The government opened up insurance and pensions sector, clearing the Companies Bill, FCRA and Competition Acts.
The biggest moves to open up the economy since 2004 continued on Thursday with the UPA unleashing its second wave of reforms inside three weeks.
Taking full advantage of the exit of Trinamool Congress (TMC) and banking on the support of the main political rival BJP, the cabinet cleared 49% foreign direct investment (FDI) in the insurance sector, 26% in the pension sector, cleared the Companies Bill 2011, amended the Forward Contracts Regulation Act and the Competition Act.
The first wave was when on September 14, the government opened up FDI in multi-brand retail (ceiling 51%), single-brand retail (100%), broadcasting (74%) and aviation (49%).
“The main thing is getting parliamentary approval for this. The challenging part is actually starting now, because there is a lot of opposition to FDI (foreign direct investment) in insurance and pensions,” Sonal Varma, India economist with Nomura Securities told Reuters.
At present, foreign insurers can take a 26% stake in local joint ventures while the are barred from the pensions business.
All UPA allies except the Rashtriya Lok Dal (RLD) led by aviation minister Ajit Singh skipped the Cabinet meeting on Thursday, under one pretext or another.
The DMK, NCP and National Conference ministers had sought prior permission to skip the meeting, official sources told DNA, expressing confidence they would back the reforms in the parliament.
Most of these reforms have been hanging fire over the past one decade due to strong opposition from the Left parties, which lent the crutch to the Prime Minister Manmohan Singh-led government between 2004-08. Later in the new avatar, the UPA-II was hamstrung as ally TMC led by the mercurial Mamata Banerjee opposed all reforms tooth and nail.
Knowing that government was short in numbers to amass support for these reforms in the parliament, Union finance minister P Chidambaram sought support from the principal opposition party.
“I take note of the BJP president Nitin Gadkari’s statement that they are opposed to FDI in multi-brand, but not in other sectors,” he said. He also revealed that government has already reached out to the leaders of opposition in both houses, Sushma Swaraj and Arun Jaitley with the list of bills and amendments, seeking their support.
He reminded that government has approved most of the recommendations of the standing committee, led by BJP leader Yashwant Sinha, which scrutinised these laws. Only exception perhaps is raising the FDI cap in pensions from 26% to 49%.
The cabinet had earlier deferred even a diluted insurance bill to retain existing FDI cap and at that time then finance minister Pranab Mukherjee had remarked as to what is the hurry in pushing the bill when the cap is to remain at existing 26%.
There are 15 amendments cleared in the Insurance Laws (Amendment) Bill pending in the Rajya Sabha since 2008 while the standing committee’s recommendation to have one third of the pension fund managers from the public sector to safeguard the people’s savings has been just disapproved.
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