India’s government won a vote in parliament’s upper house on foreign investment in supermarkets, securing a clean sweep of both chambers and raising expectations it will move ahead with further economic reforms.
While 123 members in the 244-member upper house supported Prime Minister Manmohan Singh’s move to allow companies such as Wal-Mart Stores Inc. (WMT) and Carrefour SA to own majority stakes in ventures in India, 109 voted against. Two regional parties outside the ruling alliance supported the government, one voting in favor and the other walking out before the ballot.
“It’s a victory for more reforms,” said Parliamentary Affairs Minister Kamal Nath. “We will bring financial bills in following weeks.”
The lower house endorsed the key plank of India’s biggest embrace of foreign investment in a decade on Dec. 5 with a margin of victory of 35 votes. Singh plans to present to parliament proposals to increase the foreign investment cap for the insurance sector, and allow overseas companies to buy stakes in pension firms for the first time.
Deputy Governor of the Reserve Bank of India Subir Gokarn said the foreign investment in multibrand retail could help bring down food prices, a major driver of inflation that’s the highest among the largest emerging economies.
The September move to enable overseas companies to open stores in the country didn’t require parliamentary approval to become law. Singh’s government agreed to a vote to end protests that had stalled legislative business as economic growth has slowed to a three-year low.
As the debate began in upper house yesterday, opposition lawmakers repeated arguments that the policy would throw small shopkeepers out of work, further impoverish farmers and hurt consumers. Ruling coalition members defended the retail plan, which can be rejected by state administrations.
“We should have faith” that no supermarket chains will wipe out small retailers, Commerce Minister Anand Sharma said today. “We have taken the decision in the supreme national interest of the country.”
Opposition parties have used the supermarket policy to attack the government as it seeks to recover its poise after two years during which it was attacked over corruption allegations and weak leadership, and just over a year before the next election.
“You would eventually have stores owned by the Americans, the French and the British selling Chinese products,” said Arun Jaitley, leader of the main opposition Bharatiya Janata Party, yesterday. India “would become a nation of sales boys and sales girls.”
Mayawati’s Bahujan Samaj Party, voted in favor of the government, while members of her regional opponent, Mulayam Singh Yadav’s Samajwadi Party, left the chamber before voting. Both parties, which opposed the retail opening, have a record of refusing to vote alongside the Hindu-nationalist Bharatiya Janata Party and striking deals with governing parties for their support.
The retail policy will enable Wal-Mart, Carrefour SA (CA) and Tesco Plc (TSCO) 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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