📰Yet Another Step Forward for Global Investment| Daily India Briefing

India’s parliament made a landmark reform to allow foreign companies to fully own Indian insurance firms, aimed at drawing more long term foreign capital into the financial sector. Today, we discuss what this means for India’s economy.

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Macro

• India's power demand only rose 1 percent while GDP rose 8 percent because of off-grid supply and weather. A cooler summer and a rise in storage facilities led to less power production needed. India’s power demand growth has historically been 0.9x GDP growth (0.1x currently).  

• China's export of excess domestic capacity is adding to disinflation in India. 15 percent of imports come from China which could keep RBI policy rates lower for longer. 

• The RBI is boosting liquidity with $5 billion (₹450 billion) via currency swaps. The buy-sell operations injects rupees in the short term which work to offset its dollar sales to prop up the rupee as it continues to drop. 

• Manufacturing and services PMI surveys dropped this month.  The surveys measure business expectations which have dropped due to tariffs. Business activity has continued to rise in 2H25, but there has been softer growth in the past few months.

Equities

• PVR Inox has gained 2 percent this month and is poised for more due to blockbuster film releases. PVR is India’s largest cinema chain and normally has fat margins plus controls 50 percent of Hollywood releases in India. 

• Insider block deals and institutional placements slowed to $50 billion (₹4.5 trillion) from $68 billion (₹5.7 trillion) this year. The growth in IPOs has caused ECM activity to dip. 

• Domestic pharma activity has been climbing in high single digits from price hikes and product launches.Diabetes therapy and GLPs have been the largest drivers; the biggest beneficiaries of the trend are Sun Pharma, Abbott India, Alkem, and Mounjaro, with the last clocking sales of $11.1 million (₹1 billion) last month.  

Alts

• The debate between coal and natural gas continues. Although Modi wanted to use more LNG, it only factored in for 2 percent of the energy mix last year. India still has over a century's worth of coal reserves which continues to be the cheapest and easiest way to achieve enough power for India’s goals by 2047.

Policy

• The government says the Bondi gunman (one was Indian) had little contact with his home country after moving 27 years ago. Though he holds an Indian passport, he had only visited his home in Hyderabad 6 times in that time frame; the Telangana police added that his family had no idea when his radicalization may have occurred.  

• Another potential jobs policy change: increasing rural employment guarantees from 100 to 125 days. The move would also shift the financial burden of the 20-year old program from the federal to state governments. Critics fear there will be more migration from poorer states. 

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India Takes Major Step for Foreign Investment

India’s parliament made a landmark reform to allow foreign companies to fully own Indian insurance firms, aimed at drawing more long term foreign capital into the financial sector. The legislation removes the foreign ownership cap of 74 percent and now awaits the president’s signature to become law.

The move gives international insurers complete control over their Indian operations, offering greater flexibility to deploy capital and shape strategy in one of the world’s fastest growing major economies. Attracting this kind of patient overseas money is central to Modi’s ambition of turning India into a developed economy by 2047. As the population ages and the number of people over 60 is projected to exceed the number of children around the 2040s, a stronger insurance industry is seen as critical to financial security.

Global players such as Allianz, Axa and Nippon Life have operated in India for years through JVs. Full ownership is expected to encourage them to scale up investments, introduce new products and deepen their presence without relying on local partners. Industry executives say the reform will also improve governance standards and expand insurers’ capacity to underwrite larger and more complex risks.

The timing coincides with growth in foreign investment in Indian financial institutions. Wall Street firms are increasingly using Indian technology hubs to support global operations while Japanese banks are investing across the gamut for higher returns in India. Opening the insurance sector further fits into a broader effort to make India more attractive to international capital at a time when infrastructure spending and social needs are rising.

Insurance penetration in India remains low at about 3.7 percent of gross domestic product, far below levels seen in peers such as Japan, South Korea and Thailand. While the policy change may bring in new foreign entrants, achieving scale will depend on how well companies navigate India’s fragmented and highly competitive distribution networks, given that many people do not work in the formal private sector. In other developed nations such as the US, distribution and scale mostly arrives from that entry point. 

The government has said it will review and simplify existing rules governing foreign investment in insurance. New partnerships are already emerging, including ventures between Ambani’s Jio Financial Services and Allianz. Bank research analysts expect India to be the region’s fastest growing insurance market over the next decade, even as China remains the largest overall.

See you tomorrow.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

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