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UPA Wins FDI Vote

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The Lok Sabha voted on multibrand retail FDI after two days of debate and as expected, the government won the debate by a margin of 253 to 218. While siding with the opposition as far as attacking government on FDI goes, SP and BSP members walked out of the Lok Sabha during the debate before the crucial voting could take place, leaving the floor clear for an UPA win.

The markets throughout the day had been hopeful that the government will win and retail stocks, led by Shoppers Stop, surged 7 per cent on 5 December on optimism that the government would succeed in getting Parliament approval to its decision to allow foreign investment in the sector. Trent, promoted by the Tata group, gained 4.25 per cent, while shares of Pantaloon Retail rose by 3.32 per cent. Among others, Provogue India soared 6.15 per cent, while Koutons Retail India was up 4.97 per cent.

The rupee also appreciated for the second straight day to close 14 paise higher at 54.54 on optimism that Indian government would get Parliamentary approval to FDI in multi-brand retail, leading to big inflow of dollars. Persistent overseas investments in stocks and sustained dollar sales also aided the rupee rise, forex dealers said.

Estimates show the country could receive inflows of around $3-5 billion over the next two years if FDI in multi-brand retail is allowed, traders said.

“Decision on FDI in multi-brand retail was not taken overnight,” said commerce minister Anand Sharma. “Wastage of fruits and vegetables per year is Rs 65,000 crore that amounts to 30-35 per cent of the produce,” he said.

While the Opposition had been trammeling the government saying that they had not been consulted while taking the FDI decision, commerce and industries minister Anand Sharma comes to the defence of the government. “When the topic of FDI was broached in 2011, I had written letters to all states asking for their opinion. Twenty-one states responded, out of which 11 were in favour of FDI. Seven states opposed it. I had gone and met Mamata Banerjee thrice and discussed the issue with her. However, she was firm on her decision to not allow FDI. And since we respected her and everybody else’s decision, we added a clause that whichever state wanted to introduce FDI could do so, whichever state didn’t, they had the freedom to abstain from it. So what is the allegation, that we didn’t consult the other parties, based on?” asks Sharma.

Earlier, apprehending that SP and Bahujan Samaj Party would bail out the United Progressive Alliance on FDI in retail, Opposition in Lok Sabha warned these parties as well as Dravida Munnettra Kazhagam (DMK) that history will not pardon them if they sided with the government on the issue despite opposing it during the nationwide protest.

Among those who made a scathing attack on the government over the issue were members of the Janta Dal(United), Communist Party of India-Marxist (CPI-M), Biju Janata Dal (BJD), Shiv Sena and All India Anna Dravida Munnettra Kazhagam (AIADMK).

UPA ally Nationalist Congress Party (NCP), which is a major partner in Maharashtra government, suggested it was not completely on board regarding implementation of FDI in retail, with its leader Praful Patel saying the state's Coordination Committee will assess its impact as it did not want small retailers to be hurt.

But at the same time, he rejected the Opposition contention that FDI was bad for the country.

Participating in the discussion on the issue, JD(U) leader Sharad Yadav said "history will not pardon you (Congress) if you implement this measure. I am telling this also to those who were with us in the 'Bharat Bandh'," called by the entire Opposition, including Left parties and the Bharatiya Janata Party (BJP) in September to protest allowing of FDI in multi-brand retail.

Looking at Samajwadi Party (SP) chief Mulayam Singh Yadav sitting in the front row, he recalled that SP, BSP and DMK were "with us" during the nationwide protest and said that 85 per cent of the people would be adversely affected by the move.

Second Wave Of Economic Reforms
The victory gives Singh a much-needed boost at a time when he is trying to drive a second wave of economic reforms through a fractious parliament. The debate over retail reform has proved a costly distraction for the government and has already eaten up two weeks of the month-long parliamentary session.

The vote now clears the way for voting on bills aimed at attracting foreign investment to the ailing pension and insurance industries, two measures seen by financial markets as important steps towards further liberalising an economy in the midst of a slowdown.

Expectations the government would win drove the stock market to a 19-month high on Wednesday.

The vote in the Lok Sabha was non-binding. However, a loss would have made it harder for Singh to defend the policy to bring global chains such as Wal-Mart Stores Inc. to India's $450-billion retail sector.

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, Singh 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.

(With input from Agencies)