The long awaited decision on India’s foreign direct investment cap has been deferred by the cabinet and may not be revisited until after the 2014 elections.
The current cap FDI cap is 26%, much to the chagrin of foreign insurers, but the UPA government had planned to increase it to 49%.
However, the plans hit a barrier after a parliamentary standing committee, rejected the bill in December.
Despite the country being in serious need of a capital injection, the government now said it wants to reach political consensus before pushing the bill forward.
Speaking to Reuters, a member of the Trinamool Congress, the UPA's alliance partner, said: "There is no question of supporting the government on 49 % FDI limit in insurance sector".
As well as proposing a rise in the limit on FDI, the insurance amendment bill aims to strengthen regulation of the sector and allow foreign re-insurers to enter the Indian market.
"Our stand is clear: unless the FDI cap is kept at 26% for the insurance sector, the government should not expect our support for the bill," former finance minister and opposition leader Yashwant Sinha told Reuters.
A lawmaker in the Prime Minister's party conceded that the proposal to increase the FDI limit for foreign insurers may now be shelved until after the elections due in two years.
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