The measure, which had been strongly opposed by some of the opposition parties and which now goes to the upper house, would open up multi-brand retailing to foreign direct investment, paving the way for retail giants such as Walmart to compete in the retail sector estimated at $450 billion with investments of up to 51 percent.
The victory was crucial for the coalition government led by of Prime Minister Manmohan Singh's Congress Party as it struggles to spur the economy, whose growth, hit by high inflation and huge fiscal deficit, has been slipping in the past 18 months. FDI in the retail sector is seen as one way to attract much-needed foreign investment, leading to other economic reforms.
The voting on the measure came after two days of intense debate with the opposition claiming foreign chains under the FDI plan would drive out small Indian businesses. The government has insisted the measure would help farmers through such benefits as reducing the role of the middleman.
The 253-218 vote in support of the government came after two regional parties abstained.
The Indian industry, supporting the government, said FDI in multi-brand retail would encourage foreign investors, the Economic Times reported.
"It is a welcome development. We fully support the government on the issue. The country needs to move forward. We need to send a strong signal to foreign investors," R.V. Kanoria, head of the Indian chamber of commerce, told the newspaper.
The report said the Retailers Association of India, also welcomed the step, with its head, Kumar Rajagopalan, saying, "This is one more step towards encouraging those who have been sitting on the fence to invest in India."