HIGHER FDI IN INSURANCE TO BOOST ECONOMY:

Mumbai: Moody’s has said that raising foreign direct investment limit in insurance would be a positive for the Indian economy. However, the rating agency has expressed scepticism over the government’s ability to push through the entire gamut of reforms given the short tenure and uncertainty of the support from its new-found allies on economic reforms. According to Chetan Modi, head of Indian operations for Moody’s, the government has won the trust vote on the issue of the nuclear deal and it was not clear what the thinking of other political parties supporting the US were on economic reforms. He added that while the government had won the vote, it still had a natural life which comes to an end next year. He added that the concerns of all parties were likely to be on inflation, which could be the focus area for the government. However, even if the government were to push through one of the items on the reform agenda — raising foreign investment in insurance to 49% from 26% at present — it would have positive implications for the industry and the economy. “The general change would be seen as encouraging to foreign investors and would be encouraging to the Indian economic environment” said Mr Modi. On the outlook for India’s rating, Mr Modi said that Moody’s has currently given BAA3 investment rating on India’s forex exposure and BA2 rating on domestic debt, which reflects a ‘stable’ outlook. “We are constantly assessing the domestic situation and have already incorporated the coalition structure of Indian Government and the recent development in the political scene therefore doesn’t add any particular impact on our ratings,” he said. In another statement issued here, the rating agency said that a nuclear deal with the US following the trust vote could see India gain access to US civilian nuclear technology as well as end sanctions preventing purchases of American uranium. “The deal with the US has the potential to significantly boost India’s nuclear energy production, which currently provides around 3% of total electricity supply. By developed nation’s standards, India’s civilian nuclear energy sector is decades behind and a deal with the US could see a 10-fold increase in nuclear generator capacity by 2020 according to some experts”. But with the deal still having a long way to go before being formally signed by the nation’s leaders and more political wrangling is likely. This means that Indians will do doubt have to wait some time before they see the benefits of the agreement in the form of greater, and more secure, energy production, the rating agency said.

Source: The Economic Times, The Pioneer