By Nigam Prusty
NEW DELHI Nov 29 The Indian government bowed to
intense opposition pressure and agreed on Thursday to a vote on
its decision to let foreign supermarkets set up shop in India,
taking a major step towards ending a deadlock that has paralysed
parliament for days.
In finally conceding to a symbolic vote on its flagship
economic reform, Prime Minister Manmohan Singh's fragile
coalition appears to have calculated that it has the numbers to
overcome opposition demands for the measure to be rolled back.
The debate will begin on Tuesday in the lower house, with
voting likely the next day, members of parliament told
reporters. A vote will also take place in the upper house.
A lot is at stake for Singh's minority government. If it
loses the vote it would be more than just an embarrassing
setback. It would likely face intensified pressure to reverse
its executive decision in September to allow foreign direct
investment (FDI) of up to 51 percent in domestic supermarkets.
"It is most crucial for government and the country at this
stage that the vote on FDI musters a majority otherwise it will
be a symbolic blow for the government," said Paresh Nayar, head
of fixed income and forex trading at First Rand Bank.
"India is a deficit country and needs all foreign flows to
manage the rupee, to cut deficits and to push GDP," he said.
India's economy is set to grow at its slowest pace in a
decade this fiscal year. Manufacturing is contracting and
exports are falling. October's trade deficit of nearly $21
billion was its worst on record.
The concession on the vote helped send Indian shares to
their highest levels in nearly 19 months, while the rupee made
its biggest daily gain since Sept. 21.
"It's an important step to break the parliament logjam. This
was the key stumbling block," said Rajeev Malik, senior
economist at CLSA Singapore.
The deadlock had threatened to derail the government's
efforts to drive forward its stuttering economic reform agenda
with new legislative measures to allow greater foreign
investment in the insurance and pension sectors.
The benchmark index closed provisionally 1.8
percent up, while the broader Nifty was up 1.7 percent.
GOVERNMENT NEEDS HELP
While the government is confident of mustering a majority in
the lower house of parliament, or Lok Sabha, the vote in the
upper house, or Rajya Sabha, will be harder to win. The ruling
Congress party and its coalition allies have fewer seats there.
The main opposition party, the right-wing Hindu nationalist
Bharatiya Janata Party, and leftist parties have disrupted
parliament for nearly a week with demands for a vote on the
supermarket reform, which they strongly oppose. The government
had resisted such a move and called instead for a debate.
After the house speaker announced plans for the vote,
parliament resumed operating normally, if noisily, for the first
time in months. The summer session was washed out by opposition
protests over sweetheart coal deals with power companies.
Critics say allowing foreign players into the $450 billion
retail sector will destroy the livelihoods of millions of small
shop owners. The government says the move will bring down waste
and costs in a country where one-third of fresh produce rots and
food inflation is a persistent worry.
Wal-Mart, the world's biggest retailer, plans to
open its first supermarket in India in 12 to 18 months.
For the government to win the vote in the Lok Sabha it would
need the help of the Samajwadi Party and another major regional
party, the Bahujan Samaj Party, neither of which are part of the
coalition but often vote with it in parliament.
While both parties oppose the reform, the government is
banking on them abstaining, thereby depriving the opposition of
The two parties have proven fickle allies in the past and
have not publicly revealed which way they will vote. But over
the past week, the government has been lobbying hard for their