Prime Minister Dr Manmohan Singh would soon be taking up the issue of reforms and their implementation would be put on fast track. Many of the bills for reforms are pending since last one year because of objections from the left parties. Now, the red brigade is no longer in support of the government and the UPA wants to speed up the process of reforms.
Financial sector reforms, covering insurance, banking, provident fund and pensions, may activate investments and add as much as 1.5% of the country’s growth, giving the government the opportunity to take care of welfare issues.
The main reform in insurance is to raise the foreign direct investment cap from 26% to 49% which will allow a lot more foreign money to flow in and help to expand the insurance sector.
A Pension Funds Regulations and Development Authority, a statutory regulator, will be created to take care of the pensions sector. The appointment of a regulator will set the scene for breaking the monopoly of the Employees Provident Fund Organisation (EPFO). The regulator can permit new pension funds and create the framework for them to operate in an open and transparent environment.
The banking sector reforms allow the government’s stake in public sector banks to come down below 50% and rising the current 1% cap on voting rights that applies to all other shareholders in state-owned banks. This will bring in cash inflow on a large scale and enhance the capital adequacy ratio of the banks.