On Wednesday, Dec. 5, 2012, India's Lok Sabha (Lower House) voted in favour of the government allowing FDI in multi-brand retail and an amendment to the Foreign Exchange Management Act (FEMA). Even though the parties, such as BSP and SP, are against FDI in multi-brand retail, they abstained from voting, helping the government attain a majority (253 votes against 218 for the opposition).
The next step will a be debate on the same two issues (FDI and FEMA amendment) in the Rajya Sabha (Upper House) on Dec 6, followed by voting in the Rajya Sabha on Dec 7. Securing a majority vote in the Rajya Sabha will be a difficult balancing act as the ruling government has a minority in the upper house.
Commenting on the development, Sonal Varma, Economist, Nomura Financial Advisory and Securities, said, "FDI in multi-brand retail is an executive decision and as such the voting outcome is non-binding on the government. However, if the government is able to repeat performance in the Rajya Sabha, this will be seen as a positive for two reasons.
First, it suggests that the government has the ability to undertake not just executive decisions, but also legislative reforms (i.e. ones that need parliamentary approval). Second, it clears the logjam created due to the FDI issue and parliament can start focusing on other important pending bills during the remaining days of the winter session (which ends on Dec. 20).
Overall, decision is positive for the ruling Congress-led UPA government and (hopefully) for the India: Government wins retail FDI vote in the Lower House reform outlook."
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