Enmeshed in a series of scams, shackled by policy paralysis and having endured a washout of an entire Parliament session, the UPA government could have buckled under pressure or fought it out. In choosing the latter, it looks like a hark back to the old “reformist” in Prime Minister Manmohan Singh, as a series of crucial economic decisions, including the controversial issue of foreign direct investment (FDI) in multi-brand retail, as well as the move on aviation, was cleared. Coming the very day after the bold decision to raise diesel prices, the last-minute inclusion on the cabinet agenda of FDI in multi-brand retail was an attempt at injecting “animal spirits” into a floundering economy and reviving economic growth.
The decision on retail, however, set off political sparks across the spectrum with the ruling coalition’s Trinamool Congress constituent (not present at the cabinet meeting which cleared it) joining the opposition BJP and Left in denouncing the government. It has even given a 72-hour deadline to the UPA to reconsider and roll back its decisions, calling a party meeting for Tuesday.
Ravi Shankar Prasad of the BJP said, “The UPA government has allowed FDI in multi brand retail under foreign pressure and it is a hurried decision that will jeopardise the livelihood of more than five crore people in the sector. The BJP leadership strongly condemns this decision.”
The Prime Minister at today’s cabinet meet was a far cry from the “tragic” figure or the “Underachiever” etched by foreign media of late and reportedly told his colleagues, “The time for big-bang reforms had come. If we have to go down, we have to go down fighting.”
Commerce minister Anand Sharma, who explained the policy in detail, encountered a series of questions from colleagues on job losses among other things.
Some wanted to know what guarantee there was that foreign investors would actually set up manufacturing units here and not continue to do so abroad. Others wanted assurances that it would not lead to job losses, especially in the small retail sector.
Significantly, micro, small and medium enteprises minister Vayalar Ravi was present; a few days before, he’d urged the sourcing norms be not diluted.
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“There was no major opposition to the policy,” said a minister.
While Sharma admitted that Bihar, West Bengal and some other states were opposed to FDI in multi- brand retail; he added that Congress-ruled areas such as Haryana, Delhi and Maharashtra were keen to welcome it.
On the opposition from TMC, the second largest ally, a senior minister stated FDI in multi -brand retail was an “enabling provision and if the Trinamool Congress doesn’t want it, they don’t need to bring it in their state. Ditto with SP-ruled Uttar Pradesh.”
The political fallout, say Congress sources, had been deliberated upon by the party at length, after which the Congress core group and then the party backed the government in taking these bold decisions.
As a party leader said, “After carpet-bombing the economy with all these reform measures, if we are able to revive economic growth from the present 6.5 per cent to close to double digits, all this negative public mood for the UPA is bound to change.” Adding: “It has already been hugely welcomed by industry. If there is foreign investment leading to job creation, then the youth and the middle class will rally behind the UPA. Everything else will become irrelevant.”
Despite the loud declamations from the TMC, plus its 72-hour deadline, there seems a tacit understanding that at this juncture, it would not pull out from the UPA. The Nationalist Congress Party constituent has welcomed the move.
The UPA has definitely played its biggest gamble in recent times; hoping it will pay off in the run up to 2014.