The Economic Survey for 2008-09 Finance Minister Pranab Mukherjee tabled in parliament Thursday has advocated sweeping policy changes like foreign investment in multi-brand retailing and higher foreign stake in insurance companies. The survey report card suggested the cap on foreign equity in insurance sector be raised to 49 per cent from 26 per cent currently. According to it, the limit of foreign equity can even be raised to 100 in case of health and weather insurance. (Weather insurance products are aimed at enhancing the risk-taking capacity of farmers, banks, micro-finance lenders and agro-based industries).

“This may help dispel fears of foreign equity in insurance,” the survey said. In the area of external reforms, the survey favoured foreign investment in multi-format retailing starting with food despite opposition to the idea. “Foreign direct investment in multi-format retailing should start with food,” it said, suggesting that for five years these companies must also have wholesale outlets for small and unorganised retailers. Other major initiative suggested by the annual survey was allowing foreign equity in the defence sector up to 49 per cent. The survey added that this limit can be stretched to 100 per cent in the case of high technology and strategic defence goods, services and systems that can help eliminate import dependence.

The survey has also called for decontrolling sugar, fertilizer and drug prices. However, in the case of life-saving drugs that have less than five producers, the prices should remain under government control, it said. The survey also suggested the passage of several bills including the Pension Fund Regulatory and Development Authority Bill, Insurance Bill and Forward Contract Bill. However, for real estate and housing regulation, the survey said it should be kept outside the purview of the central government and stay under the state governments’ purview. It said there should be a single regulatory agency for the transport sector including highways, railways, ports and airports, and it should have members from the sub-sectors. Regarding railways, the survey called for the entry of private companies into passenger train operations and railway services to tourist destinations. The survey also called for a new bankruptcy law.

Popularity: 1% [?]