Global giants like WalMart Stores Inc and Tesco Plc have expressed an interest in entering India's lucrative 500-billion-dollar multi-brand retail sector but have been closely following political developments before committing investments. The successful vote is now expected to encourage the governing alliance to push on with further economic liberalisation.
An opposition motion prohibiting foreign retailers was narrowly defeated 109-123 in the Rajya Sabha. The reforms had already won the approval of the powerful lower house, the Lok Sabha, on Wednesday. Friday's vote proved to be a scramble for numbers, amid dramatic pictures of an ailing lawmaker being carried on a stretcher to vote, and reports that Premier Manmohan Singh personally making telephone calls to parliamentarians to persuade them to cast their votes in the government's favour.
The United Progressive Alliance, led by the Indian National Congress party, had initially resisted the votes on reforms, unsure of a win in the upper house. Ministers earlier asserted that the parliamentary vote was non-binding on the government as the measure was an executive decision.
But a parliamentary defeat would have meant more pressure from the opposition to roll back the policy saying it lacked parliamentary approval. A Commerce Ministry official explained the government notification towards implementation of the policy had been issued after the announcement and the move by the opposition demanding the rollback of the reform had failed.
Buoyed by Friday's win on the government's flagship economic initiative since its re-election in 2009, Parliamentary Affairs Minister Kamal Nath declared there was now no stopping the country's economic reforms process. "We are going to bring in more financial legislation on economic reforms in the parliament," Nath said. Important bills including those to raise foreign investment caps in insurance and pension sectors are expected to be taken up by parliament during the ongoing session.
During the heated debates before the votes, ministers accused the main opposition Bharatiya Janata Party as well as left-wing parties of playing politics with the retail reforms that it said would promote economic growth and create jobs. They asserted there was no need for either a vote or debate as the policy left it to the states to choose whether to allow competition from foreign supermarkets.
But the opposition stuck to their stand that the move to open the retail sector to foreign supermarkets would hurt the country's manufacturing sector and threaten the livelihoods of millions of farmers and small store owners. Singh has pushed ahead with the contentious initiative despite the opposition's nation-wide protests since last year and even after a key ally, the Trinamool Congress, quit over the issue, leaving the coalition in a minority. Faced with the slowest growth in years and a huge current account deficit, the government says it has little option but to press ahead with other economic reforms that will draw foreign investment and revive the slowing economy.