Government wins vote on FDI in retail in Rajya Sabha

Government wins vote on FDI in retail in Rajya Sabha
New Delhi:  The government's double victory in the Lok Sabha and the Rajya Sabha on its decision to allow Foreign Direct Investment or FDI in multi-brand retail opens the way for financial sector reform bills to be taken up in Parliament next week, Parliamentary Affairs Minister Kamal Nath said on Friday.

He was speaking to reporters after the government won a vote in the Rajya Sabha on allowing foreign supermarkets such as Wal-Mart Stores Inc to set up shop in India for the first time.

Prime Minister Manmohan Singh's administration will now turn its attention to pushing more reforms, including raising foreign investment caps in the insurance and pension sectors. "This is the victory for more reforms. In the following week we will bring more financial legislation on economic reforms," Mr Kamal Nath said. "Our reforms are on track," he added. (Read: who said what)

There are 244 MPs in the Rajya Sabha. With 15 MPs of Mayawati's Bahujan Samaj Party (BSP) voting in favour of the government, and nine MPs of Mulayam Singh Yadav's Samajwadi Party abstaining, the government had 123 votes against the opposition's 109. On rechecking, the final numbers stood at 123 votes for the government, 102 for the opposition. 19 MPs had not voted.

The government had already won a vote on retail reform in the Lok Sabha two days earlier. The policy will allow global retailers to set up shop in the country's $450 billion (Rs. 2,500 crore) retail sector, and is aimed at drawing more overseas investment and taming inflation.

Although both votes were non-binding, defeat would have piled pressure on Dr Singh to roll back the measure.

Once again, Dr Singh's coalition government relied on Friday on the outside support of the Samajwadi Party (SP) and Bahujan Samaj Party (BSP), underscoring the extent to which it is at the mercy of powerful regional groups to push through legislation. (Watch: Mayawati, Mulayam help govt win FDI vote)

In the shrinking window before a general election that is due in just over a year, Dr Singh's government - in a minority since the Trinamool Congress exited in September to protest against tough reform measures - wants to push reforms such as allowing more foreign investment in its insurance and pension sectors, and simplifying tax laws.

But these are likely to run into a wall of opposition from opposition parties that say such market-friendly reforms will come at the expense of domestic businesses.

Dr Manmohan Singh's Congress party has 10 days left before the end of the current Parliament session to try to pass legislation.

However, the session could once again see the kind of disruption and walkouts that have repeatedly stalled business over the last couple of years. Lawmakers have used them to air grievances on anything from corruption to demands for the creation of a new state in the south.

Moreover, the main opposition Bharatiya Janata Party (BJP), having seen its motion to block retail reform defeated, is likely to obstruct moves to allow FDI in the insurance sector. The BJP wants a 26 per cent cap set on investment, against the government's proposed 49 per cent.

"We will oppose any move by the government against the recommendations of the standing committee on finance which has said it should be 26 per cent," Prakash Javdekar, spokesman for the party, told Reuters on Friday.

To carry on with reforms, the Congress party will have to rely on the support of the BSP and the SP to defeat the BJP.

"The regional parties supported the Congress party on retail reform and my feeling is that they will continue to do so because they don't want to give BJP any political advantage," said political analyst Amulya Ganguli.

India's economy is set to grow at its slowest pace in a decade in this fiscal year, and the government's overspend on subsidies on fuel and food has prompted global ratings agencies to warn of a downgrade.

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