FDI in insurance & pension: BJP’s mixed signals on reforms

NEW DELHI: The government has failed to get BJP on board to back its proposal to raise the FDI cap in the insurance sector to 49%, with the main opposition sticking to its stand that FDI in financial sectors should be restricted to 26%.

BJP has agreed to allow 26% FDI in the pension sector, a decision its leaders Sushma Swaraj, Arun Jaitley and Yashwant Sinha conveyed in a meeting with Finance Minister P Chidambaram. The passage of the pension bill will come as a boost to the government’s efforts to make some headway in financial sector reforms.

The government had last year said the cap on FDI in pension would be linked to that in insurance, which meant that if 49% FDI were to be allowed in insurance the similar limit would be applicable to pension sector too. An agreement on the Pension Regulatory and Development Authority Bill, which was originally framed during the NDA regime, had also been reached during Pranab Mukherjee’s term as finance minister. This happened after the Centre conceded BJP’s demand to ensure assured returns and include the 26% cap on FDI in the legislation.

The standing committee on finance, headed by Sinha, had rejected the proposal to raise the FDI cap to 49% in the financial reform bills. “Pension reform was started by us and we had supported its introduction in Parliament when the Left had opposed it,” Sinha told ET. BJP had bailed out the government when CPM sought a division in Lok Sabha at the bill’s introductory stage.