5 Oct 2012

More reforms announced in India

9:50 am on 5 October 2012

The government in India has approved 49% foreign direct investment in insurance companies and opened the pension sector to foreign investors.

The insurance and pension sectors are governed by acts of parliament and the changes must be approved by MPs.

The BBC reports that may not be easy, as opposition parties are still protesting against recent retail reforms and fuel price rises.

In September, the government announced the opening of the retail sector to foreign supermarkets. It also announced a 14% rise in the price of diesel, which is heavily subsidised in India, and reduced the subsidy on cooking gas cylinders.

On Thursday, the cabinet approved the insurance amendment bill, which proposes raising the level of foreign investment allowed in the insurance sector to 49%, from the current 26%.

The cabinet also cleared foreign investment of up to 26% in pension companies - a sector so far closed to foreign investment.

In a BBC interview on Wednesday, Finance Minister P Chidambaram promised more reforms in banking, insurance and other sectors.

"It will be clear we are on the reform path," he said.

Mr Chidambaram said the country would "return to 9% growth" once certain "fundamental constraints are addressed".

However, the BBC notes that latest forecasts from economists at the Asian Development Bank suggesting that India's growth will slow to 5.6% this year, before picking up to 6.7% in 2013.