Timidity on insurance

The government is very reluctant to open up insurance and it shows. Yashwant Sinha may have promised in his budget speech to allow the pr...

The government is very reluctant to open up insurance and it shows. Yashwant Sinha may have promised in his budget speech to allow the private sector through but in the weeks since, the door has remained shut. More accurately, the door has opened a crack from time to time and then swung back again before Sinha could wedge his foot in the gap. That there are differences in the cabinet is obvious enough. Swadeshi myths die hard.

What is disconcerting is that those who have come to the sound conclusion that foreign direct investment is a necessity, cannot move ahead. It is not that Murli Manohar Joshi enjoys a disproportionate amount of influence in the government. No doubt when the need arises, he can tap a deep vein of swadeshi sentiment in the BJP and the rest of the Sangh Parivar.

But he has not really had to do that on insurance as yet because the less rigid among his cabinet colleagues have not been bold enough. They appear hesitant and to lack conviction. The upshot is that insurance has been in andout of cabinet without decisions being made.

It is anyone8217;s guess whether a new committee of ministers will be able to break the deadlock in time for legislation to be introduced in the current session of Parliament. Reference to another committee may well be a way of buying time though for what specific purpose is not apparent. The pros and cons have been thrashed out already by more than one expert body. What remains to be decided is the proportion of equity permissible for various forms of foreign participation, FDI, FII, NRI and OCBs overseas corporate bodies. However, from the way the debate went at the last cabinet meeting, points of principle are still in dispute. That means there is still a long way to go before all sides have done with falling out over the actual nitty-gritty of an insurance Bill. It is all very depressing.

There can be little dispute about the kind of impetus foreign companies can provide to the insurance market. To close one8217;s eyes to this is to ignore the needs of theconsumer and the economy. In anticipation of foreign entry into insurance, there are a few signs of change in the domestic scene, but the government and domestic private sectors lack the experience and resources which a globalising economy demands.

There is little prospect of mobilising a larger proportion of savings for investment in the infrastructure without foreign players. These are arguments enough for getting on with the insurance Bill. In the sanctions era there is an additional factor. The muddle over the power regulatory Bill has not done much for the government8217;s credentials. Decisive opening up of the insurance sector has come to be seen as the next test of the commitment to reform. No one is urging reckless action. It can be ensured that foreign companies do not come to dominate the insurance sector and that there are gains for everybody. What domestic and foreign investors are waiting to see is steady and certain progress towards reform instead of the dithering and confusion that mark thegovernment8217;s approach.