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A large bill for insurance FDI

The UPA government seems to be in a real hurry. Within weeks of announcing the FDI in retail, it is now seriously considering pushing for increasing the FDI ceiling in the insurance sector, which is going to invite fresh protests from both its allies and opposition. What is somewhat significant is that after years of policy paralysis when nothing was done to build consensus, the government now seems to be throwing all caution to the winds to appease global corporate markets. The Insurance [Amendment] Bill that proposes to raise the FDI limit in the insurance sector from the current 23 per cent to 49 per cent has been pending in Parliament after it was introduced in the Rajya Sabha [Upper House] in 2008. Now the goverment wants to go ahead with tabling it in the next session of Parliament.  There has been no political consensus and it is very likely that the differences over the proposed bill will only get more belligerent if and when the government tries to move too hard on it.  It is a move that is politically slippery and when the mood of the nation is so widely divided and different political factions are mobilising support against the government for its anti-people policies, one suspects the UPA’s political wisdom. Why is it so desperate for perilous, big ticket reforms?

One must note a couple of problems about going ahead with the Bill without reasonable thought and consensus.  Since the economic meltdown of 2008 in the US and Europe, the experience of insurance reform has been depressing across the globe. Money worth millions was wiped out in the US thanks to the meltdown. The same was the case in Europe. As markets collapsed, so did the money.  Since then countries like Greece and Spain have not been able to stop centralised borrowing for meeting harsher and harsher demands for messing up its fiscal health. India may see a similar case. Second, this move is likely to irk even that section of the middle class who are apparently pro-reform. Life Insurance corporation, which controls 80 per cent of India’s insurance market enjoys the confidence of 40 crore middle and lower middle class Indians with money worth 2 lakh crore in its kitty. Tomorrow all of it could be risked. Here, after all, we are talking savings of a lifetime that the government wants to monetise. This may be fatal. The same middle class that once hailed Manmohan Singh’s reform initiatives might now go against him, causing the Congress party irreparable damage. This is especially true since the fortunes of that part of the globe which has deified freewheeling capitalism has only tumbled in recent years, thereby strengthening the belief that unrestrained capitalism is not in the interests of the people but only a few profit-hungry corporations. Here is what has changed since 1991, when Manmohan Singh last spoke.  If the Congress Party, riddled with graft charges, wants to trick people into cavalier reforms, it is shooting itself on the foot.  Otherwise it should start counting on political and economic consensus to provide the basis for reforms and not depend on the warped vision of a few World Bank types.
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