Economic reforms get risk cover

The economic reform agenda has got a boost with Parliament passing the Insurance Laws (Amendment) Bill. The bill, which seeks to increase foreign direct investment (FDI) in the insurance sector, had earlier been passed by the Lok Sabha. The Rajya Sabha gave approval to the bill on Thursday. The passage of the bill marks the end of a six-year wait for a reform measure which has wide support, excepting from the Left and some small parties. The fact that it was stalled for so long shows the inability and refusal of parties to judge issues on their merit and to keep public and national interest in view while deciding on them. The UPA government had introduced the bill but the BJP which was in the opposition vehemently opposed it. But the party which criticised and blocked it then changed its stance when it came to power at the Centre. It was now the run of the Congress to dillydally, but the party has done well and helped in passing the bill.

The bill enables the raising of FDI cap on investment from 26 per cent to 49 per cent. It will help to put life into the insurance sector which badly needs funds in the form of long-term investment. India is insufficiently insured and there is the need to improve and extend insurance cover. Existing companies have to meet the capital adequacy norms laid down by the sector regulator to expand their network. It is estimated that about Rs 45,000 crore are needed in the next five years and a good part of it has to come through the FDI route. Expansion of insurance coverage will especially benefit those in rural areas who are badly underinsured. So it has an important social dimension also. The government has given importance to improving insurance and pension facilities in the Budget for next year. Once the bill becomes law, public sector insurance companies will also be able to raise funds from the capital market for their requirements.

The government had unwisely promulgated an ordinance to implement the bill which was stuck in the Rajya Sabha. Apart from the undesirability of legislation through ordinance, the government also ignored the fact that no foreign insurance company would make any investment on the basis of an ordinance which had to get parliamentary approval later. So what was the need for the hurry? There are other ordinances also which are facing various degrees of uncertainty now. In any case, the government will be relieved that one major policy reform measure has been accorded parliamentary approval.