The Indian government has approved a plan to open up the insurance market in the country to private business and foreign investors.

The finance minister, Yashwant Sinha, said legislation would be introduced in the current parliament to end the state monopoly of the insurance business.

Foreign investment would be allowed of up to forty per cent in insurance companies.

Correspondents say more than a dozen foreign insurers have already signed understandings with Indian partners in the hope that the sector would be liberalised.