Helped by the Samajwadi Party and the BSP, the UPA government on Wednesday managed to convincingly defeat two opposition-sponsored motions against foreign direct investment (FDI) in retail and related Foreign Exchange Management Act (Fema) amendments in the Lok Sabha. For the ruling coalition — initially reluctant to put an executive decision to a parliamentary vote — the victory came as blessing in disguise, enabling it to claim parliamentary assent for its reformist agenda.
Government managers were quick to interpret the victory as proof of popular support to its reformist agenda. Prime Minister Manmohan Singh said: “FDI policy that we have put in place has the approval of this House.” Foreign supermarket giants like Wal-Mart, Tesco and Carrefour can now set up shops in India, with the comfort of political backing to the policy.
Although two days of debate on the issue saw the ruling and opposition parties trying to score political brownie points, the SP and BSP, which stridently opposed FDI in retail but had remained ambivalent on their floor strategy, on Wednesday chose to walk out of the Lok Sabha debate “in protest” rather than vote against the government.
Still, a vote on the issue on Friday in the Rajya Sabha, where the government is rather precariously placed, gives reason for the UPA managers to remain on their toes. Although the vote on FDI in retail is only of symbolic value, Fema amendments to allow inflows of foreign money into the sector are indeed needed to implement the decision.
While government functionaries claimed that FDI was a done deal after the Lok Sabha vote, independent observers said it was premature to conclude so before the Rajya Sabha decision on Fema.
In the Lok Sabha, 218 among the 471 members who participated voted in favour of the opposition motion asking for immediate withdrawal of the FDI decision, while 253 voted against it. The total strength of the House is 545. The House also rejected the motion seeking an amendment to the rules notified by the Reserve Bank of India under Fema. While 254 voted in favour of the government, 224 voted against. Members of the SP and BSP, with respective strengths of 22 and 21, did not participate in the voting as they walked out alleging that interests of farmers and small retailers had been ignored.
Earlier, replying to the debate, commerce and industry minister Anand Sharma said all relevant factors were taken into account before allowing foreign retailers to open stores in India, to ensure investors were protected irrespective of who comes to power. “FDI is made in accordance with the investment regime in force at a point in time, which can normally not be amended with retrospective effect,” he said.
Sharma clarified that the foreign investor would not be vulnerable to political power shifts in states after they established their presence in India’s retail sector under this policy.
The minister reiterated this was only an “enabling policy” and state governments were free to take their own decisions regarding its implementation. “Establishment of retail sales outlets is to be undertaken in compliance with applicable state/union territory laws/regulations, such as the Shops and Establishments Act,” he added.
During the discussion on the motion moved under Rule 184 that entails voting, BJP questioned government motives behind allowing 51% FDI in multi-brand retail. Trinamool Congress, AIADMK, TDP, CPI and CPI(M), SAD, Shiv Sena, BJD and JD(U) also spoke against the government’s decision, alleging it would hurt small retailers in India and lead to loss of jobs and price increases.
Several reform Bills are listed for the winter session, which is nearly half way through. These include the insurance Bill seeking to increase the FDI limit from 26% to 49% – the move could address capital constraints in the sector which needs an estimated $10-12 billion for expansion – and the pension Bill allowing FDI up to the same level in pension. Other Bills listed for consideration include the Banking Laws (Amendment) Bill, which will pave the way for the Reserve Bank of India to start issuing new bank licences, and the Companies Bill that seeks to usher in a regime of non-intrusive regulation of corporates, balanced with greater shareholder democracy and more disclosure requirements. Legislation regarding tax reforms (the GST Constitutional Amendment Bill and Direct Taxes Code) and an industry-friendly Land Acquisition Bill are also listed for passing. Key governance reforms – the Lokpal and Lokayuktas Bill as also the Constitution (117th Amendment) Bill for reservation to SC/ST in government jobs – are also on the winter session’s agenda. The government might try to push at least some of these bills in the session.