NEW DELHI, Oct 31: India’s cabinet has cleared legislation to nearly double foreign investment limits in insurance firms to up to 49 per cent — one of the government’s key economic reform priorities, a minister said.

Finance Minister Palaniappan Chidambaram said the government would introduce the measure in parliament to raise the foreign investment cap for private insurers — a move seen as vital to attracting foreign capital.

“The cabinet gave its approval for introduction of the Insurance (Amendment) Bill,” Chidam-baram said, promising the measure would be “comprehensive” and “reflect the needs of the insurance industry.”

The bill, which would not apply to state-run insurers, is seen as key to draw new foreign investment into India and boost foreign exchange reserves that have fallen with risk-averse foreigners pulling out billions of dollars in equity portfolio holdings as a result of the global financial crisis.

The country urgently needs foreign investment to proceed with infrastructure projects to upgrade its dilapidated ports, airports, roads and power stations.

Private insurance companies were delighted by the plans by the Congress-led government to press ahead with its plan to raise the foreign direct investment (FDI) limit to 49 per cent from 26 per cent. However, the measure may not be passed in the current session of parliament because of lack of time, Chidambaram said.

India must hold general elections by May at the latest, meaning the measure could have to wait for a new government to be passed. Foreign insurers have said increasing the FDI limit is important as it will allow them to expand their array of products and improve distribution channels.

Four-fifths of India’s 1.1bn population has no insurance cover and 90 pc have no pension sche-mes, forcing them to rely on savings and relatives in old age.—AFP