Govt non-committal on foreign insurance cos

Finance Minister Yashwant Sinha had in his budget speech yesterday said that the insurance sector would be opened up to private companies. He also said that IRA would be converted into a statutory body. Necessary legislation for this would be introduced later in the year.

Elaborating on the implication of the decision, he said as of now, both life insurance and general insurance were being thrown open to the private sector in the country. Meanwhile, insurance industryexperts felt that there could be scope for foreign companies to enter as Indian companies could, under normal laws, have minority shareholding by foreign partners.

If foreign companies can enter into joint ventures with Indian companies in other sectors particularly the infrastructure sector, why not in the financial services sector also, a representative of a leading multinational insurance company asked.

Meanwhile, Ahluwalia said the Finance Ministry expects a turnaround in economy with the GDP growth rate going up to 6.5 per cent from 5 per cent in the previous year on account of various steps initiated in the 1998 budget.

Ahluwalia and his colleagues in the North Block, felt that the inflation rate was likely to range between 6.5 per cent to 7 per cent. He also defended the decision of the government to impose 8 per cent countervailing import duty by stating that it was neither protectionist nor in contravention to the World Trade Organisation (WTO) commitments. With regard to the issue of economicsanctions, he said, the government had yet to receive details of the sanctions from the US but added that it would not affect flow of private capital into the country. Also, he pointed out that the US would not be able to block multilateral aid like that of World Bank to India.

On the value of rupee, the finance ministry officials maintained that it would be market determined and added that the RBI would continue to ensure orderly market conditions.

Referring to 8 per cent countervailing duty, revenue secretary N K Singh clarified that it would effect only one-third of the imports and was within the parameters laid down in Clause 2 of the GATT which allowed the member countries to impose such duties for mitigating the impact of sales tax and other local levies. The average collection rate, Singh agreed would marginally go up to 27 per cent from 26.56 per cent in the previous year.

Singh also expressed confidence that department of revenue would be able to meet the revenue collection targets in view ofthe various measures announced in the budget.