The winter session of Parliament is on. Even as Parliament is yet to decide on FDI in retail, we are convinced that the need of the hour is the implementation of policies hitherto announced. The purpose of this piece is two-fold. First, to understand the implementation matrix of proposed policy reforms and second, to quantify the possible benefit matrix arising out of the same. In particular, we believe that the quantification of the benefits will dispel doubts (if any) of India firmly moving ahead with the reform agenda.
First, some statistics on the pending legislative business. At the beginning of this winter session, there were some hundred Bills still pending in Parliament. Additionally, as per some knowledgeable sources, it is believed that the government has identified around 35 Bills for the session, which include some carry-overs from the previous session.
The table below summarises the status of the policy actions that the government has taken till date outside the ambit of Parliament and the Bills/actions that requires Parliamentary approval, requires consensus/Parliamentary Standing Committee approval. For the sake of convenience, we have categorised the policy decisions that have already been decided and require no Parliamentary approval in the first column. There is no problem in going ahead with implementing these policy decisions (other than possible Parliamentary reviews or debates). However, the next three columns in the table reflect the government’s dilemma in implementing some of the policies announced (for example, insurance and PFRDA amendment requires Parliamentary passage) and also the requirement of consensus in some (Goods & Services Tax, Micro Finance Bill, etc). It is with respect to these approvals/consensus that the government needs to get its act together with the active support of all concerned. We now move over to why the Government should move ahead quickly with such implementations.
First, the decision to allow an increase in FDI limit in insurance from 26% to 49% will attract at least R30,000 crore, as per independent estimates. It may be noted that India’s rank in the world insurance market has dropped four places from 11th in 2010 to 15th in 2011 due to a decline in life insurance business in FY12. As a result of this, India’s share in the world insurance market has declined. Other countries such as Brazil, Spain and Taiwan have taken over and are now ranked higher than India. Hence, the recent decision to increase the FDI limit is a