Retrospective amendments on taxation under UPA II have come under severe criticism from the investor community and also from the opposition over the last few years. The BJP in its manifesto yesterday even accused the UPA of unleashing "tax terrorism" as it promised a stable, non-adversarial regime if brought to power. Much of what the party said in the vision document has been lauded over by political observers and industry for its ambitious scope and tone. But what the BJP threatens to do specifically with FDI in multi-brand retail (scrap it!) is no different from what the Congress did with retro tax amendments in the Vodafone case.
Anand Sharma’s assertion therefore that BJP's opposition to foreign direct investment in multi-brand retail is an affront on Parliament is not entirely off the mark. This government had after all followed due legislative procedure, even staking its own survival and losing a key ally - the Trinamool Congress in a bargain to get the bill on allowing 51% FDI passed. It need not have done this as the matter was in the first place, an executive decision that did not need legislative approval or debate in parliament. Manmohan Singh’s government agreed to a debate, defeated the opposition and even went as far as leaving the final call to state governments, thereby recognizing their federal autonomy to implement or ignore the policy change.
Why then must the BJP – seen as a progressive and reformist party be so adamant on its stance to ban foreign supermarkets into India?
It is all too clear today that the fear of big retail has been as exaggerated as its supposed benefits. The many claims about what foreign supermarkets will do to the Indian marketplace have been debunked already by the fact that barring Tesco no other big retailer has shown any interest in setting up shop under the extant terms and conditions. This should then, ideally have been a non-issue and the BJP would have done itself a favour by simply ignoring it rather than explicitly highlighting its disapproval in the manifesto. But by threatening to act retrospectively hasn’t it sent wrong signals to foreign investors who’ve spent months lobbying with the Indian government and invested crores in understanding the market? More importantly doesn’t this undermine the BJP’s own image as a party that will bring stability to the Indian economy?
The argument that it is doing this in order to protect the interest of small and medium retailers and traders seems nothing but a fear mongering tactic being deployed to impress Indian traders which are seen as a critical vote bank and a backbone of the saffron party. So politically sensitive is the debate that even Prime Ministerial candidate Narendra Modi’s call to traders recently, asking them not to “fear global challenges” seems to have been ignored by his party.
“We are a powerful nation and have taken a lead in information technology. This is the age of online marketing, accept modern science and make use of it,” Modi said in his address to traders about the onslaught of e-retail last month, recognizing perhaps the pointlessness of opposing brick and mortar retail when the tech enabled next stage in modern retailing was already transforming how business was being done traditionally. The drafters of the manifesto clearly didn't think so. There have, over the past few days been whispers of differences between Modi and Murli Manohar Joshi, the Chairman of the Manifesto Committee which reportedly delayed its release. Could retail FDI have been one of the issues on which the two didn't agree?
Whatever maybe the case, the BJP was in an enviable position given its popularity in the opinion polls to initiate an informed debate and allay fears of its voters about foreign retail. What it has done instead by threatening to scrap the policy is make one wonder if there is any discernible difference at all between the two principal political parties in India when it comes to initiating real change. For all those tall promises about transforming India’s economic landscape, the BJP evidently isn't less predisposed to sacrificing economics at the altar of politics. Without as much as the spine to let an already legislatively cleared reform measure be implemented, all that big talk about smart cities, e-governance, labour and agri reforms, and a commitment to eliminate "obsolete laws, regulations, administrative structures, practices” sounds like nothing but empty rhetoric.
