Insurance is seen by foreign investors as a litmus test of India's commitment to economic reforms that began in 1991. It remains the only sector isolated from the wave of deregulation and liberalisation.

Delays might annoy insurers, but more importantly they will prevent the vital injection of billions of dollars desperately needed to boost India's creaking infrastructure.

"There is no loss of patience at this moment as the serious players are looking at India as part of their overall strategic plans," said Naren N Joshi, Chief adviser at ING Insurance.

"As of now I don't think we have lost out, but too much delay can have its own implication," Joshi said.

Official estimates say India needs $50 billion of funds to boost creaking infrastructure, bottlenecks in which area key factor holding up rapid economic expansion.

Fast growth in the insurance sector could generate $20 billion over the next 10 years and meet 40 per cent of funds required to boost the nation's infrastructure.

India's insurance business is presently worth $6.6 billion,or about 0.31 per cent of the global total. Penetration, as a percentage of gross domestic product (GDP), is 2 per cent.

An annual 15 per cent growth in premiums could seepenetration at 4 per cent of GDP and net premium income of some $26 billion.

Industry officials say India, with a population of 975 million people, is not investing enough in the insurance sector.

They say lack of competition and low income levels -- one in three Indians are estimated to live below the poverty line -- restrict the industry's growth.

"But as the economy opens up and there is a sustained growth in GDP, it will lead to increase in consumer surplus and this would find its way in the insurance sector," Jacob said.

Officials hope liberalisation ofthe industry would lead to greater coverage, a better dispute settlement mechanism, improved quality of service and security of investment from private firms.

The sheer scale of funds needed for investment is reason enough for officials to be concerned about the domestic consequences of a failure to open the market.

Yet more pressure comes from the international arena. Government officials and insurance sources say a prolonged delay could see the patience of foreign investors wear thin.

India and China are among the world's last great untapped markets and Western insurers have ploughed millions of dollars into each, setting up offices and gently prodding at officials to open up.

The strategy has secured licenses for 14 firms from Beijing and the promise to gradually free the market over a period of years.

In India, it has yielded nothing.

Reform has been promised since the early 1990s, but political instability and ideological differences have halted moves to allow foreigners a foothold in thesector, a government monopoly for decades.

Legislation was introduced in 1997 by the then United Front government, but withdrawn after stiff opposition from left-wing parties and the Bharatiya Janata Party.

Prime Minister Atal Behari Vajpayee's alliance a year later pledged to open the industry by limiting foreign equity to 26 per cent in domestic private insurance firms.

The defeat of Vajpayee's coalition in April put the plan to open the market by year end on the backburner.

"Only a new government after the general elections in September can take a decision and obtain a parlimentary approval," a finance ministry official said.

Most foreign insurers say they have factored the delay into their business plans. "We do understand that in developing markets such delays could occur," said Antony Jacob, Chief executive officer of Royal & Sun Alliance's India operations.

Asked whether Royal & Sun Alliance was disappointed by the delay, Jacob said: "Disappointment stems from our eagerness to participatein the Indian market".

Insurers said there were encouraging signs of a consensus emerging among main political parties to open the industry. "Over a period of time there has been an increasing consensus across the spectrum of political parties on the need to open up the insurance sector," Joshi said.