What does the decision and reaction to allow FDI in retail tell us about politics in India?

The Government of India (GoI) has finally opened the door for foreign direct investment (FDI) in multi brand retail in India.  This is a welcome and curious development. It is welcome because it will lead to economic dividends which will be good for the aam aadmi(common man) and for the wider economy. It will also serve as a signaling mechanism to the world and the global community of investors that India is serious about economic reforms and that the third generation of reforms are now gaining momentum. It is curious because it comes after the decision to increase diesel prices and at a time when capital flows to India were curiously pouring into India despite the poor fundamentals, poor economic growth and a political gridlock over economic reforms. Capital flows are very important for India, like perhaps for most countries. It would appear that it is the continuations of these flows into India the latest set of reforms derive their impetus from.

 

The political class in India or more accurately the opposition- motley and a fragmented bunch -have smelled blood and are baying for it. The diesel price hike and the decision to allow FDI in multi brand retail will then be a gift to the Opposition. It will try to paint hapless ruling Congress party already hit by scams and scandals into a corner. This brand and variety of populism may or may not give the Opposition latitude and may make a dent into the political fortunes of the Congress party. However, in the final analysis, it amounts to petty politicking and redounds negatively for the people of India.

 

The question is what does it (reaction) tell us about the nature of politics in contemporary India? Is the Indian polity doomed to be fragmented and is coalition politics the name of the game for India as far as the eye can see? What is the remedy to this?

 

The reaction to the decision to allow multi brand retail in India tells us the obvious: it reflects the fact that the Indian polity is fragmented and on account of this fragmentation, a cacophony of voices jostles for policy space and that populism is the card that this array of voices takes recourse to.  There is no single party that can command the mind and vote share of Indian people. This cannot be an unalloyed good for India. It leads to policy paralysis and in the final analysis affects the aam aadmi(common man). While, in theory, this may mean or imply a raucous democracy but in practice it leads to structural problems that go against the gravamen of the interests of the common man.

 

Given the disarray in the Congress party and the other main political party-the radical Bhartiya Janata Party(BJP)- coupled with the rise in regionalism and regional parties across India, this is a bit of a structural trend. It is not going to whittle down an no major political party can come out of the detritus of political parties in India and command loyalty and attention of those constituting the Indian political firmament. This structural aspect is going to be a feature of Indian politics. The positive aspects of this trend is that politics will be closer to the people and may reflect the quotidian concerns of the people and there will be an attendant impact on Centre State relations and India’s federalism. The voice of the aam aadmi may get amplified and the distant Centre may be more responsive. The flip side is populism with small regional parties that form the Coalition spectrum holding hostage the Centre and the Centre caving in the interests of power and political stability. This then amplifies the power of small regional parties and allows them to wield influence disproportionate to their size. The result is policy paralysis and political gridlock. What then is the remedy to this?

 

The answer perhaps lies in rejigging of the Indian political system. It can either morph into a two party system or a presidential system. The latter is difficult because of the diversity that defines India and the limited reach of one or two parties. This then eliminates the two party paradigm and leaves room and space for a presidential system. Power aggregated into the office of the president would mean and imply policy and political space for bold decisions and decision making. India will continue to be a democracy but politics and politicking will not hold hostage the government and policy making to the whims of petty politicians wedded to petty and parochial interests. It will free up policy, political and decision making space. It is this what Indian needs. It is , therefore, important that powers that be in India, stock take ,review and take the baby steps necessary to bring about real and substantive reform to India’s political system. And the time for that may be now.