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Indian Government Wins Vote on Retail Reform

in International Business

Indian Government Wins Vote on Retail Reform

India’s minority government narrowly won a final vote in parliament on Friday for its controversial move to allow in foreign supermarkets, giving a boost to its reform agenda.

After heated debate, members in the upper house finally voted ‘yes’ to the reforms. The government won with 123 MPs in favour and 109 MPs opposing it.

“The vote sends a very good signal to investors that underneath all the debate — which is all part of the democratic process — things (in India) do move forward,” said Montek Singh Ahluwalia, one of the country’s most powerful bureaucrats.

“This vote is very positive…Parliament got it done.”

Walmart is said to be one of the first in India to set up foreign owned megastores that opposition parties say could drive the country’s millions of small, family owned stores out of business.

Ahead of the vote in the upper house on Friday, one regional party opposing the retail reform, the Samajwadi Party, walked out of parliament, helping assure the government’s victory.

The victory marked the Congress-led minority government’s second parliamentary test of strength in three days. Earlier the lower elected house also rejected the motion.

Although a loss would not have reversed the government’s policy to allow global firms to buy up to a 51 per cent holding in multi-brand retailers in India, the defeat would have dealt Prime Minister Manmohan Singh’s left leaning coalition an embarrassing blow and stymied efforts to push through other reform measures.

The Bharatiya Janata Party proposed the motion to oppose the entry of large retail chains, saying the measure would deprive millions of Indian traders of their livelihood.

But Commerce Minister Anand Sharma said the move was “essential” for the country’s growth and rejected the opposition claims that it would hurt the small retailers and farmers or harm the manufacturing sector.

After wavering for years over policy, Singh’s government unveiled a string of changes in September, throwing open key sectors such as retail and aviation while proposing greater foreign investment in insurance and pensions.

The market-opening push, which includes efforts to cut subsidies, comes as India faces a sharply slowing economy, a gaping fiscal deficit and high inflation, which has stoked pressure on an administration already under fire for corruption.

However even with the liberalisation steps, foreign supermarkets looking to enter India will have to abide by a number of rules, including investing $100 million and opening stores only in towns with populations of over one million.

Tags assigned to this article:
India retail reformIndian economyManmohan Singh

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