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Economy Nov 30, 2011

Retail battle: It's finally about politics and numbers, not FDI

By Akshaya Mishra

The Congress is hell-bent on pushing through its proposal for foreign direct investment (FDI) in retail. It says the move would create jobs and curb inflation besides creating infrastructure which the agriculture sector lacks. However, the bigger motive is to fight the overwhelming perception that the government is caught in a policy paralysis and is unable to take decisions.

The entire opposition is against the move. The argument here is entry of big global players such as Walmart, Carrefour and Cesco in the retail sector would jeopardise the livelihood of millions of small retail traders and more than four million people would be jobless. Besides, the fledgling domestic organised sector would take a hit since global players, loaded with money, are known to resort to unfair practices to kill competition.

The Congress is hell-bent on pushing through its proposal for foreign direct investment (FDI) in retail. PTI

The government's argument that it's a policy decision and the states are free not to allow foreign players to open shop - as laws relating to opening shops and buying grain from farmers are under the purview of the states - has not cut ice with the opponents. The BJP wants a complete rollback. The Left wants it that way too. UPA ally Trinamool Congress and the DMK are opposed to the move. And there are dissenting voices within the Congress as well.

All parties want a discussion on the issue. But here technicalities kick in. BJP, which has moved an adjournment motion on the issue, wants the discussion to be followed by voting. With even allies opposed to the FDI proposal, the Congress can ill-afford a voting. With numbers not on its side it could end up on the losing side. It's almost a vote of no-confidence.

No side would climb down. The result: No business in Parliament for seven days.

CPI's Gurudas Dasgupta said, "The matter should be reconsidered by the government. They have to withdraw the FDI decision and then we will discuss."

"We want a discussion in Parliament on our adjournment motion on FDI in retail. Why is government running away from a discussion followed by a vote in the House?" said leader of Opposition in Lok Sabha, Sushma Swaraj.

"The resolution submitted for adjournment motion is non-negotiable. The government should either withdraw FDI in retail or agree to an adjournment motion to discuss the matter," senior BJP leader SS Ahluwalia said.

Of course, the government cannot allow that. It cannot afford to be seen ruling without any moral authority. It has the option to back out for now and take up the issue later. But it would amount to loss of face. Moreover, there is no guarantee that the other important and equally contentious bills would not face similar resistance when they come for discussion.

Finance Minister Pranab Mukherjee and Prime Minister Manmohan Singh are not keen on going slow. On Tuesday, Singh, speaking at the Youth Congress convention, put up a stout defence for reform in the retail sector.

"...We have not taken this decision in any haste but after a lot of consideration. It is our firm conviction that the decision will benefit our country... It will get us modern technology, not let crops get damaged, get farmers good prices and bridge gaps," he said, hinting that he is ready to fight it out. That Congress chief Sonia Gandhi has not intervened in the matter so far is clear indication that the party is keen on fighting it out. Efforts are afoot already to bring in the numbers.

The DMK, though opposed to the government's proposal, has already announced that it would back the UPA if there's a voting on the issue. If the Congress manages to convince the Trinamool Congress to shed its hard line position, it could risk a voting. Getting Congress members opposed to the bill would not be a big problem for the party.

The government could dilute its present proposal with retailer-friendly changes to allay fears in the political class as an option. It might increase the limit for procurement of goods from small and medium enterprises by big retailers from the present 30 percent to 40 percent.

However, it is more of a battle for the numbers now than for the retail sector.

by Akshaya Mishra

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