Saturday 8 December 2012

Govt wins FDI in Parliament – challenges ahead

The government had already won a vote on retail reform in the Lok Sabha two days earlier. The policy will allow global retailers to set up shop in the country's $450 billion retail sector, and is aimed at drawing more overseas investment and taming inflation. Under threat of losing India's investment grade credit rating, and facing the prospect of fighting a general election during the worst growth slump in a decade, UPA launched the policy amid a flurry of long-delayed reforms in September. Money has flowed into India's capital markets since, and Goldman Sachs last week upgraded India's outlook, but formidable hurdles remain to get the economy back on track. India's economy is set to grow at its slowest pace in a decade in this fiscal year, and the government's overspend on subsidies on fuel and food has prompted global ratings agencies to warn of a downgrade.

While the Rajya Sabha vote was symbolic, the government's victory is a boost for its push to implement a controversial economic reform agenda that is seen as crucial to reviving growth and reducing a bloated fiscal deficit. In the house, the opposition-backed motion got 102 votes and the government 123 votes. Four members, cricketer Sachin Tendulkar was away playing a match against England in Kolkata, VN Singh, Pyari Mohan Mahapatra and Murli Deora were unwell could not vote. Although both votes were non-binding, defeat would have put pressure on Manmohan Singh to roll back the measure. Getting support once again from the unlikely combination of Mulayam Singh’s Samajwadi Party and Mayawati's Bahujan Samaj Party, the government won the day in the Rajya Sabha by 21 votes. Minutes before the voting process began, the SP walked out of the house with its nine MPs, bailing out the ruling United Progressive Alliance (UPA), as it had on Wednesday when the Lok Sabha voted on the issue.
On Thursday, day one of the debate on the issue in the Rajya Sabha, Mayawati on provocation from the leader of the opposition, Sushma Swaraj, had said in the house that 15 MPs from her party would be voting with the government. This was a major set back for the BJP led opposition. Both the BSP and SP support the government from outside. The government on Friday termed its winning of the FDI vote in the Rajya Sabha as a "rejection of the politics of the BJP".

Asked how the Congress managed to work the numbers in its favour in the upper house where it is in a minority, Kamal Nath said: "The content (of the issue) was political, parties decided in our favour."
"I appealed to parties to recognise the BJP's political agenda and vote accordingly, and they did that," he added.

The UPA government got the much-needed impetus as it won the vote in Rajya Sabha on FDI in retail making it easier for the prime Minister to push ahead with more reforms, including the insurance sector. Moreover, the main opposition BJP, having seen its motion to block retail reform defeated; is likely to obstruct moves to allow FDI in the insurance sector. The BJP wants a 26 percent cap set on investment, against the government's proposed 49 percent. Policy gets parliamentary seal of approval but implementation still some way off. Government now has Parliament’s endorsement on FDI, but it needs to get FEMA rules amended in RS. LS has rejected opposition’s objections to these rules. Govt plans to pass amendments to the banking laws on Monday. The Forward Contracts Regulation Act Bill is next in the line.

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