Indian cabinet approves FDI in pension sector in key reform

NEW DELHI, Nov 16 (AFP): India's cabinet has approved allowing foreign direct investment in the country's burgeoning pension sector in a fillip to the government's economic reform process, a spokesman said Wednesday. Global financial players have long been lobbying for access to the lucrative pension sector that is expected to expand rapidly as millions of young Indians join the work force in the world's second most populous nation. The change is contained in a proposed pension bill to be considered by parliament during the winter session which begins November 22 and is seen by investors as an important economic reform. The Pension Fund Regulatory and Development Authority bill would give global financial institutions access to around $2 billion worth of pension fund assets in Asia's third-largest economy. The foreign direct investment (FDI) cap will initially be set at 26 per cent. "But the government would like to retain the flexibility of changing the cap of FDI as and when required and that is why it has not been kept as part of the bill," the government spokesman, who asked not to be named, said. The step should please foreign players who have been disappointed with the slow pace of economic reform by the Congress party-led government which critics say has been gripped by "policy paralysis" due to a string of corruption scandals. India's government has been under pressure from business at home and abroad to create a more investor-friendly environment in the country of 1.2 billion. Around 1.1 million workers have pension funds that are managed by such players as ICICI Prudential Insurance, Reliance Capital and Life Insurance Corp of India, most of which have foreign partners. Foreign players can already have 26 per cent holdings in Indian insurance companies and a number have expressed keen interest in entering the pension fund market. Foreign investors in India's insurance market include Aviva and Axa.