A New Twist in the FDI (Re)-tail: Rahul Gandhi”s Move and What it means for the Frozen Proposal

Posted on January 6, 2012 in Business and Economy

By Pradyut Hande:

With the Centre grappling with myriad issues across a wide spectrum; including stagnating economic growth, inflationary pressures, widening fiscal deficit, weakening currency, drop in industrial output and a general lack of credibility; its attempt at finally paving the way for FDI in multi brand retail would go some way in dispelling its “pseudo-reformist” attitude. Or so the Congress would have thought. However, in its haste to usher in the new era of economic reforms and pick up the gauntlet of liberalization with renewed vigour, the Congress has seemingly collided head on into the impregnable walls of staunch opposition from its coalition partners and other parties such as the BSP and the SP. The fierce backlash to the Government’s decision eventually caused it to temporarily freeze the move, much to the chagrin of the industry at large which has vociferously hailed its previous proactive stance. On the face of it, the move to roll back its overdue decision does appear regressive and flies in the face of its pro-reforms approach after a period of “policy formulation and implementation limbo”; but such are the dynamics of coalition politics that cracks and fissures can suitably be leveraged to browbeat the Central party into submission.

Set in this volatile backdrop replete with a veritable degree of caprice, the industry insiders continue to lament the Government’s incertitude on FDI in retail. However, despite the torrent of negativity and vitriol pouring in from myriad quarters, it does appear that all is not lost. Addressing farmers in the potato belt of Farrukhabad in Uttar Pradesh, the scion of the Congress party, Rahul Gandhi spoke out in unequivocal support of the move to usher in 51% FDI in multi-brand retail in the country. He also went onto term the proposal as a “pro-farmer” measure and took a swipe at the Congress’ regional rivals such as the BSP and the SP, terming their misplaced opposition, resentment and rejection as “anti-farmer” rhetoric. Gandhi’s statement that comes days after the momentary lockdown on the move comes as a timely shot in the arm for a beleaguered Government that continues to struggle in its quest to negotiate the choppy tides of tribulations. It also promises to serve the Congress well by compelling those dissenters from within its ranks to fall in line with alacrity. A unified sense of purpose taking into cognizance the larger picture is of critical significance to the eventual fate of the laid down proposal.

The Government is likely to reassess the situation, readdress the concerns of the aggrieved and dissenting parties and take up the cudgels in earnest with regards to the contentious FDI in multi-brand retail issue after the Uttar Pradesh state polls. With the young Gandhi already expressing solidarity with the plight of the farmers who stand to gain immensely from the proposal if implemented and wisely positioning the Congress as a pro-reform and pro-farmer party, he could have pulled off a political masterstroke. Farmers in this region, as well as parts of Punjab and North India, have reportedly dumped their produce as they don’t find it feasible to bear the cost of transporting their yield to the market. Additionally, even if they do manage to get their produce to the market they are unable to fetch remunerative prices, adding to their already existing financial and logistical woes. By emphasizing the fact that the farmers stand to receive better margins on their produce and in turn also reduce significant wastage, Rahul Gandhi is garnering the critical support of a critical vote bank. Hence, it appears that his carefully engineered move is designed to serve multiple purposes.

FDI in multi-brand retail isn’t merely a flashpoint any longer. It is a pressing necessity. For far too long has the Government concealed itself behind the veil of coalition political pressures, precariously perched on the fence of ambivalence and gross indecision, failing to find a middle ground. However, it is high time that proactive governance translates words into actions, ensuring tangible results. How the Government manages to find a way out of this present quagmire and actually galvanize the rapidly burgeoning retail industry remains to be seen. But for now, the industry has to make do with positive words of intent and action that may materialize in the not so distant future. Or won’t it?

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