Political pusillanimity

Politics of prevarication may further delay the insurance bill. Leaving aside its merits and demerits, the saga of insurance reforms amply demonstrates hollowness of the two major parties on the economic policy agenda

Indian Parliament is a witness to pusillanimous politics over the insurance reforms. Once again the same spectacle is unfolding in this session too. Especially, the Congress and the BJP are to be blamed for such a political expediency on a key reform measure. These two parties have a dubious distinction of shifting stands suiting their political considerations rather than any principled stand on the issue of reforms in this vital sector. One-and-a-half decades of legislative experience stand testimony to this. The NDA Government-led by Vajpayee proposed insurance reforms bill keeping the cap on FDI in this sector at 49 per cent.

The Congress fiercely resisted the move. Finally, the Insurance Regulatory Development Authority (IRDA) Bill was passed keeping the FDI limit at 26 per cent. Interestingly, the Congress which opposed 49 per cent FDI, changed its stand after coming to power in 2004. This time it was BJP’s turn to oppose the same proposal which it originally authored. The Congress taking advantage of the political situation after the left withdrawal of support, could muster the courage to bring in the insurance bill in Rajya Sabha in 2008. The Upper House was chosen as Lok Sabha term was coming to close. But strongest opposition came from the BJP. It was then referred to Parliamentary Standing Committee on Finance then headed by Yashwant Sinha of BJP. In fact, Sinha was the finance minister in Vajpayee Government. This committee unanimously recommended against any rise in the FDI limit.

The committee felt that several insurance companies in the West went bankrupt due to mismanagement of funds. Given this experience any increase in the FDI limit was considered harmful. This parliamentary committee consisted of members from all the parties, including BJP and the Congress. Despite such unanimous opposition, the finance minister in UPA-2 government, Chidambaram tried to push it through in Parliament. But, his attempt was thwarted by the opposition, including BJP. Now, with the BJP at the helm of affairs at the Centre, the insurance bill has once again become the agenda. It is now the Congress’s turn to armtwist the government.

The bill once again faces a political trap. The Congress says that in principle it is not opposed to the bill. But it still wants to take the pound of flesh from the government. Ultimately, the Congress may end up in “strike but not to wound” syndrome. The politics of prevarication may further delay the insurance bill. Leaving aside the merits and demerits of the bill, the saga of insurance reforms amply demonstrate the hollowness of the two major political parties on the economic policy agenda. Obviously, parties like BSP, BJD, AIADMK and other are the fence sitters in this political drama. Economic policy cannot be held hostage to the political shortsightedness of the parties. Political parties can agree or disagree on any policy based on principles. But, policies cannot be held ransom to ambivalent politics.