India's Latest Proposed Business Reforms Favorable for Foreign Investors

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In its lastest efforts to jumpstart India's economy, the government of Prime Minister Manmohan Singh announced last week that foreigners will now be able to invest nearly twice as much in local joint-venture insurance companies there, up to 49 percent from 26 percent. The government also announced that it was allowing foreigners to invest in the country's pension system for the first time, at the same cap of 49 percent. The pension sector had previosuly been closed to foreigners, Reuters reported.

"Without reforms there is a risk of a sharp slowdown in the economy," Finance Minister P Chidambaram was quoted as saying today, as reported by Firstpost.com. Reuters called the move, "another indicator of its determination to push through reforms."

These latest reforms came on the heels of another round of reforms in late September, when New Delhi announced the country was officially opening India's supermarket sector to foreign chains and also eased foreign investment rules in the airlines and broadcasting industries, Reuters reported.

Although there appears to be a consensus among both domestic and foreign business leaders that the loosening of regulations can help get India's economy on track, the September news was met with protests around the country, culminating in a national strike.

The question is, will foreign investors go for it? Reuters predicted a lukewarm response with regard to insurance, though the pension news it predicts will elicit "more enthusiastic participation by foreign investors." Ultimately though, the paper says, "For India to attract a flood of new capital, regulation needs to become more stable."

Reuters points out that, "For the latest reforms to go through they will need the minority government to convince the main opposition party to abstain from voting against the proposal in parliament. The government will also have to persuade its smaller allies to vote in favor of liberalization."

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