August 01, 2014

Why Trinamool opposes FDI in insurance

... And for the Congress, it is time to stand up and be counted.

In opposing the Insurance Bill in Parliament, the Trinamool Congress is not being difficult, it is being consistent. We have been clear about the dangers and risks of FDI in insurance and pensions – the two sectors go together – for ever since I can remember. Our manifesto and political platform was categorical on this when we lost elections – 2004 or 2006 – as well as when we won elections: 2009, 2011, 2014.

Why do we oppose FDI in insurance? Insurance and pensions are crucial for the well-being of middle-class families. Such modes of savings are the ultimate nest egg for ordinary people. Ideally, the funds for these should be invested in mechanisms that have sovereign guarantees – government bonds, municipal bonds, fixed deposits and the like.

International insurance companies prefer investing in the stock market and in mutual funds, and in a sense gambling. When things go right, such a process can lead to windfall gains – and fat bonuses for the executives of the international insurance companies. When things go wrong, families and hard-working individuals will see their money crumble.

The financial collapse in the United States and the West in 2008 is a warning for us. An entire generation of Americans will have to postpone retirement and keep working till well into their seventies to repay their debts and pay for the recklessness of financial-services buccaneers. Do we want this scare scenario repeated in India? That is why Trinamool blocked the opening of insurance to foreign players even when our party was part of the UPA II government.

The BJP government says the move to push up FDI in insurance companies from 26 to 49 per cent is a simple one and entails no changes other than raising the cap in foreign holding. This is not quite true. Trinamool’s concern is about two clauses that seem to be new in this Bill.

One, it includes FII – or portfolio investment, hot money, which enters and exits the country at will, and without a long-term stake – in the 49 per cent. Two, it sets the stage for disinvestment and loosening of government holding in public-sector general insurance companies. These companies are the mainstay of the savings plans of middle-class Indians. Why are we determined to jeopardise all this?

Trinamool and the Left Front are diametrically opposed to each other in most spheres. Admittedly, on this narrow score – the matter of FDI in insurance and the two principal grievances we have – the two political groups have similar apprehensions. So do many in the BJP, though they are afraid to say it openly. As for the Congress, it is time for it to stand up and be counted.

Derek O’Brien
Member of Parliament
Chief Whip in the Rajya Sabha and National Spokesperson, Trinamool Congress