Warren Buffet led Berkshire Hathaway has decided to call it quits on its India online insurance distribution venture after just two years of being in the market along with BajajAllianz. Dilly dallying on the aspect of FDI in insurance by the government has finally seemed to have exasperated the Oracle. It is a known fact that Warren Buffet likes control of the businesses he runs. Foreign insurers are presently restricted to upto only 26% of equity of the Insurance JV’s in India.
Almost on cue, POSCO’s Rs 30000 Cr steel project in Karnataka and ArcelorMittal’s Rs 50000 Cr steel project have been withdrawn by the respective companies. The reason cited is inordinate delays in receiving clearances, hurdles land acquisitions etc.
Although, IKEA’s ~ Rs 10500 Cr proposal to set up their furniture stores along with cafeteria’s was approved, there isn’t anything else on this front after so much hype over the ‘big bang FDI reforms’ announced last September.
William Pesek of Bloomberg nicely sums up http://www.bloomberg.com/news/2013-07-22/why-buffett-bailed-on-india.html
All this is bad news for India at a time when it tries to desperately attract foreign capital, both FDI & FII. FDI flows (the more preferred of the foreign flows) in 2012 – 2013 fell 38% YoY to ~ $ 22 billion. This is crucial to plug the yawning gap in current account. The more the government dilly dallies the more bad press India going to receive on foreign investments front.