NEW DELHI - Indian Prime Minister Narendra Modi faced a final vote on plans to open up the insurance sector to foreign companies, amid indications that parliament would pass what would be his first major economic reform.
Members of the upper house were expected to vote on Thursday evening to increase the foreign investment limit in local insurers to 49 per cent from 26 per cent after the opposition Congress party swung behind the bill, which cleared the lower house last week.
Passage would represent a rare victory for Modi, who was elected last May on a promise of jobs and economic growth. His agenda has been stymied by clashes with the opposition, signalling how hard it will be to deliver on that mandate.
The opening of the insurance sector - which has languished in parliament for more than six years - is one of a series of measures that Modi hopes will make it easier for overseas firms to bet on India's growth story.
"It has been stuck for such a long time... if it passes it will be a huge boost to investor sentiment," said Dhirendra Kumar, chief executive of funds and insurance advisory service Value Research.
"I don't see massive inflows into the sector immediately from foreign investors. Nevertheless, it will be a very positive signal."
The legislation would shake up India's overcrowded life insurance sector, allowing global insurers such as Britain's Prudential - which holds a minority stake in India's biggest private life insurer ICICI Prudential Life - and others to increase their Indian stakes.
It could also pave the way for the year's biggest initial public offering, as HDFC Life, a joint venture between India's HDFC and Britain's Standard Life Plc, has said it would move towards a listing once the rule change is in place.
Congress sources said that, while the party remained opposed to a land acquisition bill that the government was trying to get through parliament, they were willing to back the insurance bill having first proposed the measure back in 2008.
Modi needs both houses of parliament to pass the bill in the current session to prevent an executive order he issued in December to implement the insurance measure from lapsing.
Efforts by former Prime Minister Manmohan Singh's government to raise the investment cap were thwarted by rival political parties, including Modi's, which at the time opposed private companies having greater control over insurance funds.