Rajya Sabha to give all-clear to insurance Bill

The long-await­ed insur­ance Bill, which will raise the over­seas invest­ment lim­it in the sec­tor to 49% from 26%, looks set to become law before the year is out with a major­i­ty on the par­lia­men­tary select com­mit­tee ready to give its assent. The Chan­dan Mitra-head­ed com­mit­tee has giv­en the green sig­nal to the Insur­ance Laws (Amend­ment) Bill.  Also, there is agree­ment on this lim­it being a com­pos­ite one, which means it does­n’t bar port­fo­lio investors. That would make it more attrac­tive for insur­ers as it opens up the options when it comes to rais­ing cap­i­tal or exit­ing. The gov­ern­ment plans to stick to the pro­posed for­mu­la­tion of cap­ping total for­eign invest­ment at 49.

Along with the goods & ser­vices tax (GST), this is one of the reform mea­sures most close­ly watched by inter­na­tion­al investors and, if passed, will be read as an affir­ma­tion of the Naren­dra Modi gov­ern­men­t’s resolve to speed up eco­nom­ic liberalisation.

Insur­ance pen­e­tra­tion in the coun­try declined to 3.96% of GDP in 2012–13 from 5.2% of GDP in 2009-10. The insur­ance indus­try is hope­ful that the gov­ern­ment will be able to pass the Bill in the cur­rent ses­sion of Parliament.

Most Indi­an part­ners hold­ing a 74% stake in their insur­ance ven­ture with for­eign part­ners are unable to infuse the funds need­ed to expand. The gov­ern­ment has already opened up the rail­ways to FDI and raised the over­seas invest­ment lim­it in defence to 49% from 26%.

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