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Opening up the insurance sector to the winds of change is what the doctor would have ordered for a comatose insurance business and ailing ec...

Opening up the insurance sector to the winds of change is what the doctor would have ordered for a comatose insurance business and ailing economy. With privatisation and up to 40 percent foreign equity allowed, there are bound to be major gains in course of time for consumers, industry and the economy. More players mean an expansion of business, lowering of premia, wider choice of insurance products, new channels for savings and higher investment in the infrastructure.

A statutory Insurance Regulatory Authority should ensure that the rules are fair and observed, and keep politicians and bureaucrats at a safe distance from the business. All this is promised by the latest cabinet decisions based on the recommendations of a ministerial committee. The logic of insurance privatisation has always been unassailable. Nevertheless it has been assailed in many quarters.

The BJP whose stalwarts have been obstructive in the past and more recently is not unique in this respect. It is to the government8217;s credit that ithas found a way of overcoming fairly severe political opposition within its own ranks.

As the chequered history of insurance privatisation since 1993 has shown, doing what is necessary is not the easiest of things in a rambunctious democratic system. The really hard part is not so much overcoming vested interests as getting political leaders themselves used to the idea of privatisation before they can start managing the politics of it. Thus over the last five years all three major political formations in the country in turn, the Congress, United Front and BJP, have had the hot potato thrust into their unwilling hands.

Now that there is no one left to pass it to perhaps something will actually be done. Before words can be translated into action a few more hurdles have to be crossed. The government should not imagine that the diehards have all been converted to the cause. Parliament is likely to hear them rise once again to the defence of inefficient ways of doing business. So the BJP and allies should gointo the session well prepared to do their duty by the economy.

Immediately, the reformist intent of the government as seen in a series of recent measures cannot but revive flagging market sentiment and foreign investor interest. The decisions on the insurance sector come on the heels of the successful completion of the Concor disinvestment programme. The watchword is cautiously8217; but interim steps towards granting product patents have also been announced.

All this proves that nothing concentrates the minds of political leaders so well as an economy in crisis. It may be over-optimistic for official circles to expect foreign direct investment in sectors other than insurance to pick up dramatically. The level of FDI depends on a number of other factors apart from reformist signals from the government. Among those factors are macroeconomic trends and external developments such as changes in the economies of South East Asia. But foreign investors with a prior commitment to India who were waiting forauspicious signs ought to be enthused.