ndian Prime Minister Manmohan Singh
is seeking to build on the biggest opening of the country’s
economy in a decade with the cabinet today scheduled to consider
proposals to lift caps on foreign investment in insurance and
pension industries.
Ministers will consider allowing overseas companies to own as much as 49 percent of local insurance ventures, from the current 26 percent, and for the first time permit foreign direct investment of as much as 26 percent in pension funds, according to two government officials with direct knowledge of the matter, who asked not to be identified, citing rules. The plans would need parliamentary approval to become law, which may prove difficult for a minority government.
After two years of policy paralysis, the Congress party-led government burst into life last month with decisions to throw open retail and aviation sectors, and its energy markets, to foreign investment and cut fuel subsidies. While the moves, which didn’t need the support of lawmakers, splintered Singh’s biggest ally from the ruling coalition, the prime minister defended his actions saying only strong economic growth would pay for programs to aid millions of poor people.
“It’s amazing how quickly expectations of the government have changed,” said Alex Mathews, research head at Geojit BNP Paribas Financial Services Ltd. (GBNP) in the southern city of Kochi. “The government looks set to continue with bold reforms.”
Singh’s administration has rejected a recommendation by a parliamentary panel, which in December said a further increase in foreign direct investment may not be in the interest of the country’s insurance industry, according to the people, who spoke yesterday.
In the past, the government has been rebuffed in its attempts to pass these rule changes due to opposition from political parties, including communists, ideologically opposed to private companies investing in pension funds or insurance companies, many of them state run.
Since the exit of Mamata Banerjee’s Trinamool Congress from his ruling coalition, Singh has to rely on smaller regional parties outside his alliance to get measures passed in parliament because the government is in a minority in both chambers of the legislature. He’s seeking to bolster an economy growing at near its slowest pace in three years and stem his party’s declining popularity following a series of corruption allegations and defeats in provincial elections.
The cabinet may also consider proposals that will overhaul the way India distributes subsidized food to the poor as the government attempts to curb rampant theft that denies nourishment to many of 350 million people living on less than 50 cents a day.
Ministers will discuss plans to fully computerize the five- decade-old Public Distribution System, the world’s largest effort to provide affordable meals, Food Minister K.V. Thomas told reporters yesterday without giving further details.
Coming amid the slew of policies to open a slowing economy to foreign investment, the move would deliver on a promise by Singh to balance bolstering growth with assistance for the nation’s poorest.
In a prime-time address to the nation Sept. 21, Singh said his government would do more to spread the benefits of economic expansion in the 18 month leading up to the next election.
His speech followed criticism from opposition parties and allies that the decisions to raise diesel prices and open the economy to foreign supermarket chains would erode farmers’ incomes and put the jobs of millions of small shopkeepers at risk.
To contact the reporter on this story: Abhijit Roy Chowdhury in New Delhi at achowdhury11@bloomberg.net
To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net
Ministers will consider allowing overseas companies to own as much as 49 percent of local insurance ventures, from the current 26 percent, and for the first time permit foreign direct investment of as much as 26 percent in pension funds, according to two government officials with direct knowledge of the matter, who asked not to be identified, citing rules. The plans would need parliamentary approval to become law, which may prove difficult for a minority government.
After two years of policy paralysis, the Congress party-led government burst into life last month with decisions to throw open retail and aviation sectors, and its energy markets, to foreign investment and cut fuel subsidies. While the moves, which didn’t need the support of lawmakers, splintered Singh’s biggest ally from the ruling coalition, the prime minister defended his actions saying only strong economic growth would pay for programs to aid millions of poor people.
“It’s amazing how quickly expectations of the government have changed,” said Alex Mathews, research head at Geojit BNP Paribas Financial Services Ltd. (GBNP) in the southern city of Kochi. “The government looks set to continue with bold reforms.”
Singh’s administration has rejected a recommendation by a parliamentary panel, which in December said a further increase in foreign direct investment may not be in the interest of the country’s insurance industry, according to the people, who spoke yesterday.
Insurers Gain
Indian insurance companies gained yesterday on speculation the legislation raising overseas investment will be passed by ministers, Mathews said. Max India Ltd. (MAX) rose 6.1 percent and Bajaj Finserv Ltd. (BJFIN) climbed 3.5 percent, outpacing the BSE India Sensitive Index (SENSEX), or Sensex, which closed up 0.24 percent.In the past, the government has been rebuffed in its attempts to pass these rule changes due to opposition from political parties, including communists, ideologically opposed to private companies investing in pension funds or insurance companies, many of them state run.
Since the exit of Mamata Banerjee’s Trinamool Congress from his ruling coalition, Singh has to rely on smaller regional parties outside his alliance to get measures passed in parliament because the government is in a minority in both chambers of the legislature. He’s seeking to bolster an economy growing at near its slowest pace in three years and stem his party’s declining popularity following a series of corruption allegations and defeats in provincial elections.
Aviva, ING
Aviva Plc (AV/), Allianz SE (ALV) and ING Groep NV (INGA) are among global insurers that will be able to further invest in their Indian ventures if the cap is raised.The cabinet may also consider proposals that will overhaul the way India distributes subsidized food to the poor as the government attempts to curb rampant theft that denies nourishment to many of 350 million people living on less than 50 cents a day.
Ministers will discuss plans to fully computerize the five- decade-old Public Distribution System, the world’s largest effort to provide affordable meals, Food Minister K.V. Thomas told reporters yesterday without giving further details.
Coming amid the slew of policies to open a slowing economy to foreign investment, the move would deliver on a promise by Singh to balance bolstering growth with assistance for the nation’s poorest.
In a prime-time address to the nation Sept. 21, Singh said his government would do more to spread the benefits of economic expansion in the 18 month leading up to the next election.
His speech followed criticism from opposition parties and allies that the decisions to raise diesel prices and open the economy to foreign supermarket chains would erode farmers’ incomes and put the jobs of millions of small shopkeepers at risk.
To contact the reporter on this story: Abhijit Roy Chowdhury in New Delhi at achowdhury11@bloomberg.net
To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net
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