The reforms in retail that were meant to signal the end of the government's policy paralysis, have been suspended. The Finance Minister shared this decision with all political parties today and got in return the truce the government desperately needed - Parliament will now get back to work.
That's essential for the government because important legislation is pending. Headlining that list is the Lokpal Bill, intended to combat corruption. Anna Hazare and his team of activists have warned of massive protests, a new hunger strike by the 74-year-old activist, and a campaign against the Congress in five states headed to elections. To prevent this, the government has to deliver a Lokpal Bill that Anna finds acceptable before this Parliament session concludes on December 21.
At a meeting of all political parties, that lasted less than half an hour, Finance Minister Pranab Mukherjee read out a short statement -"The decision to permit 51% FDI in retail trade is suspended till a consensus is developed through consultations among various stakeholders." Mr Mukherjee then formally shared the same resolution in the Lok Sabha at 11 am. He stressed that the "stakeholders" he referred to include Chief Ministers and political parties. Without the involvement of state governments, he said, the new FDI policy cannot be implemented.
Sources tell NDTV that the Prime Minister formally informed the Cabinet about the decision to put FDI in retail on hold, at a meeting this evening.
The opposition accepted the government's stand. The BJP's Sushma Swaraj said it is a victory of democracy that has forced the government to bow before the "will of the people."
The Left says that the government's announcement amounts to a "virtual rollback" - a rollback was the pre-requisite declared by the BJP and the Left for parliament to start functioning again. "We are happy that this time the government has yielded without waiting for the washout of the entire Parliament session. This time they have relented mid-way through the session by agreeing to suspend the decision on FDI in retail," CPI(M) politburo member Sitaram Yechury told reporters.
Mr Yechury added, "...it was decided that the government is so far taking back the decision on FDI in retail, whatever word they may use. The decision will not be implemented. In future, whatever decision will be taken on the issue, it will be based on a consensus with all stakeholders."
Members of the UPA coalition, however, say the reforms have been paused, not cancelled. Rajiv Shukla, junior minister for parliamentary affairs, said, "They asked for a few clarifications. It has been decided that the Parliament will function from today. The government's decision is that till the time a consensus is reached, the FDI would be suspended."
Taking full credit for the end to the logjam is UPA ally Trinamool Congress, which effectively arm-twisted the government into its climbdown on the reforms move. Looking pleased after the all-party meeting, the Trinamool's Sudip Bandhopadhyay said, "This had already been discussed between Pranab and Mamata earlier, it was just presented to all parties today." Parliament would now function he said, "this is Mukherjee and Banerjee's game."
Mamata Banerjee, the government's biggest ally, indeed owns responsibility for forcing the U-turn on FDI in retail. First, the Trinamool chief made it clear that her party will not support FDI. Then she announced on the weekend that Mr Mukherjee had phoned her to share that the policy would not be implemented for now. Ms Banerjee has the muscle of 18 Lok Sabha MPs. The opposition said that if the government did not rollback its decision, a vote was needed in parliament. With Ms Banerjee making it clear that she would not vote for the government, the math was precarious for the UPA. It would skid through a vote, with a serious dent to its moral authority.
The government had initially said that it would neither defer nor rethink its FDI policy - while stressing the right of the Executive to mandate policy, ministers said that in deference to Ms Banerjee, who is the Chief Minister of West Bengal, states had the right to reject the reforms being introduced. However, there were other states that were keen on FDI, Commerce minister Anand Sharma pointed out. The Prime Minister went public with the assertion that FDI in retail would benefit the country and that it was here, and here to stay. The U-turn is being looked at as a serious dent in the PM's authority.
Now that they have been suspended, sources in the government say the reforms in retail , which will allow the entry of global super-chains like Tesco and Wal-Mart, will be erased from the government's to-do list till after the UP elections, expected within the next few months. There was subtle opposition to the move even within the Congress, partly because of the elections in UP, a key state.
India Inc has made it clear that a suspension of the reforms announced will have disastrous economic consequences. "It's a disappointing, regressive step," said Harsh Mariwala, President, Federation of Indian Chambers of Commerce and Industry (FICCI). Earlier, FICCI Secretary General Rajiv Kumar had warned that market sentiment would "weakened, decimated." (India Inc says FDI suspension disappointing)