New Delhi: The central government will revamp the existing model of Bilateral Investment Treaties (BIT) to make it more investor-friendly, Union Finance Minsiter Nirmala Sitharaman announced during her Budget 2025-26 speech in Parliament on Saturday.
She said that as proposed in the Interim Budget, India signed Bilateral Investment Treaties (BIT) with two countries in 2024. "To encourage sustained foreign investment and in the spirit of ‘first develop India’, the current model BIT will be revamped and made more investor-friendly," the FM said.
She also proposed to increase the foreign investment limit to 100 per cent in the insurance sector as part of new-generation financial sector reforms. The FM said the FDI limit for the insurance sector will be raised from 74 to 100 per cent.
"This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified," she said.
To enhance the FDI limit, the government will have to bring amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999. Speaking to the media after the Budget presentation, she said the draft Bill is also going to simplify certain procedures and rules.
The draft Bill will be tabled in Parliament soon, she added. The Insurance Act 1938 serves as the principal Act to provide the legislative framework for insurance in India.
It provides the framework for the functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, shareholders and the regulator -- Insurance Regulatory and Development Authority of India (Irdai). The entry of more players in the sector would not only push penetration but result in greater job creation across the country.
Currently, there are 25 life insurance companies and 34 non-life or general insurance firms in India. These include companies like Agriculture Insurance Company of India Ltd and ECGC Ltd. The FDI limit in the insurance sector was last raised -- from 49 per cent to 74 per cent -- in 2021. It was in 2015 when the government hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent. The government earlier allowed 100 per cent foreign direct investment in insurance intermediaries.
'Ease of doing business'
Sitharaman said that in the last ten years, the Government demonstrated a "steadfast commitment" to 'Ease of Doing Business' and it was determined to ensure that the existing regulations must keep up with technological innovations and global policy developments.
"A light-touch regulatory framework based on principles and trust will unleash productivity and employment. Through this framework, we will update regulations that were made under old laws," she said.
The FM proposed four specific measures "to develop this modern, flexible, people-friendly, and trust-based regulatory framework appropriate for the 21st century".
They include:
- High-Level Committee for Regulatory Reforms: In her Budget speech, the Union Finance Minister said that a High-Level Committee for Regulatory Reforms will be set up for a review of all non-financial sector regulations, certifications, licenses, and permissions. The committee will be expected make recommendations within a year. The objective, she said, is to strengthen trust-based economic governance and take transformational measures to enhance ‘ease of doing business’, especially in matters of inspections and compliances.
- Investment Friendliness Index of States: The FM said an Investment Friendliness Index of States will be launched in 2025 to further the spirit of competitive cooperative federalism.
- FSDC Mechanism: Under the Financial Stability and Development Council, a mechanism will be set up to evaluate the impact of the current financial regulations and subsidiary instructions, she said. It will also formulate a framework to enhance their responsiveness and development of the financial sector, the Finance Minister said in her speech.
- Jan Vishwas Bill 2.0: "In the Jan Vishwas Act 2023, more than 180 legal provisions were decriminalized. Our Government will now bring up the Jan Vishwas Bill 2.0 to decriminalize more than 100 provisions in various laws," the FM said.
