| NEW DELHI
NEW DELHI Aug 5 Plans by India's government to
allow more foreign investment in the country's still-small
insurance sector has hit snags in parliament, testing Prime
Minister Narendra Modi's campaign promise to push through
reforms to revive the economy.
Over the past week, the government has twice sought to
introduce legislation in the upper house of parliament
permitting 49 percent foreign participation in an insurance
venture, up from 26 percent, but it has been blocked by the
Finance Minister Arun Jaitley has called the heads of
political parties to a meeting on Wednesday in a bid to form a
consensus behind the legislation so billions of dollars can flow
into a sector starved of funds and held back by over-regulation.
Modi's government expects that if the sector is opened
further, insurers such as Canada's Sun Life Financial
Inc, Prudential PLC Nippon Life Insurance Co,
Italy's Generali and Dutch insurer Aegon NV will
inject more funds into what is the world's 10th biggest life
insurance market - even though currently fewer than 4 percent of
Indians have insurance.
Jaitley needs the support of the opposition in the
250-member upper house of parliament where his Bharatiya Janata
Party (BJP) and its allies have about 60 members.
The ruling group faces no problem winning approval from the
lower house, where it has a comfortable majority after an
election in May.
But the upper house is the stumbling block. Its next
elections - when one-third of its members retire - are not due
ANOTHER OPTION AVAILABLE
If the government continues to be stymied it has an option -
rarely used - to hold a joint session of parliament and deploy
its huge majority in the lower house to push through the
insruance bill. A previous BJP government used a joint session
once to get through a tough anti-terrrorism law, citing national
But the BJP would rather get the upper house on board.
"We are going to bring the bill for discussion in this
session," Commerce and Industry Minister Nirmala Sitharaman told
Reuters, suggesting the government was prepared for a showdown
over its first, modest stab at reform since Modi took office in
In 2000, when the BJP led the government, India opened its
insurance sector to private and foreign ownership. Since then,
most top international insurers have entered.
In 2008, the government - then led by Congress party -
proposed changing ownership laws to allow 49 percent foreign
participation in insurance ventures, but it could not win
Liberalising investment rules "will bring a lot of capital
into an investment-starved sector whose growth is good for the
economy," Jaitley told CNBC TV18 Monday night.
The Congress, thrashed by the BJP in this year's lower house
elections, hasn't declared opposition to the insurance bill.
"There is no final yes or no on this," said Randeep Singh
Surjewala, a senior member of Congress, which has 69 members in
the upper house. "We are in the midst of internal consultations.
We are pro-investment, but we want the interests of all
stake-holders to be protected."
Jaitley said he could not understand why the Congress was
not backing the liberalisation as the party had repeatedly
sought to push it through earlier, and the bill he brought was
essentially the same as Congress proposed in 2008.
"Only 10 days ago, Congress got up during the budget
discussion and said this 49 percent in insurance is our idea,"
the finance minister said. "I don't mind they wanted to take the
credit. Suddenly I find they want to go to a select committee
India's two main parties - the BJP and the Congress - remain
bitter opponents even after the electoral battle, seeking to
deny the other any political advantage.
When in opposition, both parties have sought to whip up
resistance to liberalising sectors of the economy such as
insurance and defence, and to labour reforms. Such steps are
considered vital to reviving growth that last year fell to 4.7
percent, the slowest pace in a decade.
Tens of thousands of employees at India's state-controlled
insurance companies and their communist party backers are
strongly opposed to foreign involvement in the insurance sector,
saying it would give them control over domestic savings and was
against the national interest.
Even a trade union affiliated to the ruling BJP criticised
the measure to open up the insurance sector.
"Trade unions are strongly opposed to the hike in the
foreign investment limit as it would lead to outflow of people's
savings," said Vrijesh Upadhyay, general secretary at Bharatiya
Mazdoor Sangh, India's biggest trade union.
(Additional reporting by Aditya Kalra; Editing by Richard