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News: The proposed buyout of general insurance company RahejaQBE by Paytm Insuretech was rejected by the insurance regulator, the Insurance Regulatory Development Authority of India (IRDAI).
In trying to insure India against injury, India shouldn’t push money away that could aid the rise of its economy.
Why the buyout has been rejected?
As per reports, the insurance regulator is not comfortable with the investment pattern offered by One97 communications, mainly because Chinese companies like Ant Financial and Alibaba are involved.
What are the issues with the IRDAI’s decision?
Paytm’s proposal does not flout FDI limits, and while concerns associated with the influence of the parental investors may be valid, the harm it might expose India to has not been spelt out.
What are the implications?
The rejection of the deal will hamper the investment plans of several domestic and multinational insurance companies like Swiss Re that are hoping to expand their presence in India’s fast-growing general insurance business.
What is the way forward?
The actuarial and other Indian data could be leaked from any insurer’s database. What calls for a strict vigil is how investor funds are applied, not their source.
With China set to add large sums to the globe’s capital stock, we need a proper cost-benefit analysis of the blockade we opted for in response to the border hostilities of 2020.
India needs to balance its need for security with the freedom of enterprise.
An approach that’s codified formally and calibrated closely by risk calculations is the need of the hour.
Source: This post is based on the article “A Chinese threat should not muddle Indian policy” published in Livemint on 4th Jan 2022.