There seems to be some light at the end of the tunnel for the beleaguered United Progressive Alliance, or UPA, government with the logjam in Parliament over a vote on foreign direct investment (FDI) in retail being resolved. From being unable to take any kind of reform agenda forward because of insufficient legislative numbers, the coalition of support that is likely to allow the ruling UPA to win a parliamentary vote after a discussion on FDI should also let it look forward to addressing some of the long-pending legislative programmes. If all goes well, legislation affecting sectors as diverse as insurance, pensions, forward contracts, company law and regulation of competition should now see the light of day. Once the government is seen to be able to act, it is likely to change the mood of business and the stagnation in investment – which lies at the heart of the present slowdown in growth – should begin to end. If all this happens, the government should once again be able to govern, in a meaningful sense of the word, for the remaining one-and-a-half-years of its term.
But the above scenario is qualified with many uncertainties, which are illustrated by the retail FDI issue itself. Even if Parliament endorses the policy change, the inflow of substantial foreign funds is unlikely to begin immediately. For organised retail to take off in a big way, the state governments have to play a facilitating role, to begin with, by changing the law that forces farmers to sell their produce through agricultural produce market committees. This is not all. No business can function without a plethora of enabling local permissions. For these to be speedily available, state governments and local governments will have to be proactively supportive rather than grudgingly compliant. Besides, for farmers to get the full benefit of better market prices, a cold chain has to develop right into the rural interior. For that to happen, round-the-clock availability of power will be essential. Thus, if organised retail is to take off, it will be imperative to reform the power sector too. FDI in retail is only one of the many factors that can facilitate the transformation of retail into a modern and robust sector.
What is visible right now is an opportunity to do a whole lot of things. For that, however, a legislative arrangement has to be in place with some stability. The coalition of forces mustered in Parliament by the UPA has to agree to go along with it for the rest of the life of this Parliament. This is not the case. Political parties like the Bahujan Samaj Party and the Samajwadi Party will rescue of the government when it comes to the crunch, since they do not want a general election right now. At the same time, they are also extremely keen to grow their own brands and see rosy prospects of a post-election scenario in which powerful regional parties will call the shots. So the two are unlikely to make it easy for the UPA to pursue a positive agenda and have something to show while going to the polls. The scenario ahead is one of periods of acute crises with bailout coming in the nick of time for any number of critical laws. This is not an exciting scenario at all; it is far different from one that assumes a fruitful legislative journey ahead.