India’s government conceded to opposition pressure to allow lawmakers a vote on plans to expand the presence of foreign retailers, backing down to end deadlock that had derailed moves to bolster the economy.
While the decision to enable companies like Wal-Mart Stores Inc. (WMT:US) and Tesco Plc (TSCO) to open supermarkets in India doesn’t require parliamentary approval to become law, rejection of the proposals in a ballot would expose the weakness of Prime Minister Manmohan Singh’s minority administration and sap investor enthusiasm for the centerpiece of his policy drive.
The government gave ground after talks with coalition allies and regional parties that have signaled they are unlikely to vote against the ruling bloc. Singh’s chief rival, the Bharatiya Janata Party, had vowed to continue protests that stalled parliament for five days until a vote was announced.
“Sailing through the retail vote will be a challenge for the government,” with parties extracting a price for their support, said Deven Choksey, managing director at K.R. Choksey Shares & Securities Pvt. in Mumbai. “Still, ending the parliament logjam is a positive development and brings hope that other economic reforms will get through.”
The 10-party, Congress-led ruling alliance is as many as 24 seats short of a majority in the lower house of parliament, and will need two key groups outside the coalition -- Mayawati’s Bahujan Samaj Party and her leading opponent, the Samajwadi Party -- to at least abstain to win the vote. In the upper house, the government faces an even stiffer contest.
The government is “confident of numbers,” Singh said on Nov. 27. The debate in the lower house will begin on Dec. 4, Parliamentary Affairs Minister Kamal Nath said today.
Parliament had been repeatedly adjourned since it resumed sitting Nov. 22 as opposition groups led by the BJP and communists accused the government of reneging on its promise to win the support of the legislature before moving ahead with the retail policy.
Defeat may harden opposition to proposals to enable foreign companies to hold bigger stakes in insurance firms and overseas investment in pension sector, both of which do need parliamentary approval. Congress’ most-senior leaders united behind the foreign investment push during a rally this month.
Singh’s initial attempt to woo overseas companies to modernize India’s retail market stalled in December as his biggest ally, Mamata Banerjee’s Trinamool Congress, objected. Banerjee pulled her party from the coalition government in September as the policy became the cornerstone of India’s biggest embrace of foreign investment in a decade, a push unveiled as growth in the economy stumbled to a three-year low and business leaders demanded action to curb the fall.
Banerjee and other regional leaders say allowing in multinational chains would force small shopkeepers out of business and drive down prices paid to farmers for their produce.
The lower house ran smoothly after the speaker, Meira Kumar, accepted the motion for a debate that entails voting. The chairman of the upper house, Vice President Hamid Ansari also admitted the notice on voting, D. Raja, a lawmaker of the Communist Party of India, told reporters.
The retail policy, which state assemblies are able to block, will enable Wal-Mart, Carrefour SA (CA) and Tesco to step up their presence in the world’s second-most populous nation to tap a market that Technopak Advisors Pvt. estimates will expand to $725 billion by 2017.
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