Government Continues with Reforms – FDI Insurance, Pension, Companies Bill
October 5, 2012
The Union Cabinet has cleared a slew of important bills such as hiking FDI in insurance and pension sectors which have been pending for a while. Importantly, these bills need to be approved by Parliament before becoming a reality.
Continuing with the reform process, the Union Cabinet today cleared several important bills as follows,
- Insurance Laws (Amendments) Bill (hiking FDI limit to 49%)
- Pensions Bill (hiking FDI limit to 49%)
- Companies Amendments Bill
- Forward Contract Amendment Bill
- Amendments to the Competition Act
- 12th Five Year Plan draft document
Why does Hiking the FDI Limit in Insurance Matters ?
FDI limit in the insurance sector has been on the anvil for a while and is quite critical from the industry’s perspective given the dire need for capital. Besides, deepening of the insurance sector helps channelize savings into longer-term infrastructure projects. It would be beneficial for companies like ICICI Bank (ICICI Prudential Life), HDFC Ltd (HDFC Standard Life), SBI Bank (SBI Life), Max India (Max Life), Future group (Future Generali Life), AB Nuvo (Birla Sun Life) and several others.
The Union cabinet also approved proposal to move official amendments to the forwards contracts bill.This, if passed by parliament, will enable systematic development of the market. Introduction of options trading, introduction of new commodity classes such as freight, rainfall and commodity indices.
Will the Parliament Pass these Bills?
BJP is opposed to hiking FDI in insurance and pension sectors although it might allow passage of the Companies (Amendment) Bill.
Clearly, there might be some time before these bills become a reality. Nonetheless, it is becoming clearer from these actions that the government is on a reform drive, committed to reviving business and market sentiments as well as the economy.
Update Other REforms the Government is willing to take are as follows,
Kelkar committee recommendations on fiscal consolidation – Rationalization of fuel, fertilizer and food subsidies; Mobilizing revenue by selling government assets (including land and shares in PSUs)
Deepak Parekh Committee Infrastructure Financing recommendations – Increase user charges (rail, roads and power), 100% FDI in telecom; greater private participation in railways; Setting up Expressways Authority of India
Direct cash transfer of subsidies – NREGA wages and scholarships to be linked to UID (Aadhar) number and directly deposited to beneficiaries bank account. This will eventually be extended to LPG, kerosene and fertilizer subsidies as well
Goods and Services Tax (GST) Unified market for all goods and services across India.