Reuters
NEW DELHI - Indian Prime Minister Manmohan Singh's government won a vote of confidence in parliament on Tuesday, ensuring the survival of the ruling coalition and a civilian nuclear deal with the United States.
The government said it would now push ahead with the pact, which would give India access to foreign nuclear fuel and technology and end decades of isolation, as well as work towards reforms to liberalize the trillion-dollar economy.
"This will send a message to the world at large that India's head and heart is sound, that India is prepared to take its rightful place in the comity of nations," Singh told reporters. "I have always said the deal was important and now we know it."
The government's joy at its victory was tempered by a bribery scandal, after opposition lawmakers interrupted the debate to wave wads of cash they said were offered as bribes by the government to abstain.
The furor was described as one of the lowest points in parliamentary history, and led to fresh demands for Singh to resign, and catcalls preventing him from even delivering his concluding remarks after the two-day debate.
Singh said the accusations has made him "extremely sad" and promised to cooperate in a parliamentary inquiry.
There had been a flurry of horse-trading in the run-up to the vote as both sides wooed small, regional and caste-based parties. But in the end the government won more comfortably than expected, by 275 votes to 256 with 10 abstentions.
Investors had expected a narrow win for the government, and said the victory could boost markets. The main share index has risen by more than 12 percent in the last four sessions.
"The next task for the government will be how much it will be able to push through on the reforms front." said Agam Gupta, head of trading at Standard Chartered Bank in Mumbai.
"Stocks should start on a strong footing and bonds will also get bought. This is a positive for all the asset markets."
Political analyst Mahesh Rangarajan said: "It's a clear victory and an endorsement of the nuclear deal."
"But the bribery scandal will come back. Expect an opposition offensive in the coming weeks."
Nevertheless, analysts said the government should now survive until the end of its term, with elections due by next May.
Push for reforms
The confidence vote was sparked by the withdrawal of the government's communist allies to protest the nuclear deal, which they say will make India's security and energy policies dependent on the United States.
The Hindu nationalist Bharatiya Janata Party (BJP) said the deal would limit India's chances to test nuclear weapons.
Finance Minister Palaniappan Chidambaram said the vote proved the government had a majority in favor of economic reforms, after four years when efforts to liberalize were often blocked by its former communist allies.
"We have a majority. Therefore, we have to work with other parties to carry forward the reforms process," he told reporters.
The deal makes India a defacto nuclear power despite not signing the Non-Proliferation Treaty and conducting nuclear tests in 1974 and 1998.
It could unlock $40 billion in investment over the next 15 years, according to an Indian business lobby group, as India seeks new energy sources to tap its booming economy.
Investors hope the victory will give the government time to battle rising inflation, which has hit the pockets of millions of poor voters, as well as to pass some economic reforms in sectors like insurance and pensions.
Despite the parliamentary victory, it is still unclear whether there is enough time for the deal to be passed by the U.S. Congress under the Bush administration.
The agreement needs clearance from the governors of the U.N. atomic watchdog and a 45-nation group that controls sensitive nuclear trade.
The government helped secure a parliamentary majority with the support of the regional Samajwadi Party (SP), which replaced the communists as its parliamentary support.
The SP will now effectively hold the balance of power in India and the party is expected to give the government more room than the communists to pass economic reforms.
With the vote going close to the wire, several MPs who are ill were flown or wheeled in from hospital, and others, in jail for crimes such as murder and extortion, were granted temporary release.