Wednesday, September 26, 2012

Look who all are supporting FDI and reforms now……

Ten days after the “big bang” reforms announcement by the government, and ten days after big bang protests by the opposition, the real picture on who stands where is starting to become clear. The bad politics is separating from the good economics. The support for the government’s economic reforms agenda is growing, most of all for FDI in retail. Save and except for the whining of a sulking BJP, most others are coming around to accepting the truth about reforms.

Arun Shourie, senior BJP leader, and a gutsy ex-minister himself, was the first to come out openly and strongly in support of the government’s decisions to increase diesel prices and introduce FDI in several sectors including retail. By saying that the PM had taken tough decisions, he showed himself to be a statesman – abandoning petty politics for the national good.  

Then there is the Akali Dal – the party which initially wrote to the government expressing support for FDI in retail. Later under pressure, they joined the NDA in opposing the reforms. The Indian Express today reports that the party would be happy to allow FDI in retail in Punjab, provided the Center “addresses the fears of the stakeholders and provides a sense of security to them”. This is nothing but a face saver. The Badals realize the impact contract farming has had on the farmers and their preference for it. Having worked in Pepsi in the past, I fully understand how potato farmers in Punjab gained from the association with the company. The farmers of Punjab want FDI in retail – not because they like FDI per se – but because they want more facilities to be created.

And that is the crux of the FDI matter. It is not as if FDI in retail is the solution to all our problems. It is not as if we cannot create our own cold storage chains. It doesn’t matter whether Walmart is welcome in New York or not (Advani was misinformed as was made obvious by the statement of the Asia CEO of Walmart yesterday). What matters is that we need all the investment we can get. We need a trillion dollars for our infrastructure buildup and we should be keen to grab with both hands whatever is available wherever in the world. The days of “swadeshi” are over. The days of being global and being smart are here.

Not surprising then that the Punjab Farmer’s commission – a government advisory – is likely to meet Badal to ask him to allow FDI in retail. This could help small and marginal farmers move away from Paddy into other high-yielding cash crops likes fruits and vegetables. But this can only happen if the farmers are given marketing and pricing support, which FDI would help in. Not surprising also that Chengal Reddy, Secretary General of the Consortium of Indian Farmers Association (CIFA) has been crying hoarse in support of FDI in retail. Not surprising also that Rahul Gandhi had the gumption to support FDI in retail in front of a farmer’s gathering in UP back in Nov-Dec 2011 when the government had first announced the FDI decision.

There is also an informed view that Naveen Patnaik is not opposed to the reforms and specifically to FDI in retail. That’s why he didn’t support the bandh called by the Left and the BJP. Again, and very significantly, Raj Thackeray in Maharashtra has supported both the diesel price hike and the FDI in retail saying he understood the economic compulsions behind the moves. His only caveat: recruit more marathi manoos, a compromise the Walmarts will be happy to make! (Even today, most shop floor workers in modern format retail come from the state itself).

Likewise, in spite of the rhetoric of Mulayam Singh Yadav, son Akhilesh appears to be in favor of allowing FDI in retail into his state. I have a feeling that he may strike some sort of a compromise on the issue – restricting the Walmarts of the world to the NCR but leaving the rest of the state out of reach for the first few years. Akhilesh knows that NOIDA and Ghaziabad and even cities farther away like Agra and Meerut are dependent on Delhi for their economy. Having a Walmart there to attract the crowds from Delhi would make good economic sense. After all, if UP can have a Formula 1 racing track, why not a Walmart?!

Then of course the Chief Justice of India has given a backhand support for reforms, recognizing that it is only fast economic growth that can bring out the best in a democracy.

So support for reforms and support in particular for FDI in retail is becoming widespread. The only serious opposition is from the Left – which is a party with 18th century ideology. So its completely understandable. The BJP’s opposition is mere opportunism just as so much of its politics is. There is a strong feeling that Narendra Modi will be the first one to welcome Walmart into Gujarat. With the economic progress that one sees in Gujarat (no thanks to Modi!) and with the wide roads in the state (thx to the NHAI – a Central government undertaking!), and the generally progressive mindset of the Gujaratis, there will be pressure on Modi to allow FDI in retail. Let the Gujarat elections get over; and Modi will be scurrying to be the first to inaugurate a global retail biggie in Ahmedabad! I wonder where Advani will hide for cover at that time!

The real truth is that once we remove the opportunistic opposition to reforms, we find a very encouraging picture. The people of India are pro-reforms; some of the major parties are not. Ultimately, it is the will of the people that counts in a democracy. The BJP lost the 2009 elections because it made the mistake of opposing the Indo-US nuclear deal. The BJP had now better be careful in opposing the reforms….

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