India: Singh opens insurance, pension sectors to foreign investment

Prime Minister Manmohan Singh unveiled the second wave of economic reforms in as many months on Thursday, opening the insurance and pension sectors to foreign investment.

The moves have been expected since Singh's United Progressive Alliance (UPA) government weathered the pullout of Mamata Banerjee's Trinamool Congress following last month's decision to hike diesel prices and open the retail sector to investments from companies like Walmart.

But by following through on those expectations, Singh has doubled down on his bet that potentially controversial actions — even those that may be tarred as "anti-people" by his detractors — will gain him political mileage by erasing the impression that his government is weak and indecisive.

International investors, at least, will be pleased. In recent months, various ratings agencies have slashed their outlook for India in what some have termed "blackmail" to force Singh's hand.

However, as FirstPost.in points out, "for all the bravado that characterises the UPA government’s approach, it’s not very clear that it has the numbers to deliver on all these policy initiatives, some of which need to formalised through legislation. Even if it manages to rustle up a majority in the Lok Sabha (lower house), with the help of the Congress’ new-found allies that have administered it the kiss of life after Mamata Banerjee pulled the plug, the numbers look very iffy in the Rajya Sabha (upper house)."

On Thursday, Singh's cabinet ministers approved proposals allowing overseas companies to hold as much as 49 percent in insurance firms, and for the first time permit foreign investment in pension funds, Bloomberg reported. But both measures will require the passage of new bills in parliament.

Aviva Plc, Allianz SE and ING Groep NV are among global insurers that will be able to further invest in their Indian ventures if lawmakers approve the proposals when Parliament resumes next month, the agency said.

Both bills have been introduced in Parliament before, with the government unable to win the support of groups ideologically opposed to private companies investing in pension or insurance funds, many of them state run, Bloomberg added.

Notably, the Samajwadi Party — which shored up the UPA after the Trinamool Congress' withdrawal — has said that it will oppose these additional reforms, according to the Deccan Herald.