The Cabinet has cleared financial sector reform bills seeking to hike foreign direct investment to 49 per cent from 26 per cent in the insurance sector and opening up of the pension sector to 26 percent FDI allocation. It also approved the passing of a Companies Bill. The three bills will now go to Parliament, where the UPA Government will need the help of the Opposition to pass them, at least in the Rajya Sabha. Soon after the government's announcement of a second round of reforms, the main opposition BJP flayed the former's move, warning that it will oppose both the insurance and pension sector bills. It also said that the party might even demand referring the bills again to Parliament's Standing Committee on Finance. Besides opening up of the pension sector, the Pension Fund Regulatory and Development Authority Bill seeks to give statutory powers
to the interim sector regulator, set up through an executive order in 2003.
Earlier in the day, Communist Party of India (CPI) leader D. Raja said it would be a disastrous
and dangerous move on part of the Congress-led UPA Government to go through with proposed insurance and pension sector reforms, warning that it would destroy the fundamentals of the Indian financial sector. Justifying his comment, Raja said private insurance companies in United States of America or in Europe or in other countries have completely failed and collapsed.
"Why private capital should be allowed to enter into our insurance sector? Our insurance sector, the public sector insurance companies, life insurance corporations, general insurance corporations;
they are doing extremely well and they are helping the government and the country in terms of investments," said Raja. "CPI and other Left Parties will stoutly oppose this move when it comes before the Parliament," he added. Raja further said that there is nothing new about the pension scheme, and alleged that it is the proposal given by the World Bank. "What is new about this pensions scheme?
Several times it has been discussed, it is nothing but the proposal given by the World Bank. Why Government of India should succumb to World Bank and implement the new pensions scheme? They (foreign capital) come to India to make money, to make profit. India is a big market. This is also going to be very disastrous," said Raja.
"The government should have some responsibility, social responsibility. If Dr. Manmohan Singh's Government claims that it is government of 'aam aadmi', then government should act accordingly and responsibly. The government should not allow the foreign capital to loot the pensions funds of our working people," he added.
The Cabinet also considered the Forward Contract Regulation Act (Amendment) Bill to empower commodity markets regulator FMC with greater financial autonomy, facilitate the entry of institutional investors and introduce new products for trading such as options and indices. The Companies Bill is aimed at bringing all sectors under the Companies Act, amendment to the Competition Act and a proposal for operationalising the Infrastructure Development Fund (IDF).
This is the second wave of reforms decisions to be undertaken by the government within a month. The government is already facing intense pressure from the opposition over a slew of reforms that it announced last month. It has also lost the support of the Mamata Banerjee-led Trinamool Congress (TMC), which has withdrawn its support over the move to allow FDI in multi-brand retail, a cap on the number of LPG gas and diesel price hike.
