* Bills would allow foreign ownership up to 49 pct
* Trinamool leader angry, threatens no-confidence vote
* Separate bill would improve accountability to shareholders
(Adds pension limit, finance minister comments, opposition
By Manoj Kumar and Frank Jack Daniel
NEW DELHI, Oct 4 India's cabinet approved bills
on Thursday to attract foreign investment into insurance and
pensions among a package of new measures to restore confidence
in the economy, although the reforms will face a tough fight in
The steps followed big-ticket policies unveiled last month,
including hiking diesel prices and inviting in foreign
supermarkets, aimed at fending off a cash crunch and reviving
growth, which has slowed to a nearly three-year low.
Those reforms helped India's markets rally in recent weeks.
The latest moves have added to the positive sentiment and could
boost interest in a forthcoming sale of shares in state-owned
companies, but they are still far from becoming law.
"The main thing is getting parliamentary approval for this.
The challenging part is actually starting now, because there is
a lot of opposition to FDI (foreign direct investment) in
insurance and pensions," said Sonal Varma, India economist with
The bills would allow up to 49 percent foreign ownership of
insurance companies and in the pension sector, Finance Minister
P. Chidambaram told reporters. Currently, foreign investors are
barred from buying into pensions, and the cap for insurers is at
"The insurance regulator has categorically stated that
insurance requires huge capital. It will only come if we can
raise the FDI limit," Chidambaram said.
Most of India's 24 insurance companies have lost money in
the past decade, hit by restrictions on foreign holding and by
Anticipation of the outcome of the cabinet meeting earlier
triggered gains in financial stocks such as State Bank of India
and ICICI Bank, driving India's main BSE index to a
15-month high, while the NSE index hit 17-month highs.
Prime Minister Manmohan Singh faces a tough fight to win
parliament's approval for more foreign investment in the
economy, especially with two state elections looming and after
an outcry over the decision to allow foreign supermarkets into
the retail sector.
The pension and insurance bills have been proposed for
several years. Unlike last month's measures, they need to be
approved by parliament, where the coalition government is in a
minority after its largest partner, the Trinamool Congress,
pulled out due to last month's reforms.
Trinamool's leader, Mamata Banerjee, reacted angrily to the
new announcements and threatened to call a no-confidence motion
against the government.
"The government must go to save the country," she said.
Giving some hope to the government, the normally obstructive
opposition Bharatiya Janata Party (BJP) said it was waiting for
further details and was not totally opposed to the latest
"I am optimistic that they will be able to win the support
of all sections of the house, especially the principle
opposition party," Chidambaram said, saying he aimed to
introduce the bills in a session due to start at the end of the
The cabinet also signed off on a shareholder-friendly bill
to make corporate management more accountable, which would
overturn a half-century old law.
It set guidelines for long-term debt for infrastructure
projects, cleared a bill for tougher antitrust rules and another
plan to allow more options trading on commodities exchanges.
India's economic growth rate was around 5.5 percent in the
last two quarters, a far cry from the near double-digit rate of
recent years. Global credit rating agencies have warned India
could lose its investment grade rating because of unsustainable
budget and current account deficits.
Last week a government panel, led by former finance
secretary Vijay Kelkar, warned of a "fiscal precipice" if the
government does not urgently slash fuel, food and fertilizer
subsidies to curb a deficit that could hit 6.1 percent of gross
domestic product this fiscal year.
The first set of reforms announced last month have boosted
the rupee, which partly recovered from a sharp drop in value
this year, but the central bank says more action is needed to
save the budget and reduce inflation.
"The diesel price hike barely scratched the surface. The
more important signal will be to act on the Kelkar committee
recommendations and have a fiscal roadmap," said A Prasanna,
chief economist at ICICI Securities Primary Dealership.
(With reporting by Nigam Prusty and Arup Roychoudhury in NEW
DELHI, Sumeet Chatterjee, Shamik Paul, Himank Sharma and
Subhadip Sircar in MUMBAI; editing by Jane Baird)