NEW DELHI - Plans by India's government to allow more foreign investment in the country's still-small insurance sector has hit snags in parliament, testing Prime Minister Narendra Modi's campaign promise to push through reforms to revive the economy.
Over the past week, the government has twice sought to introduce legislation in the upper house of parliament permitting 49 per cent foreign participation in an insurance venture, up from 26 per cent, but it has been blocked by the opposition.
Finance Minister Arun Jaitley has called the heads of political parties to a meeting on Wednesday in a bid to form a consensus behind the legislation so billions of dollars can flow into a sector starved of funds and held back by over-regulation.
Mr Modi's government expects that if the sector is opened further, insurers such as Canada's Sun Life Financial Inc, Prudential PLC Nippon Life Insurance Co, Italy's Generali and Dutch insurer Aegon NV will inject more funds into what is the world's 10th biggest life insurance market - even though currently fewer than 4 per cent of Indians have insurance.
Mr Jaitley needs the support of the opposition in the 250-member upper house of parliament where his Bharatiya Janata Party (BJP) and its allies have about 60 members.
The ruling group faces no problem winning approval from the lower house, where it has a comfortable majority after an election in May.
But the upper house is the stumbling block. Its next elections - when one-third of its members retire - are not due until 2016.
If the government continues to be stymied it has an option - rarely used - to hold a joint session of parliament and deploy its huge majority in the lower house to push through the insruance bill. A previous BJP government used a joint session once to get through a tough anti-terrrorism law, citing national security.
But the BJP would rather get the upper house on board. "We are going to bring the bill for discussion in this session," Commerce and Industry Minister Nirmala Sitharaman told Reuters, suggesting the government was prepared for a showdown over its first, modest stab at reform since Modi took office in May.
In 2000, when the BJP led the government, India opened its insurance sector to private and foreign ownership. Since then, most top international insurers have entered.
In 2008, the government - then led by Congress party - proposed changing ownership laws to allow 49 per cent foreign participation in insurance ventures, but it could not win parliament approval.