Finance minister P Chidambaram has cleared a proposal to raise foreign direct investmentlimit in insurance and pension sectors to 49%, making it clear that he intends to push sentiment changing reforms even though politically things look difficult for the United Progressive Alliance government.

The finance ministry will move a detailed proposal for the consideration of the cabinet.

"The bills (pension and insurance) have been cleared and are ready to go to the cabinet," a finance ministry official said.

The union cabinet had deferred a decision on these bills when Pranab Mukherjee was the finance minister because of opposition from allies such as Trinamool Congress even though the FDI limit was only 26%.

Chidambaram will need all his persuasion skills to get all allies on board, though it is not yet clear when the cabinet will take up the proposal. Even if approved, the two bills are unlikely to make it to Parliament in the Monsoon session that concludes on August 27.

Stung by criticism over lack of policy decisions, the UPA government is eyeing several measures to lift investment sentiment, and boost growth that slipped to a nine year low of 6.5% in 2012-12 and is in the danger of going down further.

The government had introduced the Insurance Laws (amendment) bill, 2008 in Parliament December 2008 to update the sector law and increase the foreign participation in the sector.

FDI limit in the pension sector will be linked to cap in insurance sector that the government proposes to raise to 49% from present 26%.

Raising limit in the sector will help insurance companies to step up investment. The Pension Fund Regulatory and Development Authority Bill, 2011 seeks to give statutory backing to the pensions regulator that was set up through an executive order in 2003.

Senior BJP leader and former finance minister Yashwant Sinha headed standing committee on finance has in its recommendation on the bill not favoured an increase in FDI limit. In fact, it had recommended that the bill expressly cap FDI in the sector at 26%, implying that the legislation will not have an easy passage in Parliament. (Economic Times)