Policy Actions - Reform drive continues - Edelweiss

The Union Cabinet has cleared a slew of important bills such as hiking FDI in insurance and pension sectors which have been pending for a while. Importantly, these bills need to be approved by Parliament before becoming a reality. Notably, the main opposition party, BJP, seems opposed to raising the FDI limits. Nonetheless, it is becoming clearer that the government is on a reform drive and markets are likely to derive comfort from these reassuring moves.

Government takes crucial steps again

Continuing with the reform process, the Union Cabinet today cleared several important bills:

- Insurance Laws (Amendments) Bill (hiking FDI limit to 49%)
- Pensions Bill (hiking FDI limit to 49%)
- Companies Amendments Bill
- Forward Contract Amendment Bill
- Amendments to the Competition Act
- 12th Five Year Plan draft document

These crucial bills have been pending for a long time now. In particular, hiking the FDI limit in the insurance sector has been on the anvil for a while and is quite critical from the industry's perspective given the dire need for capital. Besides, deepening of the insurance sector helps channelize savings into longer-term infrastructure projects.

Govt acts boldly but needs Parliament backing

Most of these bills need Parliament approval (unlike FDI in multi-brand retail) and therefore while the Cabinet approval is certainly a step forward, it remains to be seen whether the government manages to push these through the winter session of Parliament.

As of now, it seems that the main opposition party, BJP is opposed to hiking FDI in insurance and pension sectors although it might allow passage of the Companies (Amendment) Bill.

Another boost to market sentiments

Clearly, there might be some time before these bills become a reality. Nonetheless, it is becoming clearer from these actions that the government is on a reform drive, committed to reviving business and market sentiments as well as the economy. Markets are likely to derive comfort from these reassuring moves.

Source : Equity Bulls

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