Karnataka - Bangalore

Unions come out against hike in FDI in insurance

Bangalore: Unions in the insurance industry held a convention in Bangalore on Saturday opposing the Union Government’s move to increase foreign direct investment (FDI) in the insurance business.

The convention, organised the Insurance Corporation Employees’ Union, which is affiliated to the All-India Insurance Employees’ Association (AIIEA), was inaugurated by the former Communist Party of India (M) MP Nilotpal Basu.

Mr. Basu said the sector “has been on the sights of the United Progressive Alliance (UPA) Government since its first budget in 2004.”

The Government’s attempt to increase FDI in the sector from 26 to 49 per cent suggested that the Government “is unruffled by the ongoing global financial crisis.”

The Union Government’s claim that “it knew everything” and had “provided for a fiscal stimulus in its last budget is far from true,” said Mr. Basu.

Even liberal thinkers, he said, had observed that “the impact of the crisis is beyond imagination.”

“The crisis is a paradigm failure,” the former MP remarked.

Mr. Basu said speculative excesses had taken hold of the global economy to the point where they held sway over the real economy.

For instance, while global gross domestic product (GDP) was about $51 trillion in 2007, the turnover in international financial markets was to the tune of $100 trillion.

He pointed out that the trading volumes of derivatives amounted to over $1,000 trillion, implying that “the shadow economy of derivatives trade dominated the global economy.

“A crisis is bound to occur if the shadow devours the real economy,” he remarked.

Mr. Basu pointed out that foreign investors could not perform the role of servicing the insurance needs of ordinary Indians.

“Those who remain uninsured can never hope to be serviced by private companies,” he remarked.

The track record of the public sector insurance companies showed that they had “developed linkages with people and their livelihoods over the years,” he added. “The Life Insurance Corporation of India and the General Insurance Corporation alone can invest what the private companies claim they can bring in,” he added.

“It is odd that the Government’s move is coming at a time when there is growing realisation all over the world that there is need for greater government regulation, intervention and control of the financial services industry,” Mr. Basu said.

G.D. Nadaf, general secretary of the All-India Bank Officers’ Confederation and Amanulla Khan, president, AIIEA, addressed the convention.

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