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Monday, 05 December 2011 09:32
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After Tata, Mamata blocks Wal-Mart


Other than raising salaries of MPs, or implementing a Pay Commission award, there are few pieces of legislation/policy that will get the support of all MPs who represent the voice of the people in a democracy. And there is no set of reforms, in any country, that does not leave a set of people feeling they’re going to be dramatically worse off. In India, right through the 1990s, when Manmohan Singh unleashed one reform after the other, the dominant view amongst Indian industry was that opening up the economy would result in it getting wiped out by MNCs. Yet, Indian industry went from strength to strength, even taking over marquee names ground into the dust in their countries by leading MNCs. During this period, per capita income rose nine times and the size of the middle class from 2% of the population to 13%—for even the poorest quintile, real incomes have risen steadily since 1991. So it’s difficult to understand what the search for consensus on allowing FDI in retail was all about—yet, this is the reason cited for putting the decision on hold after UPA ally Mamata Banerjee made it clear she was opposed to it.

What makes the government’s decision to back down—a final announcement will be made in Parliament only on Wednesday so there is still a glimmer of hope—even more curious is that this was one of the most square-bracketed (to use the phraseology of international negotiations!) reform you could think of. FDI is to be allowed only in cities that have more than 1 million people, you have to source 30% of produce from local SMEs, individual states have the power to veto the law, there is no land for Big Retail to set up giant shops except in the outskirts of most cities, land prices are high enough to drive them out of business …

From the point of view of getting the reform through, the government was on a winning wicket in the sense it could get done through a legislative order, so the parliamentary logjam didn’t matter. With farmer groups coming in to voice their support—India has 90 million farmers who stand to benefit from organised retail versus the 3-4 million kirana shops who are supposed to feel threatened—it wasn’t immediately clear the move would have backfired politically either. And yet the prime minister who pushed through the nuclear Bill and Rules despite great opposition from the BJP appears to have completely given in to Banerjee. If this reform can’t be pushed through, the chances of pushing through others are even slimmer. It’s a pity that India is losing its appetite for reforms at a time when most other big economies, including China, are in all manner of trouble.



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