The cabinet on Thursday approved bills to open up the insurance and pension sectors to foreign investment, apart from a slew of other measures, which together are the boldest reforms proposals initiated by the UPA government since assuming power in 2004.
The effects were visible: investor sentiments rose, Sensex rallied to a 15-month high and the rupee hit a five-month high ahead of the cabinet's announcements in the evening; but, the real test for the government lies in getting these measures passed in Parliament.
The cabinet cleared a bill to allow up to 49% foreign investment in the pension industry.
Finance minister P Chidambaram said the move would make pure pension products available to those employed in the private sector, which would be governed by a regulatory authority. Currently, most pension plans are insurance-linked.
The government also approved the politically-contentious move to hike the FDI ceiling from the current 26% to 49% in India's rapidly-growing private insurance sector, which was being hobbled by lack of capital.
"Insurance needs huge capital. This can only come from foreign investment," Chidambaram said.Key allies and the opposition, such as the Left and the Trinamool Congress, have vowed to resist the reforms when they come up for voting, especially in the upper house, where the government does not enjoy a majority.
The government hopes to reach out to the principal opposition party, the BJP, which can help pass these key legislations, which policymakers say are critical for boosting the economy and raising resources.
"We need to read the fineprint before we make our position clear," BJP chief spokesperson Ravi Shankar Prasad told HT.
"The finance minister said the cap for insurance would also automatically apply to pension. The BJP is committed to protect pensioners' hard-earned money."
Among the other refo0rm-oriented steps announced on Thursday, the Cabinet cleared a bill to amend the Forward Contracts (Regulation) Act to strengthen the futures market, a move opposed by the Left and Trinamool Congress.
A "futures contract", the market for which is rapidly growing in India, is an agreement to buy or sell goods, such as food commodities or metals, on a future date but at an agreed price that is set at present.
"Is it the intention of the UPA government to sell out the country? We should unitedly oppose all such moves and will not allow the government to be bailed out after a series of such anti-people decisions," Trinamool Congress chief Mamata Banerjee said.
The Cabinet also approved amendments in the Companies Bill to overhaul India's corporate governance norms, make directors more accountable and give individual shareholders more powers to defend their rights through class-action lawsuits.
Oppn and allies speak:
Trinamool vows to oppose FDI in pension
Will oppose FDI in pension: Samajwadi Party
BJP wants conditions for FDI in insurance, pension
UPA out to sell country's interests in all sectors: Left
Companies Bill to come this winter
12th Plan focus on health, education
PDS big fix: From silos to ration shop
More teeth for competition watchdog
Deal for infra development gets nod
Getting bill on futures passed to be a real test