The Hindu nationalist-led government in India is facing dissent from within its own ranks over a plan to permit foreign investment in the insurance business, which is believed to have massive potential.

The finance ministry recently announced legislation to permit foreign-based firms to hold up to 40% of a joint insurance venture with Indian companies.

Just a year ago, the Bharatiya Janata Party (BJP) led a successful parliamentary rebellion over the plans of the former government to reform India's insurance sector.

Now in government the Hindu nationalists and Prime Minister Atal Behari Vajpayee, are facing opposition from within their own ranks to plans to open up insurance to foreign investment.

The legislation to allow foreign participation in insurance companies was to have been submitted in the current session of parliament.

The ministry says the bill will still go ahead, despite reports of a memorandum signed by more than 70 BJP MPs opposing it.

In opposition, the BJP championed Indian industry and investors at the expense of those abroad. But economic liberalisation, pursued by India since the late 1980s, means opening once closed sectors of the economy to all investors, domestic and foreign.

Several dozen joint venture insurance companies, linking Indian firms with big American, British and other insurance giants, are poised to enter the Indian market.

Right now, just two government-run firms control the entire market here.

Experts say there is massive business potential in the insurance market in India. This rebellion by government MPs is humiliating, and comes at a time when all investors are still cautious about India.