The government on Wednesday got Lok Sabha approval for a Bill that seeks to raise foreign investment cap in insurance companies to 49% from 26%, a major financial-sector reform aimed at giving a boost to the capital starved sector as India tries to woo global capital.
The real test for the Bill, languishing since 2008, will, however, be in the Rajya Sabha, where the ruling coalition doesn’t have a majority. The Bill needs approval of both houses to become a law.
If the opposition parties defeat the Bill in the Rajya Sabha, the government may convene a joint session of both houses of Parliament to get it approved, finance minister Arun Jaitley had indicated earlier. MoS Jayant Sinha also hinted at a joint session on Wednesday.
The government had raised the cap in insurance through an executive order in December when it failed to build consensus with opposition parties for passage of the bill.
Among other things, the insurance Bill proposes that ownership and control shall remain at all times in the hands of resident Indian entities.
The 49% cap will also apply to insurance brokers, third party administrators, surveyors and loss assessors and other insurance intermediaries.
Raising the foreign investment limit is expected to generate inflows of $6-8 billion in the insurance sector that is looking for growth capital. The capital requirement of the Indian insurance industry is estimated at $12 billion by 2020.
Most of the foreign partners in Indian insurance joint ventures have been demanding increase in foreign investment cap to tap into the high potential but under penetrated market.