Millennium Post

It’s Chidambaram all the way on economic decisions

Led by finance minister P Chidambaram, economic reforms in India received a further push on Thursday, with the cabinet approving legislative changes that will allow up to 49 per cent foreign equity in pension sector and hike such limit in insurance to 49 per cent from 26 per cent.

The cabinet meeting, presided over by Prime Minister Manmohan Singh, also approved other long-pending measures such as crucial changes in the Companies Act, and giving greater autonomy to the regulator to introduce more commodities and options for future trading.

The decisions, announced by finance minister P Chidambaram, included designating five domestic airports for overseas operations, bringing all the financial services under the competition commission and revamp of employment exchanges.

The government also cleared a tripartite agreement for setting up of infrastructure debt fund  [IDF] to re-finance bank debt to the sector. The Cabinet Committee on Infrastructure  [CCI] cleared the tripartite agreement for operationalising the IDFs after consultation with the Reserve Bank and other stakeholders. The IDF, which was proposed in the union budget for 2011-12 fiscal, is aimed at accelerating and enhancing flow of long term debt for funding the ambitious programme of infrastructure development in the country.

Following the reforms, Planning Commission deputy chairman Montek Singh Ahluwalia expressed hope that the government's decision to open the pension sector to foreign investors and raise the FDI cap in insurance to 49 per cent will boost investments. 'I think the government has bitten all bullets that is there to bite...I hope anyone interested in investing in India will read the message,' Ahluwalia said.

India's insurance industry is valued at $41 billion with 24 companies in life insurance business and 27 in general insurance industry. The penetration is rather poor at 4.4 per cent of the population for life and 0.71 for non-life business.


New Delhi: India Inc termed government's second wave of reforms, including decisions to open the pension sector to foreign investment and raising the FDI cap in insurance to 49 per cent, as 'path-breaking and landmark'. 'The new instalment of big bang reforms is a clear message that the government is determined to strengthen the economy,' FICCI President R V Kanoria said. He said that these forward looking measures would infuse the much-needed capital in the insurance and pension sectors.

Kanoria also urged the government to make investment guidelines more flexible so that such funds can be used to support infrastructure development.
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