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May 26, 1998

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Swadeshi may get the boot as BJP tries to open up insurance

Rajesh Ramachandran in New Delhi

Sanctions appear to be forcing the Bharatiya Janata Party-led coalition to discard its policy on the insurance sector.

The Atal Bihari Vajpayee government is thinking of opening up the sector, much to the dismay of Indian industry. The latter has been told the question of allowing foreign investors into the sector does not arise. In fact, Information and Broadcasting Minister Sushma Swaraj had told Parliament during a debate last year -- when she was in the Opposition -- that the BJP would never open up the sector.

"The government will ensure that a climate of competition is created in the insurance sector --- if need be, by involving the Indian private sector in the insurance business," according to the BJP manifesto which vouches that Indian industry would be protected during the period of transition towards globalisation.

The party's proposed move, observers said, is being 'driven by its desire to mop up resources'. The party may add a rider to its liberalisation initiative in the sector by adding a 'social clause': fulfilling 'social obligations like crop insurance'.

Another 'face-saving device' seems to be the insistence that the foreign investor would have to take the domestic route through an Indian partner.

Sources said the proposal, being worked out by the finance ministry, will slap a ceiling of 49 per cent on foreign investors. The proposal may be incorporated in the Budget.

"The insurance sector would be opened up with caution,'' a source close to the finance minister told Rediff On The NeT, ''There would be certain conditions which foreign players have to meet."

Asked how the move would generate additional resources, a top BJP leader said, "The interest rate in the West is 3.5 per cent to 4 per cent -- and there are no takers even at that rock-bottom rate. As far as they are concerned, the best market and most politically stable proposition in Asia -- after the East Asian crisis -- is India."

And more importantly, the opportunity to grab the huge insurance market would make the powerful US insurance companies lobby against the sanctions imposed against India following the nuclear tests.

Asked if this would not mean that swadeshi would have to consigned to the back-burner, a senior BJP leader said, "Swadeshi is the underlying principle of governance. The nuclear test is the biggest shot in the arm for the hardcore swadeshi lobby. So that is enough to keep the swadeshi lobby happy."

However, the question remains whether the BJP would succeed where the Congress and the United Front had failed -- both the governments could not push through insurance sector reforms.

The Opposition, especially the Left which had opposed the United Front's decision to open up the sector, may go hammer and tongs at the government in the Budget session which begins tomorrow.

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