Budget 2025: Insurance sector’s FDI limit increased to 100%

In her Budget speech on Saturday, Finance Minister Nirmala Sitharaman announced a major change for the insurance sector, raising the Foreign Direct Investment (FDI) limit from 74% to 100%, albeit with specific conditions.

"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 stated.

#WATCH | #UnionBudget2025 | Union Finance Minister Nirmala Sitharaman says, "The FDI limit for the Insurance Sector will be raised from 74 to 100 percent. This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails… pic.twitter.com/UOYI0DNesf

— ANI (@ANI) February 1, 2025

This move follows the central government’s proposals made in November to lift the FDI cap in Indian insurance companies, alongside enabling insurers to engage in multiple types of insurance business and activities.

The government had previously invited comments on the proposed amendments to key legislations, including the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority (IRDA) Act, 1999.

The Insurance Regulatory and Development Authority (IRDAI) has committed to achieving "Insurance for All" by 2047. As of now, a significant number of India's citizens and insurable assets remain uninsured, placing a substantial burden on public finances and increasing risks of high out-of-pocket expenses.

The increase in FDI is expected to help address this issue and support the long-term goal of expanding insurance coverage.

The budget session of Parliament, which started on January 31, will run until April 4. Finance Minister Sitharaman’s speech laid out the government’s fiscal policies, revenue and expenditure plans, taxation reforms, and other important announcements. This marks her eighth budget presentation.

According to the Economic Survey 2024-25, India’s economy is projected to grow between 6.3% and 6.8% in the next fiscal year (2025-26). However, the survey also emphasized the need for sustained growth of around 8% over the next decade or two to realize the country’s "Viksit Bharat" vision.