India's cabinet on Wednesday approved an executive decree to hike foreign investment in the funds-starved insurance sector, bypassing squabbling lawmakers to push ahead with economic reforms.
The ordinance, a rarely used measure, raises the foreign direct investment cap in insurance companies to 49 percent from 26 percent. The move must be approved by both houses of parliament during the next session to take permanent effect.
"The ordinance demonstrates the firm determination of the government for reforms," Finance Minister Arun Jaitley told reporters in New Delhi.
Foreign investors have been long eyeing the lucrative sector, which analysts say has huge potential thanks to a fast-expanding middle-class and the fact that only around four percent of the 1.25-billion population has insurance cover, according to industry figures.
"Large investment is waiting to come," Jaitley said, with government officials saying they expect billions of dollars in foreign funds to flow into the sector in the coming years.
Shares of insurers leapt on the announcement, with Max India, the local arm of Japan casualty insurer MS&AD Insurance Group, jumping nearly eight percent to 387.55 rupees.
The traditionally fractious parliament has been stalled by rows over alleged "forced" religious conversions of Christians and Muslims by Hindu hardliners, many of them close to the ruling Bharatiya Janata Party which took power in May.
The row has left the right-wing government with much left undone on its 'to-do list' in the last session of parliament, which wrapped up Tuesday.
The insurance decree, one of the government's big-ticket policies, "announces to the world and investors this country can no longer wait" for reforms, said Jaitley, who presents his first full budget next February.
The decree followed a vow by Jaitley last weekend not to allow parliamentary protests to hold the government's economic reforms hostage, saying "either we reform or we miss the bus once again."
The cabinet also cleared an ordinance renewing approval for the long-awaited auction of coal mining licences in India, which is heavily dependent on the resource for generating electricity.
The sale by auction is aimed at making transactions more transparent after previous government allocations were dogged by illegalities.
The shift to auctions will ensure "fair play in coal block allocations", needed to ensure more private players in the energy field, said Chandrajit Banerjee, director-general of the Confederation of Indian Industry, a leading business lobby.
Analysts said the sale and development of coal blocks will help replace vast amounts of coal now being imported by Indian energy companies.
The government, led by Prime Minister Narendra Modi, has been seeking to step up the pace of reforms to revive the stuttering economy after criticism from business it was not moving swiftly enough.
India has been stuck in the longest spell of below-five-percent growth in a quarter-century, hit by high interest rates, an investment slowdown and flagging consumer confidence.
Economic growth in the last financial year to March 2014 was 4.7 percent after falling to 4.5 percent the previous year, half the boom rates rate of a few years ago.
This year, the government hopes growth will accelerate to 5.5 percent and cross six percent next year. But it needs near double-digit expansion to cut massive poverty and create jobs for its army of young workers.
Modi has been busy cutting India's infamous bureaucratic red tape but has steered clear so far of many big-bang reforms, with opposition control over the upper house of parliament slowing the reform drive.