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Corporate Nov 23, 2012

What the political tug-of-war over FDI in retail hides

By Venky Vembu

The political slugfest between the UPA government and the Opposition over the proposal to permit FDI in retail is merely the shadow play that deflects attention from a more fundamental battle. In and of itself, the FDI in retail proposal, for all the thunderous sloganeering and political brinkmanship it has given rise to, isn't a game-changer one way or another. As Firstpost has noted earlier, neither is the proposal a recipe for wholesale disaster or a first step towards neo-colonisation of India, as its hyperbolic critics make it sound; nor is it the manna from heaven that will miraculously transform life in India, in the way that supporters of the proposal make it out to be.

So, why is it that the issue, on which the government was reduced to a minority when TMC leader Mamata Banerjee withdrew support to the UPA, has become such a hot-button issue? Why is it that the confrontation over it has disrupted Parliament for so long in the previous session, and ground down work in the first two days of this session? Exactly what is at stake here?

The battle over the FDI is, in one sense, a proxy battle between (principally) the Congress and the BJP and between the Congress and the smaller parties that support it from the outside (like the Samajwadi Party and the BSP). That battle is a symbolic one, where the various combatants are squaring up for what they expect will be a bitter electoral contest, whenever the next general elections are held. Each of the parties has different political objectives at stake, and they are using the FDI in retail policy as a trial balloon to test each other out.

The winter session of Parliament has been disrupted over allowing FDI in retail. PTI

For the Congress, the decision to embrace FDI in retail isn't born of conviction. As we've noted earlier, at various points of time, Congress leaders have voiced opposition to the FDI in retail proposal. Indicatively, in 2005, during the first term in office of the UPA, when the proposal of allowing big-box retail was first floated, Prime Minister Manmohan Singh and Commerce Minister Kamal Nath seemed amenable to intense lobbying from Wal-Mart - and, on its behalf, from the US Ambassador to India David Mulford.

At that point, as this report points out, UPA chairperson, who was wary of being outflanked by the Left parties (on whose support the UPA-1 was surviving) wrote to Manmohan Singh questioning the wisdom of allowing foreign retailers to set up shop. How, she wondered, would all this benefit Indians?

Rather than educate her, Manmohan Singh figured that 'Madam's' heart was evidently not in it, and folded his cards.

But last month, at a rally convened at Ramlila Maidan, the same Sonia Gandhi and Manmohan Singh spoke up in eloquent defence of the proposal to permit FDI in retail, and dwelt at considerable length on the wonders it would bring to Indian farmers and youth. They gave no inkling of the circumstances under which their earlier thinking on the subject - which was diametrically opposed to the proposal - had evolved over time.

But it is easy to see why the turnaround happened. Wracked by corruption scandals for the three-plus years of its second term in office, and with the prospect of early general elections on the horizon, the UPA today needs an alternative political discourse on which to contest the elections. And although the Lokpal movement of last year may have withered away, it effectively weakened the Congress' political instincts in fighting the perception that it was neck-deep in corruption. It doesn't help that Arvind Kejriwal has kept up the pressure with his 'exposes', starting with Sonia Gandhi's son-in-law Robert Vadra's magical rise in business fortunes.

Although the Congress has been systematically working to wipe off the taint of corruption - by the expedient of discrediting the CAG reports in both the 2G scam and the coal block allocation scam - it is stumped for a positive narrative of its own. Memories of the scams haven't quite disappeared from people's minds, in the way that Home Minister Sushil Kumar Shinda prophesied.

It is in this context that the flurry of policy announcements announced two months ago (which passed for 'big bang' reforms) and, in particular, the proposal to permit FDI in retail, plays out. For the Congress, every minute of parliamentary time spent discussing the FDI in retail proposal (or, more correctly, paralysing Parliament) is a minute not spent in facing criticism over its record of corruption. Right now, it probably doesn't care if the FDI in retail proposal eventually fails to pass: it serves as a perfect foil for the Congress. Which is why it has dug its heels in and is forcing the BJP to expend more and more energy on this issue than on targeting the Congress on corruption charges.

The BJP perhaps senses that it is being lured into a trap, but is confronted with a dilemma: it cannot afford to yield ground on the FDI in retail issue because it will then be seen to have 'let down' (at least at the perceptional level) one of its primary constituencies: the traders, who reason they are at risk of being wiped out by big-box retail.

For the smaller parties, like the Samajwadi Party and the BSP (and even for Congress allies like the DMK), the issue is a proxy battle to extract greater leverage over the Congress in the run-up to the next elections. And the best negotiating tactic is premised on maximalist opposition at the first level. Particularly since the FDI in retail proposal gives the State governments the option not to allow retailers to set up shop in their States, there is little incentive for the Samajwadi Party or the BSP or the DMK to escalate the issue to breaking point.

In this shadow play, the longer Parliament stays paralysed over the issue of FDI in retail and the higher the decibel level of the slogans against FDI, the happier will be the Congress. This gives it the cover of projecting itself as a reformist-minded government that is being held back by regressive parties, which plays well in the pink press. Plus, it gives less talk time for newspapers and televisions channels to focus on the corruption scandals of the past three years.

by Venky Vembu

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