Congress vice-president Rahul Gandhi met Prime Minister Manmohan Singh and reportedly expressed his regret for going public with his censure at a time when Dr Singh was in the US.
The government has decided to withdraw a controversial ordinance that protects convicted parliamentarians and triggered a furious critique from Rahul Gandhi last week, who described the policy as "nonsense."
The reversal of policy was cleared at a short cabinet meeting on Wednesday evening, chaired by the Prime Minister.
Wednesday's decision was taken unanimously by all cabinet members, said union minister Manish Tewari. "There was a view articulated by Rahul Gandhi and he was taking into account the widest possible feedback. Therefore the decision was reconsidered," the minister said.
Sources said allies like Sharad Pawar made the point at the meeting that the dramatic u-turn is embarrassing for the government because it showed that the ordinance was rushed through without careful thought. The PM and the cabinet are institutions that cannot be undermined, Mr Pawar is reported to have said.
The fate of the ordinance seemed pre-ordained once Mr Gandhi shared his scathing review last week. The Congress vice-president met the PM yesterday morning and reportedly expressed his regret for going public with his censure at a time when Dr Singh was in the US. However, sources said, Mr Gandhi reiterated his staunch opposition to the order, which is seen as the catalyst for the government's change of heart.
The BJP's Ravi Shankar Prasad described Wednesday's developments as "the theater of the absurd." He said, "This confirms what the BJP has been saying. That the PM and cabinet are not important. Dynasty is."
His remarks were soon followed by senior party leader Sushma Swaraj claiming credit for the withdrawal of the ordinance. "We said the ordinance was immoral, illegal and unconstitutional. What Congress is spreading since morning is complete falsehood," she tweeted.
The ordinance was a blatant attempt to over-ride a Supreme Court judgement that disqualifies convicted law-makers from office. The executive order was to be used to protect MPs from the court's ruling till a bill to the same effect was debated and voted on by Parliament. The government on Wednesday said that the proposed legislation will be withdrawn.