FDI Government is keen to pass reforms-related legislation like insurance, pensions, companies and banking bills seen to be vital

to UPA's bid to improve India's investment prospects and beat back a threat of a downgrade by rating agencies and will hope to limit disruptions. The breakthrough in the four-day stalemate in Parliament came with DMK chief M Karunanidhi announcing that despite a sense of "bitterness" over supporting FDI in retail, the party would vote with UPA keeping in mind the consequences of the government falling. Karunanidhi's invocation of the danger posed by "communal" BJP did not surprise UPA circles as DMK's alleged antipathy to global retailers is not seen to be as deep rooted as it appears to be. DMK's ties with Congress are fraying but it is cannot risk an election. UPA's stand on a vote in Parliament on FDI was sealed at a meeting of the coalition's coordination committee on Tuesday with senior ministers saying the precise rule under which a discussion takes place will be left to Lok Sabha and Rajya Sabha presiding officers. Rahul Gandhi too attended the meeting in another affirmation of his growing role in Congress and coalition affairs. The ruling coalition has the support of about 265 MPs in Lok Sabha in a 545member-strong House. With Samajwadi Party's 22 and BSP's 21 MPs, its numbers cross 300, comfortably more than the required 273. In Rajya Sabha, UPA and allies have 95 MPs. UPA needs BSP's 15 and SP's nine in a House with an effective strength of 244. The Upper House arithmetic appears to rule out an abstention by Uttar Pradesh outfits if they are to help the government. The shift also means that the BJP-Left combine's move to team up and insist on a vote on FDI policy paid off. The vote is expected to see parties like AIADMK and BJD opposing the government, deepening the impression of a near vertical split in political opinion over FDI. Although UPA leaders claim the standoff over the FDI policy was not as grave as it was made out to be, it needed some persistent negotiations to bring all supporters on board. Space had to be created for allies like DMK to retreat from their public opposition to FDI. Government managers can pat itself for getting DMK, SP and BSP - all of whom participated in a nationwide Opposition bandh against FDI last December - to back UPA on a vote in Parliament. The discussion is likely to take place early next week.

In the end getting outside supporters SP and BSP on board proved less challenging than anticipated with Congress sources pointing to the regional parties keeping their distance from recent Opposition sponsored antigovernment protests. Not all the bills are likely to be passed, but the government will like to prioritize some along with taking the advantage of a freshly-minted political consensus over the Lokpal bill to ensure its passage at least in Rajya Sabha where it is pending. Finance minister P Chidambaram has repeatedly told Congress and in UPA meetings that the government needs to pass the important legislation as there are limits to executive action. The passage of important bills can also persuade the Reserve Bank of India to lower rates. So far, RBI has pointed to the high deficit and inflation to plead its inability to lower lending rates New Delhi: In a major reform drive and signalling that it is shrugging off its policy paralysis, the government has pushed through the move that will allow 51% foreign direct investment in multi-brand retail. It has also relaxed norms for foreign direct investment in the aviation sector, allowing international airlines to invest in domestic peers and cleared a slew of other reformoriented measures - an increase of foreign direct investment in some broadcasting services from 49% to 75% and disinvestment in four key profitmaking public sector units (PSUs). (Read: Government clears divestment in four PSUs) The slew of reforms comes a day after the government took the politically tough decision to hike the price of diesel by Rs. 5 per litre and also capped the supply of subsidized liquefied petroleum gas (LPG) cylinders to six per household. Allies and Opposition parties alike have slammed it and demanded a rollback, but, faced with the threat of becoming the first in the BRICS (BrazilRussia-India-China-South Africa) group of emerging economies to be downgraded to junk, the government now seems clear that economic imperatives outweigh political expediency. So it has overridden huge opposition from allies like Mamata Banerjee and friendly parties like Mulayam Singh Yadav in deciding to move to open its retail sector to foreign supermarkets was a surprise one. This will allow global retail giants like WalMart to set up deep-discount stores in India. A sure-shot

political storm follows. (Read: New, bold reforms announced by the Govt) The 9 O'clock News: The biggest stories (Nov 27, 2012) Importantly - and the government has underscored this provision - the policy allows state governments to decide whether to allow FDI in multi-brand retail or not. So, the government says, if some parties don't want the FDI, they can make that choice. The Trinamool Congress, wants the decision withdrawn. It has already said it will not implement it in West Bengal, which Mamata Banerjee rules. (Read: Who said what) Kunal Ghosh, a Trinamool Congress MP said, "Mamata Banerjee and Trinamool Congress are totally against this decision. We will not implement this. We will stock of the situation and come to a decision." Responding to whether his party will pull out of the government on this issue, Mr Ghosh said, "We do not have the numbers to dominate the government. If Trinamool congress withdraws now there will be an allegation that we are trying to destabilise the government. There will be horse-trading. Mamata Banerjee will not take a fraction of a second to withdraw support, but that will not stop this decision. She will take a final decision." Multinational retailers like WalMart, Carrefour of France and Metro of Germany already have stores, but they are not allowed to sell to walk-in customers. They deal with smaller retailers, like the family-run shops in most localities. The government had last year cleared 51 per cent FDI in multibrand retailers for cities with populations of more than a million. But it had to roll back that decision after huge protests led by allies of the UPA government and the opposition, broke out across the country. The decision set off fears that multinational giants will put small retailers and local shops that service households will be wiped out. Those in favour of FDI say that this unlikely since local mom-and-pop shops give personalised services like home delivery that these huge deep-discount stores won't. They also say that most of these stores, because of their size will be far fewer that

local establishments. FDI in multi-brand retail has many pre-conditions, though. The minimum FDI limit has been set at $100 million. Half of any investment has to be made in infrastructure like cold-storage chains and warehouses. This is designed to help the agricultural sector and India has a severe shortage of these. The most problematic condition, from the point of view of investors, will be that at least 30 per cent of the goods to be sold will have to sourced from local producers. Analysts say that MNCs might have a problem of quality control and supply. FDI is single-brand retail was already permitted, but that too with several conditions, including 30 per cent local procurement. The government now says if companies don't want to procure 30 per cent locally, they will have to set up a manufacturing unit. Household goods giant IKEA of Sweden wants to invest more than Rs. 10,000 crore to set up stores, but wants this rule to be relaxed. There is split within the government over this. The government argues that FDI in multi-brand will give consumers the best deals possible on goods and also get it much-needed money. It also says that farming sector will get a boost, since big retailers will not only source dircetly from them, cutting out middlemen, but also invest in coldstorages and other technology that India lacks. Those opposed to FDI in multibrand retail say that it will be exactly the opposite: MNCs will control prices and squeeze the producers. These MNCs are also expected to generate jobs in the areas where they set up stores as well as along the procurement chain. The government sees this as a big advantage.