Passage of insurance bill is a firm step towards growth

Passage of insurance bill is a firm step towards growth

Hindustan Times, New Delhi
| Updated: Mar 15, 2015 14:05 IST








For a capital-scarce economy, allowing overseas investors to deploy funds in high-growth sectors is, perhaps, the first step in seeking to spin jobs and multiply income. Each piece of structural adjustment faces its own dynamic of resistance, pacing out its passage through departments, ministries and social and political stakeholders.

Political debates in Parliament, and outside, are a manifestation of this democratic phenomenon. It took the Narendra Modi-led NDA government nearly 10 months to pass its first major reform measure as Parliament approved the amendment in the insurance law to allow greater foreign investment of up to 49% from 26% in the sector.

The passage of the insurance Bill on Thursday marks the culmination of a more than six-year-old process of bringing in changes in a law after it was first introduced by the Congress-led UPA government in 2008.

In a democracy, reform is essentially a political process. Wider consultations are important, but not to the extent that it holds up critical reforms that can hurt a country’s image as an investment destination.

Last year, the government bit the bullet when it lifted state controls on diesel prices. It has followed it up with bidding of coal mines, which is set to result in a windfall for coal-rich states that could significantly bolster their ability to fund development schemes and create jobs.

A higher foreign investment in insurance is more about reversing the slowdown in the economy, and less about allowing foreign investors access to household savings. India is in dire need of resources to fund its infrastructure needs. Frugal households could well turn out to be the primary financiers of these mammoth projects.

India’s savings rate could reach 40