Jaitley speaks in the Rajya Sabha on Wednesday. (PTI)
New Delhi, July 23: Finance minister Arun Jaitley has decided to go ahead with raising the foreign direct investment ceiling in insurance from 26 to 49 per cent and is expected to get the Union cabinet’s formal endorsement when it meets tomorrow.
Once that is done, the NDA government will table the Insurance Laws (Amendment) Bill before Parliament next week and work to have it passed in the ongoing session, said a highly placed source in the ruling establishment.
The source claimed the NDA was “confident” of getting the support of the Congress and the big regional parties, the AIADMK and the Biju Janata Dal. The government does not expect to have the Trinamul Congress and the Left Front on board although for form’s sake, it will speak to their leaders before placing the bill in the House.
Asked if his party would back the bill, Anand Sharma, the Congress’s deputy leader in the Rajya Sabha, told The Telegraph: “Let them bring the bill to see if the bill is the same as what our cabinet had brought.”
When in 2012 the Manmohan Singh government had tried to implement the very same hike in FDI cap in insurance, the BJP had rejected it on the grounds of “safeguarding the interests of the people”.
The sense of urgency in the Narendra Modi-led dispensation now about unveiling big-ticket reforms is prompted by “economic and political pragmatism”, sources said.
“Enhancing FDI in insurance will bring cash inflows besides signalling to global investors that we are serious about economic reforms. This message must travel far and wide right away,” a government source stressed.
The perception that the Prime Minister and the BJP were “playing it safe by adopting consensus and continuity over change” had gained ground among sections of the business community and opinion-moulders after the railway and general budgets. The BJP’s spin doctors laboured hard to fight the notion that these budgets were not different from the UPA’s by plugging the line that a pro-business approach could co-exist with concern for the poor.
FDI in insurance has been subject to ping-pong battles since the NDA opened the sector to private stakeholders after enacting the Insurance Regulatory and Development Authority Act, 1999, in 2000. This Act allowed foreign shareholding with a 26 per cent cap.
In 2012, BJP's Yashwant Sinha, who headed the standing committee on finance, had rejected the UPA’s proposal to raise the cap to 49 per cent, stating in the panel's report that it may not have the “desired” effect and expose the economy to global vulnerability.
Privately, some BJP leaders had suspected that Sinha, who was finance minister for a large part of the previous NDA regime, was pandering to the RSS’s “pro-swadeshi” group.
“Sinha is off our back, the RSS and the Swadeshi Jagran Manch have been spoken to, so there should be no hassle from within (the Sangh),” a BJP source said.
The projected enhancement of FDI in insurance will also pave the way for 49 per cent FDI in pension because the standing committee that Sinha chaired had recommended FDI in the pension sector on the condition that it be linked to FDI in insurance and not be at variance with the provisions governing the insurance sector.
Accordingly, the UPA government had linked the two areas.