Thursday, November 17, 2011

Politics of opportunism now makes the BJP opposes FDI….

I have always held two beliefs about the BJP. One that endeared me to it; and the other that propelled me away. First, BJP stood for Hindutva and this was anathema to me. I have always believed that in a diverse and heterogeneous country like ours, any politics based on religion is divisive. Second, BJP stood for right-of-center economic policies and this attracted me to it. The Congress on the other hand stood for two things again. One was its secular policies (and I see them as secular; not appeasement) and two, their socialist beliefs. It was Indira Gandhi who amended the Constitution to add the word “socialist” into the preamble of the Constitution through the 42nd Amendment after all. During the NDA rule, we saw the BJP pursue policies of capitalism and encouragement to FDI. That’s why its decision to oppose the Congress’s proposals to allow FDI in retail, aviation and insurance is a bit confusing. Is it a change of beliefs or just plain pportunistic politics? I suspect it is the latter.

Take FDI in retail first. The argument given is that growth of large retail format stores will lead to the closure of millions of small mom-and-pop shops. And lead to large scale unemployment. By this logic, we should ban all large format Indian-owned stores, including Indian ones, right? So we should disallow Kishore Biyani, Kumar Mangalam Birla and Mukesh Ambani also from getting into large format stores right? From the information I have, these three have together put up close to a thousand stores in the last 5-7 years. I doubt if any foreign retailer – be it Walmart or Carrefour or Tesco or Target – has plans to open even half these many number of shops. I haven’t heard the BJP complain about Indian large format stores – won’t they lead to unemployment and closure of neighborhood shops?

We talk about our poor back-end retail infrastructure in the country – the poor quality of the cold chain; the inadequacy of our grain storage facilities – we need trillions of dollars of investments to upgrade all these. If Indian investment is unable to do the needful, why stop FDI from coming in? Yes, there is one constituency that wants to disallow FDI in the retail sector – the big Indian corporates named above who want to keep growing by keeping the foreign competition out. Does big format retail help contain consumer prices? Of course it does. I was in Big Bazaar recently in Ahmedabad and was able to buy “tuwar daal” at Rs 25 per kg. Yes, Rs 25 a kg! Neatly packaged in a 25 kg bag, cleaned, oiled and majorly discounted (there was a 1:1 offer going on)! What’s the cost of the same in an ordinary kirana outlet in Mumbai? Rs 75 a kg or more. For millions of middle class people, these large format stores have come as a god-sent. So which side is the BJP on? The common man; or the neighborhood baniya? I do of course understand that the BJP’s core constituency is the neighborhood baniya – and protecting it is what is topmost in the BJP’s mind when it opposes FDI in retail.

Take investment in the aviation sector. I cannot understand why the BJP has to object to investments in this sector. This sector is clearly an infrastructure sector and the more it can grow – with help of funding from wherever it comes – the better it should be for the country. We opened up our airports to foreign investment and today we boast of some reasonably good quality (even if not world class) airports.

Take FDI in the Insurance sector. Penetration of life insurance in our country is less than 20% (of the population). This is just in terms of number of policies issued. I am not sure 20% of the population is individually insured. Besides, the insurance covers are too small to provide any real protection. Now it’s well known that when an insurance company issues a policy, it has to set aside a certain amount of money in the form of capital – so that when (and if) redemption happens, it has enough available for payments. If insurance penetration has to grow in the country, insurance companies need billions of dollars of capital. Our life insurance business is only about $10 billion worth (in terms of premiums). It should be a minimum of $100 billion given the size of our population. If this extra cover is required, where is all the capital going to come from? Likewise our general insurance sector is extremely under-penetrated. The share of this sector is just 0.6% of our GDP, against the worldwide average of four times this. Why is the BJP objecting to FDI in insurance then? Does it not want insurance penetration to increase? Does it believe Indian companies have enough capital to do it on their own?

Where were we when we were trying to do everything on our own? What was the quality of automobiles we used to drive before we opened up the sector to FDI? What was the waiting time for even the pathetic quality cars and two wheelers we called Indian? Has the arrival of foreign investment in automobiles led to less or more employment in the auto sector? What about consumer durables or even fast moving consumer goods? India is a country which needs as much investment as it can get. But the issue is not about the sagacity of allowing FDI. It’s about plain politics for the BJP. But I will come to the BJP in just a moment.

Let me talk of the Left first. The Left of course, cannot see beyond its nose on FDI. Everything foreign is like a red rag to it. The Left should think why its inspirational masters in Russia and China have all turned towards FDI in a big way…..The Left has already been taught a bitter lesson in the last elections in 2009. The Left has been rejected wholesale and yet they continue with their ostrich like head-in-the-sand attitude. Yet they won’t change….

Now coming to the BJP. The BJP – and I have always said this – is an opportunistic party. How can one forget the Wikileaks revelation that the BJP had told the US that they were merely posturing on the Indo-US nuclear deal? If they were merely posturing, why were they willing to let the government fall by refusing to support it at the time of voting? Wasn’t it Vajpayee who had taken India proudly towards becoming a nuclear weapons state? Wasn’t it Vajpayee who supported nuclear power and started talks with the US for the nuclear deal? Then why does the BJP now oppose nuclear power at Koodankulam? If it wasn’t for opportunism, why did it oppose the government on the Indo-US nuclear deal? They can always make some excuses about some clause or the other in the deal – but no one is convinced that the BJP was genuine in opposing it in Parliament.

I will be particularly harsh on the BJP here. It is the BJP that thinks its time to rule has already come. And it believes it can hasten this by making sure that the country’s economy tanks. If there is no economic growth, if inflation rises, if unemployment surges…..all of which will happen if the government is disallowed from functioning…..then it will have a good chance of forcing a mid-term election. The BJP is playing pure politics – even shunning its principles as and when required.

Arnab Goswami mentioned on Times Now last night that there was a growing consensus that the opposition would block Parliament’s winter session as well. Like I explained – it helps the BJP if Parliament shuts down and no laws can be passed. Then the BJP can claim that the government is in a freeze. The BJP wants a logjam in Parliament. If the BJP had its way, it would ensure a logjam for the remaining three years. They don’t care about the country. All they care about now is grabbing power. The BJP leaders shout “Bharat Mata ki jay” and “Vande Mataram” at every gathering in a show of nationalism; yet when the time comes to prove its nationalism in action, it does the exact opposite..

The real truth is more than the Left, it’s the BJP’s stand on FDI that is disturbing. Atleast the Left is consistent in opposing FDI. The BJP is opportunistic – when it is in power, it supports FDI. Yet when it is in opposition, it opposes it. The BJP truly needs to introspect…..the people are not fools after all

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