Onwards And Upwards? Cabinet Approves Increase In Foreign Ownership Cap

On October 4 2012 the Cabinet approved an increase in the cap on foreign investment in the insurance and pension sectors from the existing 26% to 49%. The decision clears the way for the measure to be considered by Parliament in its winter session. However, whether the increase will clear the political and legislative obstacles in its path remains uncertain.

Sector reform

The Cabinet's approval of this increase is the latest in a chain of events spanning more than 20 years. The government's 1991 industrial policy signalled the advent of a liberalised Indian economy and paved the way for private participation in the insurance sector. In 1993 the government set up the Malhotra Committee to review the structure of the regulation and supervision of the insurance industry, and to suggest reforms. In a 1994 report the committee recommended, among other things, that the private sector be permitted to enter the insurance industry and foreign insurers be allowed to enter