x Abu Dhabi, UAEFriday 21 July 2017

Political theatre makes a farce of India's economic policy

Each of India's provinces has been empowered to decide if they want to open their doors to foreign investment. As political power shifts from the centre to the states, economic power will follow.

Over the past two days, India's politicians have vigorously debated several versions of the future. Late Wednesday evening, the Congress-led government was given a green light to go ahead with a policy allowing foreign direct investment in the retail sector.

So what was the commotion about? Is India so determined to live in the dark ages that it has to resist a modern marketplace? Or are legislators protecting the somewhat vague idea of an India in which the anachronisms of several centuries ago can live in the present day?

Sushma Swaraj, the leader of the opposition Bharatiya Janata Party, claimed a moral victory, pointing out that as many as 14 parties had spoken out against FDI (only four parties, the Congress and its allies, were in favour). Mr Swaraj insists that giants such as Walmart, with their enormous capital reserves, would destroy India's small enterprises.

The government's counterargument is that the country cannot be subservient to the "East India Company complex", referring to the British monopoly that won exclusive trade rights with India in 1699, and ended up ruling the country for 200 years. Praful Patel, the industry minister, has said - only half in jest - that the East India Company is now owned by an Indian.

The other point is that Indian food retail chains such as Bikanervala and Haldiram have had global success with their peculiar brands of sweet-and-sour snacks.

The government won the vote by 254 against 224, and really it was a foregone conclusion worked out in advance. But losing the vote would have shown Prime Minister Manmohan Singh to be even weaker than he is already perceived. What was special about the vote - apart from the inevitable horse-trading - was the repartee of politicians on every side, lifting the debate from a black-and-white, yes-or-no policy decision about boring economics to a clash of civilisations.

There was also a highly unusual political alliance between the Communist parties and right-wing parties such as the BJP and the Biju Janata Dal. Normally these parties avoid each other like the plague.

The Trinamool Congress Party, led by West Bengal's chief minister, Mamata Banerjee, also joined the opposition after abandoning the Congress Party.

For Trinamool Congress - which is said to have forsaken Congress after New Delhi refused to pay off West Bengal's debt inherited after three decades of Communist rule - it was an opportunity to settle scores with its former ally.

Even within Congress, some senior leaders opposed opening the retail sector to FDI.

On the other hand, some of the BJP's allies, such as the Shiromani Akali Dal party in Punjab, favoured FDI as recently as a year ago. On Wednesday, that party voted alongside the BJP.

The government had to win the vote, but the price was a deal with two other parties, the Samajwadi Party and the Bahujan Samaj Party, which are fierce rivals in Uttar Pradesh (and both also rival Congress in the state). By prior agreement, both parties walked out of parliament, thereby lowering the necessary margin of victory and making it easier for Congress to swing other votes in its favour.

During the debate, Samajwadi party leader Mulayam Singh Yadav criticised the government's plans, but when the time came he walked out as he had promised. The rumour is that Mr Yadav has already demanded his pound of flesh: quashing investigations into corruption scandals, and demanding a railway line for Uttar Pradesh.

The leader of the BSP, Mayawati, appears to have her own demands: quotas for Dalits in government, and a memorial for the great Dalit leader and author of India's constitution, Bhimrao Ambedkar.

Trinamool Congress politicians have likened Congress's position to that of a patient on life support, and either Samajwadi or the BSP can pull the plug at any time.

The battle over FDI is hardly over - in the next few days, it must past muster in parliament's upper house, which is a formality after the lower house vote, but will be an opportunity for more grandstanding.

Moreover, each of India's provinces has been empowered to decide if they want to open their doors to foreign investment. As political power shifts from the centre to the states, economic power will follow.

 

Jyoti Malhotra is a political and foreign affairs analyst based in Delhi