India’s Narendra Modi-led government has approved a higher FDI cap in the defence, railways and insurance sectors, but the changes are likely to face political difficulties and delays – such as those the insurance bill is currently experiencing – as they still must be approved by the upper house of parliament. Although the ruling National Democratic Alliance (NDA) has a commanding majority in the lower house, it is in a minority position in the upper house.

If either of the two houses rejects a bill there is a provision for a joint sitting of parliament, in which the government can push through the bills with its commanding majority. But, the prospect of a joint session is looking unlikely in the case of the insurance bill, with the political opposition going to great lengths to delay its passing. Instead of turning down this bill – which is what the ruling government might have preferred – the opposition have asked for the bill to be vetted by a select parliamentary committee.

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All of this will considerably delay the introduction of the reform, which was first announced in the maiden budget of the NDA government on July 10, 2014. With prime minister Mr Modi scheduled to visit the US in September, it is looking likely that he will have to make the trip before this key measure of reform has been passed. 

Opposition to the Modi government’s FDI proposals is mainly coming from the Indian National Congress party, which sought to introduce a similar insurance bill when it was in power. The party’s main reason for opposing the measure in its currently proposed form, however, is that it feels the 49% cap on foreign investment is too high. 

Indications are that the Modi-led government might approve the Congress-led opposition’s demand to refer the bill to a select parliamentary committee on the condition that this takes place within a certain time frame. By doing this, the insurance bill could be approved in the forthcoming winter session of parliament.

N Chandra Mohan is an economics and business commentator based in New Delhi