M A I N   N E W S

UPA rolls reform ball again
* Cabinet clears 49% FDI in insurance, 26% in pension
* Sensex breaches 19,000
Tribune News Service

New Delhi, October 4
In less than a month, the turbo-charged Manmohan Singh government has announced the second booster dose of big ticket economic reforms by liberalising foreign investment in the insurance and pension sectors.

The Cabinet today cleared the proposals to amend the legislations to hike foreign equity in the insurance sector from 26 per cent to 49 per cent and introduce foreign investment in pension up to 26 per cent.

The approval of these legislations is subject to Parliamentary approval as they will have to be cleared in both Houses of Parliament. Given the political opposition, it may not be an easy task but the government is pushing ahead as Finance Minister P Chidambaram said the government will reach out to all political parties to get the insurance and pension Bills passed.

By taking these bold decisions, the government is giving a signal that it means business and there is no policy paralysis. The plan is to boost the confidence of foreign investors and also show resolve to the investor community that it can take brave decisions.

The strategy seems to be working as the stock markets today were at a 17-month high having crossed the 19,000 mark. As a result of the government actions, foreign funds are flowing into the stock market and the rupee has strengthened which will bring down the import Bill.

The move to liberalise insurance has been in the works for many years under successive governments. The Vajpayee government had considered a proposal to increase the cap to 49 per cent but was stalled for various reasons.

Then again in UPA-I, the proposal could not go through because of the opposition from the Left which was supporting the government. The increase in cap to 49 per cent will bring in a lot of investment from MNCs given the potential of the insurance sector and improve penetration.

“The benefit of this amendment will go to the private sector insurance companies which require huge amount of capital and that capital will be facilitated with increase in FDI to 49 per cent,” Finance Minister P Chidambaram told reporters. The Minister also clarified that state-run insurance companies will remain in the public sector.

With the Cabinet approving the proposal, the Insurance Laws (Amendment) Bill is likely to be taken up by Parliament for passage in the forthcoming winter session. The government also allowed foreign investment in pension funds and said the FDI limit could go up 49 per cent in line with cap in the insurance sector. Allowing foreign direct investment forms a part of the amendments to Pension Fund Regulatory and Development Authority (PFRDA) Bill, which was approved by the Union Cabinet.

The commodity markets also got a boost with the government approving the FCRA Bill that seeks to boost the futures trade and more powers to sectoral regulator Forward Markets Commission (FMC). The Cabinet also approved changes to the Competition Act and Companies Bill.

The 12th Five Year Plan document was also approved which will now be placed before the National Development Council. Five airports in Lucknow, Varanasi, Tiruchirapalli, Mangalore and Coimbatore have been declared as international airports.

Balancing the reforms with its social agenda, the government okayed doubling the hospital care and patient care allowance of Central government employees and introducing a programme to strengthen nutrition improvement. Supply of imported pulses at susbidised rates under PDS to Below Poverty Line card users was also approved.

Keeping up the momentum