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|January 23, 1999||
The Rediff Business Interview/ S Gurumurthy
'Opening insurance will start the disaster for India. What happened to Russia will happen to us'
S Gurumurthy, convener of the Swadeshi Jagran Manch, was a very angry man when Shobha Warrier met him for an interview at his Madras office. Angry because "the English press is hell bent on selling off India'' by supporting the opening up of the insurance sector ''without any rhyme or reason''. A revealing conversation on the eve of the SJM's Swadeshi Mela in Delhi next week.
Why are you against the opening up of the insurance sector?
I am not against opening up of the insurance sector. I am certainly against foreign investment in the insurance sector.
Because there is no need for it. Nobody has even claimed that there is any need for it, either from the point of view of the quantum of investment or from the point of view of any technology involved. Yes, except that the foreigners want a free play in the financial sector in India in which insurance occupies a very important place. Who has given a cogent reason, even a single reason as to why foreign investment is needed in the insurance sector?
The economists say we cannot be choosy about investments and that if we need investments in other sectors, we have to open up the insurance sector also.
To attract FDI in some other sector, why do you want to open up the insurance sector? This is what pressure is. Even the promise of investment in other sectors is no commitment. Whatever happened so far is precisely by these means. You do this and we will do that. Who can ask them to perform? Even if there are 20 foreign insurance companies, foreign investment cannot be more than 200 to 300 million dollars, which is nothing.
Then, why are you against foreign investment?
Because it will control thousands of millions of Indian money. And the insurance sector operates only on insurance premium. It does not operate on capital, it does not operate on investments. In fact it operates on chance. When you are going on the road, you may die. So, you are insuring. Your car may get smashed in an accident, so, you are insuring. Insurance business is mostly local in terms of ideas, in terms of participants, in terms of market, etc. Now somebody should tell me the reason. But nobody tells the reason behind foreigners entering the insurance market. The entire English press is going all out to sell India and not one word from them too.
Will it be harmful to the country if foreigners too participate in the insurance sector?
When you hand over huge long-term funds to the foreigners, it is harmful. The foreigners want this sector because they can control huge amounts of money. If they can control some 500 to 600 billion of rupees on long term, they can control the country. The Indian companies also can do business here. If they cannot do, I can understand the presence of foreign companies.
The government says that foreigners won't be allowed to take money out of the country.
This is not relevant. In fact this will be decided multilaterally when the TRIMS regime is negotiated. For the present, they get tremendous amount of economic power. For what? Why should we give such economic power to the foreigners? The collapse of the entire southeast Asian economy was because they opened the financial sector. Only because we had not opened the financial sector, we survived.
The southeast Asian countries allowed their money to go out of their countries. Here in India, it will not be allowed, they say.
It is only a matter of time. TRIMS (trade-related rights) will eventually come. When you allow foreigners to control 70 per cent of India's economy, you can't prevent them from taking the money out. The lobby will be very powerful that you will one day or the other succumb to them.
Won't the competition be beneficial to the customers?
Let 10 Indian companies compete. Are there not banks competing with each other in India? Are there not soap manufacturing companies competing with each other in India? Are there not computer white goods units, garment manufacturers and many such things competing with each other in India?
What according to you will happen to the Indian economy if the insurance sector is opened to foreigners?
It will start the disaster for India. What happened to Russia, what happened to southeast Asian countries will happen to India. I challenge anyone to have a debate with me on why the insurance sector should be opened.
How are you going to prevent the government from doing this?
We will arouse people. Insurance is not the absolute thing. It is only symbolic. We will tell people the consequences on the economy once such a thing happens. We opposed Enron but the government went ahead. Now you see the Maharashtra Electricity Board is becoming insolvent. The newspapers now say those who opposed Enron then are proving to be right.
In the automobile industry, competition...
Competition will come from within India also. Why do you say it will come only from outside? In Japan there was no foreign automobile competition. But they are one of the most efficient auto-makers through local competition. In fact, for the Japanese automobile success, protection is considered as the chief reason. In India, earlier we had only Maruti in the small car segment and the prices were extremely high. With the entry of new players in the field, they have slashed prices. Is the competition not advantageous to the customers?
It is not because of foreign companies entering the market that they slashed the price. It is because of the entry of an Indian company. Why does Telco undersell others? It is because they have their own technology.
Their cost of project is about 30 per cent of the cost of similar projects of foreigners. This was what happened to the light vehicle sector. In the light commercial vehicle segment, Telco finished all foreign competition because it had local technology. If foreign companies have been allowed to set up car factories in India earlier, Telco would not have developed a car. Now newspapers say that Indica is an example of how swadeshi works in India. But for the protection given, Telco would not have dared to go into the car venture.
This is precisely what Japan did. Do you know what is a free market? Anybody can come and then Telco would not have been there.
In the case of insurance, the government says foreigners cannot have more than 26 per cent stake.
What 26 per cent? Let us assume that a company drops 50 per cent of its equity to the public, then 26 per cent is with a private party and he becomes the chief promoter of the company. Why 26 per cent? And why not 20 per cent?
So, you feel that investors' money will not be protected.
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