The guidelines laid down by the CPM open, rather than close, doors to FDI in India. The conditions laid down for FDI by the CPM are that, one, such capital should augment the existing productive capacities in our economy; two, such foreign capital must upgrade the economy technologically; and three, such capital must lead to employment generation. The interests of industry are very well-aligned with these goals. As in the case of support for Press Note 18, Indian industry’s new-found friends among the communists want FDI to the extent that it does not conflict with the interests of the national bourgeoisie. Not surprisingly, even when the CPM was not batting for industry, India’s FDI policy was not very different.Today, restrictions on FDI exist only in a few sectors. Insurance has an FDI limit of 26 per cent. The sector has witnessed significant growth after it was liberalised. Between ’00 and ’05, the number of insurers has gone up from 5 to 14 insurers; the premium underwritten by the industry has nearly doubled from Rs 45,000 crore to over Rs 83,000 crore. New products have been launched and tailor-made for different sectors. Competition has reduced premium costs for customers and the number of people insured has risen from 19.6 in ’01 to 28.6 million in ’04. LIC has increased its business in this competitive environment. A large number of people have found employment as agents and employees of these companies. However, further growth in the industry is becoming constrained by the lack of equity capital, as companies are unable to inject fresh funds due to the requirement that 74 per cent of the additional capital should be domestic. There is, therefore, a case for increasing FDI levels in insurance to 49 per cent.Until now, the raising of FDI caps in insurance was being opposed by the Left. But now that the CPM is clear on its FDI policy, and that FDI in insurance does not contradict the conditions laid down, surely it is obvious that it must no longer oppose FDI in the insurance sector. Injection of equity capital to 49 per cent will not mean the take over of the Indian company and it will make it possible for the sector to expand its productivity and employment generation.
