Centre draws flak over reforms in insurance, pension sector
Political leaders of various parties on Thursday criticized the government as the Union Cabinet is likely to approve bills that will raise the cap on foreign direct investment in insurance firms and opening the pension sector to foreign investors.
The cabinet will be meeting this evening to possibly approve both bills as part of economic reforms.
Financial sector reforms, including pension and insurance have been pending for years for want of a political consensus.
Their approval on Thursday will come weeks after Prime Minister Manmohan Singh unveiled measures aimed at shoring up government finances and attracting foreign investment to revive economic growth.
Foreign groups are not allowed to invest in the pension sector, while investment is capped at 26 percent in the insurance sector.
Earlier this year, Singh had to put on hold a similar bill after failing to win over allies and opposition parties.
D. Raja, a lawmaker and senior leader of the Communist Party of India (CPI), said raising the cap for foreign investment in insurance sector to 49 percent would have an adverse impact on the country's economy.
"If government finally decides it will be a very disastrous move, very dangerous move, it will destroy the fundamentals of our financial sectors whatever it remains. One thing must be kept in mind the private insurance companies in United States of America or in Europe or in other companies have completely failed and collapsed. So, why this private capital should be allowed to enter into our insurance sector," said Raja.
The bills, which require parliamentary approval before becoming law, will likely be taken up in the forthcoming parliamentary session.
Domestic and foreign insurers, which have invested billions of dollars in India over the past decade, have been lobbying for years to raise the foreign direct investment limit.
The minister, who declined to be named, said the bills would raise the cap on FDI in insurance firms to 49 percent and permit 26 percent foreign investment in the pension sector.
Coming down heavily on Congress led government, Raja said that they are against the entry of foreign capital in the pension sector.
"The government should have some social responsibility. If Dr. Manmohan Singh's government claims it is government of common man then the government should act accordingly. Government should have a social responsibility. Government should not allow the private and foreign capital to come in and loot the pension funds of our working people. This is why we are opposing," said Raja.
Faced with a slowing economy, Singh has been trying to push ahead with stalled reforms to boost growth.
Speaking on the same lines, Saugata Roy, leader of India's regional Trinamool Congress (TMC) party, said that by allowing foreign investors in both sectors, the government was putting people's hard earned money at risk.
"We think that pension is related to the security of people and pension fund should not be introduced in speculative market. We are going to strongly oppose it. We are also opposing to raise the cap of FDI in insurance to 49 percent because insurance is linked with security of people. Foreign investment in insurance funds would pose a threat to people's security," said Roy.
Last month, the government raised the price of heavily subsidized diesel and cut supplies of subsidized cooking gas despite strong political opposition, including from within the ruling coalition.
It also opened up the retail sector to global supermarket chains, allowed foreign airlines to buy stakes in local carriers and raised the bar on foreign investment in broadcasting.