Liberalization … really?

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Sakate Khaitan, a senior partner at Clasis Law, previews India’s long-overdue insurance law reforms

The eagerly awaited second generation economic reforms that the Indian government intended to unleash with insurance sector reforms remain a nonstarter. The government had been hoping to inject fresh enthusiasm into foreign investors by pushing the long-overdue Insurance Laws (Amendment) Bill, 2008, in the recently concluded budget session of parliament. However, Indian lawmakers failed to deliver on their promise and action on the bill remains in abeyance.

Insurance reforms have been stuck in a legislative quagmire for around nine years. It took roughly four years for the proposals to be adapted into the bill, and five years after that, the bill has yet to become law. The key proposals contained in the bill are as follows:

Increased foreign investment cap

An increase in the foreign investment ceiling in Indian insurance companies to 49%, from the existing 26%, is one of the most important proposals in the bill.

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Sakate Khaitan is a senior partner at Clasis Law who spreads his time between Mumbai and London. He can be contacted at sakate.khaitan@clasislaw.com.

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