India gov't wins vote on foreign retailers entry

Last Updated: Wed, Dec 05, 2012 14:45 hrs

The Indian government won a vote in in parliament's powerful lower house Wednesday that gave backing to its plans to open up the country's massive retail sector to international big-box companies such as Wal-Mart.

The government won with 253 votes, while 218 lawmakers— who say the move will crush small shop owners and farmers — voted against the plan, after 43 lawmakers belonging to two socialist parties abstained from voting.

Before the vote, the Congress had said it was confident of winning the nonbinding vote with the support of its political allies.

A loss would have been a major embarrassment but would not have stopped the measure from being implemented after the Cabinet in September decided to allow foreign companies to own stakes of 51 percent in supermarkets and other big retailers for the first time. However, individual states would have the right to decide whether to let the retailers operate in their territory.

Parliament's upper house will debate the issue later this week

The measure to allow foreign retail chains to do business in India was an attempt by the government of Indian Prime Minister Manmohan Singh to institute reforms that will shore up a slowing economy and bring in a fresh infusion of investment, which could also help farmers and small businesses.

Singh told reporters the vote was a pragmatic one and a victory for the government's policy of economic reform.

Telecommunications Minister Kapil Sibal said during the debate that "there would be improvements in the supply chain and an assured buyer for their products."

But opposition parties said small retailers will not be able to withstand the competition from the global giants.

"Foreign companies are keen to expand their businesses in India as they see this as a big market. But our small businesses and traders will be wiped out," said Sushma Swaraj, of the main opposition Bharatiya Janata Party.

"Big retailers are not in the charity business. They will squeeze our farmers and small producers," she told lawmakers.

The government has argued that farmers would benefit because less of their produce would rot, small retailers would become more competitive and efficient, and consumers will get lower prices and better quality.

Commerce Minister Anand Sharma said the entry of big retail companies would prove an incentive for greater investments in the food infrastructure chain.

"Around 35 percent of the fruit and vegetables grown in the country rots in the field due to the absence of cold storage facilities. This decision will strengthen the backend infrastructure and cut down the enormous wastage of food produce and grain," Sharma said.

The vote came after lawmakers who oppose the measure had kept Parliament's operations at a standstill for several weeks, demanding a debate and vote on the measure. After initial resistance, the ruling Congress party agreed. The debate began Tuesday and the vote came after two days of rigorous debate.

Wal-Mart, British-based Tesco PLC, French-based retailer Carrefour and others had been eyeing India. Retail is the second-biggest industry sector, behind agriculture, in the nation of 1.2 billion people.

Winning the vote has come as a major shot in the arm for Singh's beleaguered government, which has faced sharp criticism after a slew of corruption scandals over the past year. It would also affect the government's decision to bring in other longstanding financial reforms, including opening the insurance and pensions markets to foreign investors, both of which would require a vote in Parliament.

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