Editor's note: This article originally stated that Newark-based Prudential Financial had a joint partnership with ICICI Bank, when in fact London-based Prudential plc was the partner. This has been corrected. The Fool regrets the error.

Billionaire investor Warren Buffett is finally setting up shop in India -- a country where the billionaire investor is yet to make substantial investments. Berkshire India, a wholly owned subsidiary of Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), has received approval from India's insurance regulator to sell auto insurance products as a corporate agent of Bajaj Allianz General Insurance. And that's not all. Berkshire also has plans to enter the Indian reinsurance market.

The $214-billion company is in talks with a domestic general insurance company for a 26% stake. Indian rules allow only a 26% foreign direct investment (FDI) in the country's insurance sector, with a domestic company holding the majority 74% stake. In its budget proposals in February, the Indian government said it plans to increase the FDI ceiling in insurance to 49% from 26%. Buffett, eager to draw first blood as the industry opens up, clearly wants to have the first mover advantage. The reason is simple: At present, there is only one reinsurer in the domestic segment -- the government-owned General Insurance Corporation.

The opportunities
The Indian non-life insurance industry is currently estimated to be worth $6.2 billion. In levels of penetration, India ranks a lowly 136th in the world. This clearly shows the huge potential in the general insurance market. According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), general insurance premiums will rise to levels of close to $22.2 billion in the next five years. The future looks exciting.

The rural sector holds the biggest promise. India's agriculture is heavily dependent on the monsoons. Insurance companies would definitely want to make a foray in this area. They do have various schemes in place, and thanks to government initiatives, this sector is looking brighter than ever before.

Speaking about government initiatives, in the life insurance segment, companies are required to sell 7%, 9%, 12%, 14%, and 16% of their policies in rural areas in the first, second, third, fourth, and fifth financial years, respectively. These are areas waiting to be tapped. Therefore, it did not come as a surprise when Berkshire India announced that it would eventually branch out into other non-life insurance products.

No surprise
Players who have entered the Indian market through joint ventures are reaping the benefits already. London-based Prudential plc has a tie-up with ICICI Bank (NYSE: IBN), AIG (NYSE: AIG) is in a joint-venture with conglomerate Tata, ING (NYSE: ING) with Vyasa, and Aviva (NYSE: AV) with Dabur.

A booming economy is there for people to exploit as levels of awareness rise. In such an economy, insurance can never go out of business.

Again, it does not come as a surprise that Buffett chose to enter India using the investment vehicle. Fool Morgan Housel, in his fantastic analysis of Buffett's annual letter to shareholders, correctly points to the booming insurance business as one of the 10 most important points in that letter.

The Foolish bottom line
My intuition says that it won't end with insurance. In fact, this is a very modest way to enter India -- minus the fanfare. Buffett might be eyeing the retail market -- the industry which is slated to grow from $392.6 billion in 2011 to $674.4 billion by 2014. That sums it up; do I really need to explain more?

So, what's behind such a quiet entry into the second-fastest growing economy in the world? Chime in with your comments below. And watch this space for more developments.

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Isac Simon doesn't own shares of any of the companies mentioned in the article. Berkshire Hathaway is a Motley Fool Inside Value selection. Berkshire Hathaway is a Motley Fool Stock Advisor pick. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.