(Recasts story to say law passed)
NEW DELHI, March 12 (Reuters) - Indian Prime Minister Narendra Modi passed his first major economic reform almost a year after coming to power, as parliament voted late on Thursday to allow more foreign investment in the insurance sector.
Lawmakers in the upper house agreed to increase the foreign investment limit in local insurers to 49 percent from 26 percent after the opposition Congress party swung behind the bill which cleared the lower house last week.
The passage of the bill represents a rare victory for Modi, who was elected last May on a promise of jobs and economic growth, but has seen other initiatives stymied by clashes with the opposition in parliament.
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.
“I don’t see massive inflows into the sector immediately from foreign investors. Nevertheless, it will be a very positive signal,” said Dhirendra Kumar, chief executive of funds and insurance advisory service Value Research.
The legislation will 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 had backed the insurance bill as they had first proposed the measure in 2008.
Modi needed 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. (Reporting by Andrew MacAskill, Nigam Prusty and Himank Sharma; Editing by Douglas Busvine, Robert Birsel and Andrew Heavens)