increase in FDI limit.
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