Govt wins vote in Rajya Sabha on FDI in retail

Indian government won a parliamentary vote on Friday to allow foreign direct investment (FDI) in the Indian retail sector in a development that now paves the way for opening the sector to the likes of Walmart, Carrefour and others. The move, however, does not allow foreign investment in online retail as the government had previously kept e-commerce out of the purview of this policy liberalisation.

Earlier this week, the Congress-led ruling United Progressive Alliance (UPA) won the Lok Sabha (the Lower House of the Parliament) vote on opening up the multi-brand retail sector for FDI, but it faced a tough challenge in the Upper House. However, on Friday, Rajya Sabha members also voted in favour of allowing FDI in multi-brand retail.

Rajya Sabha members, who are not directly elected by the general public like the Lok Sabha members are, voted 123:109 in favour of the UPA.

Certain alliance members of the UPA were opposed to the idea of FDI in retail, which had posed a question mark over the policy move. The government had allowed up to 51 per cent foreign investment in multi-brand retail in September this year in a big move as it faced criticism over policy paralysis amid corruption scandals.

The ruling coalition was supported by Bahujan Samaj Party (BSP) and Samajwadi Party (SP), two strong political outfits who otherwise lock horns with the UPA in their home state of Uttar Pradesh. Earlier, the SP won the state elections in Uttar Pradesh, defeating the BSP, and also the UPA. Both SP and the BSP abstained from voting in the Lok Sabha and indirectly allowed the government to win the voting. On Friday, the BSP voted in favour of the government, but the SP again abstained from the voting process.

Besides the Left wing, the main opposition party, Bhartiya Janta Party (BJP), has been opposed to the opening of the retail sector. BJP derives a chunk of its vote bank from local traders’ community who fear that foreign investment in retail would kill the neighbourhood stores and affect the livelihood of millions of small store owners.

UPA’s winning the vote in the Parliament in this key policy move now sets the stage for clearing the bills related to other reform measures such as attracting foreign investments in pension and insurance sectors.

The stock market, which had moved up earlier this week as the government won the vote in the Lok Sabha, however, put on a muted response to the voting in Rajya Sabha as it was already factored in expectations.

The 30-stock benchmark index Sensex closed at 19,424 on Friday, down 0.3 per cent. This still remains close to its highest level in more than 19 months and just 10 per cent shy of its historical peak that it hit in January 2008.

Also read:

India opens up with FDI in multi-brand retail, aviation and other sectors

Devil in the fineprint: India keeps out e-commerce from FDI in multi-brand retail

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