New Delhi: India’s cabinet on Wednesday approved an executive decree to hike foreign investment in the funds-starved insurance sector, bypassing squabbling lawmakers to push ahead with economic reforms.
The ordinance, a rarely used measure, raises the foreign direct investment cap in insurance companies to 49 per cent from 26 per cent but must be approved by both houses of parliament within six months to take permanent effect.
“The ordinance demonstrates the firm determination of the government for reforms,” Finance Minister Arun Jaitley told reporters in New Delhi.
Foreign investors have been long eyeing the lucrative sector, which analysts say has huge potential thanks to a fast-expanding middle-class and the fact that only around four per cent of the 1.25-billion population has insurance cover, according to industry figures.
“Large investment is waiting to come,” Jaitley said, while government officials say they expect billions of dollars in foreign funds to flow into the sector in coming years.
The traditionally fractious parliament has been stalled by rows over alleged “forced” religious conversions of Christians and Muslims by Hindu hardliners, many of them close to the ruling Bharatiya Janata Party which took power in May.
The issue of religious conversions is particularly sensitive in the majority-Hindu country where religious freedom is a constitutional right.
The row also meant the right-wing government left much undone on its “to-do list” in the last session of parliament which wrapped up Tuesday.
The insurance decree, one of the government’s big-ticket reforms, “announces to the world and investors this country can no longer wait” for reforms, said Jaitley, who presents his first full budget next February.
The decree followed a vow by Jaitley last weekend not to allow parliamentary protests to block economic reforms, saying “either we reform or we miss the bus once again.”
Auction
The cabinet also cleared an ordinance renewing approval for the long-awaited auction of coal mining licences in India, which is heavily dependent on the resource for generating electricity.
The sale by auction is aimed at making transactions more transparent after previous allocations were dogged by illegalities.
The government, led by Prime Minister Narendra Modi, has been seeking to step up the pace of reforms to revive the stuttering economy after criticism from business it was not moving swiftly enough.
India has been stuck in the longest spell of below-five-percent growth in a quarter-century, hit by high interest rates, an investment slowdown and flagging consumer confidence.
Economic growth in the last financial year to March 2014 was 4.7 per cent after falling to 4.5 per cent the previous year, half the boom rates rate of a few years ago.
This year, the government hopes growth will accelerate to 5.5 per cent and cross six per cent next year.
