NEW DELHI, (Reuters) – The Indian government bowed to intense opposition pressure and agreed yesterday to a vote on its decision to let foreign supermarkets set up shop in India, taking a major step towards ending a deadlock that has paralysed parliament for days.
In finally conceding to a symbolic vote on its flagship economic reform, Prime Minister Manmohan Singh’s fragile coalition appears to have calculated that it has the numbers to overcome opposition demands for the measure to be rolled back.
The debate will begin on Tuesday in the lower house, with voting likely the next day, members of parliament told reporters. A vote will also take place in the upper house.
A lot is at stake for Singh’s minority government. If it loses the vote it would be more than just an embarrassing setback. It would likely face intensified pressure to reverse its executive decision in September to allow foreign direct investment (FDI) of up to 51 percent in domestic supermarkets.
“It is most crucial for government and the country at this stage that the vote on FDI musters a majority otherwise it will be a symbolic blow for the government,” said Paresh Nayar, head of fixed income and forex trading at First Rand Bank.
“India is a deficit country and needs all foreign flows to manage the rupee, to cut deficits and to push GDP,” he said.
India’s economy is set to grow at its slowest pace in a decade this fiscal year. Manufacturing is contracting and exports are falling. October’s trade deficit of nearly $21 billion was its worst on record.
The concession on the vote helped send Indian shares to their highest levels in nearly 19 months, while the rupee made its biggest daily gain since Sept. 21.
