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‘Inappropriate timing’ of Centre’s moves

Life Insurance Corporation’s corporate office in Chennai.

The Cabinet approval for the introduction of a comprehensive bill in Parliament to raise foreign direct investment (FDI) limit in insurance was long coming ever since the Left parties walked out of the UPA (United Progressive Alliance) over Indo-U.S. nuclear deal. But when it came on Friday last, it came at a very inappropriate time.

Predictably, it has drawn angry reactions from the Left parties and others. The Cabinet also gave its nod to introduce another bill to raise the paid-up capital of Life Insurance Corporation of India (LIC) from Rs. 5 crore to Rs. 100 crore to bring it on a par with private insurers with a view to ensuring a level-playing field.

There was also this totally unconnected exercise by an industry body, which drew rebuff from the Government for the ‘inappropriate timing’. The Associated Chambers of Commerce and Industry of India (Assocham) was forced to withdraw its analysis in double quick time in the wake of criticism from powers-that-be for its “irresponsible behaviour”. Assocham had suggested, in a recent report, that 25-30 per cent of jobs in seven industry segments could be axed over 10 days following Diwali in the wake of the global meltdown. The industry body took back the report clarifying that “it was not representative of the industrial segments in its totality.” A minister at the Centre came down strongly on “totally irresponsible” Assocham for coming out with such a report, predicting scary forecasts.

If the chamber could be criticised for putting out such a ‘scary report,’ the Central Government too should take the blame for pushing for a hike in FDI limit in the insurance sector at an inopportune time. The speed with which the U.S. Government acted to pick up equity by pumping huge money into AIG, one of the biggest insurance groups in the world, still remains fresh in the minds of the public at large. In fact, the uncertainty that followed the bail-out of AIG has created anxiety in the minds of people who have bought life insurance products from Tata-AIG, a private life insurer in India. Coming as it does at a time when the world’s biggest capitalist nation is turning part-socialist in a no-holds-barred bid to rescue an economy which appears to have got into a quicksand kind of a situation, the move by the Centre on the insurance front is bound to set off a huge opposition.

Given the timing of the move, the opponents of the move are bound to get support and sympathy from known as well as unexpected quarters. That companies with name, reputation and history could go down the drain is scary enough for even the so-called new Indian with a global outlook to quietly join the opposition ranks. If it took several years for effecting a change in the mindset of an inwardly looking Indian, the collapse of global giants could take him back in time and make him a cautious Indian of yester-year.

Given the current situation, the anti-reformists are bound to exploit the grounds well of negative perceptions. They have all proofs in front of them to press forward their opposition to the move. If the timing of the release of the Assocham report was inopportune, the move to hike FDI limit in insurance is inappropriate for its timing, to say the least.

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