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Parliament on Thursday approved National Democratic Alliance government's first major economic reform measure as the long-pending bill providing for raising foreign investment cap to 49 per cent in insurance was passed by Rajya Sabha after main Opposition Congress and some other parties came on board.
The controversial Insurance Laws (Amendment) Bill, 2015, which replaced an ordinance promulgated in December last, was passed by voice vote after walkout by Trinamool Congress and Dravida Munnettra Kazhagam.
The smooth sailing of the bill in the Upper House, where the ruling NDA is in minority, was possible with the help of Opposition parties like Congress, All India Anna Dravida Munnetra Kazhagam, Nationalist Congress Party and Biju Janata Dal besides allies Shiv Sena and Akali Dal.
The bill was introduced this evening after a heated debate and adjournments over technicalities as a similar legislation was pending in the House.
"With this move some kind of political consensus has emerged and we see this as an important event in kick-starting the reform process again. From an international investor community point of view this was a long awaited move and therefore will help in regaining their trust in the Indian economy and polity.
"For the insurance industry the passing of the bill will help in putting in place a more progressive regulatory framework. The FDI/FPI limit increase will lead to capital inflows which could be used to expand distribution and to invest technology and service infrastructure, said Deepak Mittal, MD & CEO, Edelweiss Tokio Life Insurance.
The original bill, which was brought by the Congress in 2008, was withdrawn and the new bill was passed after a debate of about two-and-a-half hours.
“The Insurance Amendment Bill will further support the development and enhancement of the health insurance industry with an infusion of capital and the ability to operate as a separate line of business.
The investments and separate business classification will promote customer-centric product and service innovations with an enhancement to technology, deepening market penetration besides improving distribution efficiencies. A paradigm shift moment for the Indian insurance sector," said Sandeep Patel, MD and CEO of Cigna TTK Health Insurance.
"With financial inclusion proceedings in full force, the timing of increase in limit for FDI in insurance sector is a blessing in disguise. In our estimate, the FDI limit hike in insurance could result in immediate inflow of around Rs 20,000 crore. Furthermore, FDI hike in insurance is de jure increase in FDI limits for pension sector also," said Arundhati Bhattacharya, SBI chief.
Trinamool Congress and Left parties strongly opposed the measure. While Trinamool, DMK as also Samajwadi Party, Bahujan Samaj Party and Janata Dal (United) staged a walkout, Left members moved amendments which were negated.
The bill, which was passed by Lok Sabha on March 4, provides for raising the foreign investment cap in insurance sector from 26 per cent 49 per cent and is expected to bring in funds to the tune thousands of crores.
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