FDI in retail can do for the Congress what land reforms did for the Left in West Bengal

I see striking parallels between the opposition to FDI in multi-brand retail and the early resistance, in the mid-1980s, to the introduction of computers. Then, as now, the main opposition came from the ruling party, albeit a different one, in West Bengal.

The IT revolution turned India into an IT superpower and played a big role in changing global perceptions about India. It could have changed West Bengal’s economic fortunes, too. On the face of it, the state had everything – a large educated workforce, a large English-speaking population and a history of engaging financially with the world – to be at the vanguard of the tech revolution.

But a deadly mix of cynical politics, blinkered leadership, ideological dogma and xenophobia ensured that West Bengal was denied the benefits of computerization for another decade and a half.

The argument: one computer would do the work of four people. Hence, mass computerization would lead to massive layoffs.

Two-and-a-half decades later that much feared IT-led devastation of the Indian economy hasn’t happened. Even its strongest opponents, the Left, has come around and realised its potential and every state is falling over itself to woo Indian and foreign IT majors to invest.

So, did Jyoti Basu and his advisors miss a trick?

Difficult to say… Instead of trying to build a fickle middle class constituency, the Left focused on nurturing its peasant base. More than two-third of West Bengal was, and remains, dependant on agriculture. It was clearly a vote bank worth pursuing.

The CPI(M)’s land reforms programme empowered farmers, gave them self respect, cut out middlemen like landlords from the rural value chain and earned it the undying loyalty of two generations of peasantry. Thus, it set up the platform from which it ruled the state virtually unchallenged for 34 years.

Cut to the present.

The government of the day, this time at the Centre and in some progressive states, has once again unveiled a programme that will

* Empower farmers by giving them better returns;
* Cut out middlemen; and
* Ensure lower prices for consumers like you and me.

Yes, a part of the existing farm-to-fork value chain will be disrupted. But as China’s experience shows, the virtuous cycle created by massive investments in back-end infrastructure, improvements in efficiency of small and medium enterprises and growth of the services sector will gainfully absorb most people rendered surplus.

In China, in Brazil and in Mexico, the introduction of Big Retail and FDI in the sector has resulted in the growth of both neighbourhood stores as well as organized retail.

A 2008 study by the Indian Council for Research on International Economic Relations titled “Impact of Organised Retailing on the Unorganised Sector”, which was included in a 2010 discussion paper that influenced the government’s FDI policy, says: “Farmers benefit significantly from the option of direct sales to organised retailers. Average price realisation for cauliflower farmers selling directly to organised retail is about 25 per cent higher than their proceeds from sale to regulated government mandi [agricultural market]. Profit realisation for farmers selling directly to organised retailers is about 60 per cent higher than that received from selling in the mandi.”

Farmers make up more than half the Indian population and the electorate. The retail trade accounts for only about a tenth.

It’s a no-brainer. Any party or coalition that can win over the currently divided farm vote-bank will become unassailable in elections. Yet, politicians are opposing a policy that can win them the ever-lasting (well, almost) gratitude of more than half the electorate. Why?

The BJP’s opposition is cynical. Two of its chief ministers, Narendra Modi and Raman Singh, had initially written to the Centre supporting FDI in multi-brand retail. But the central leadership decided that there were more political benefits to be milked by opposing a policy that had no strong backers.

The Left’s opposition is ideological and Mamata Banerjee’s resistance is populist.

None of these stands is rational.

I can think of three reasons why parties are opposing the retail decision:

* Ideological opposition to business and a deep-seated xenophobia-induced fear of foreign capital: Large sections of the Indian population suffer from this, and many politicians and political parties find it convenient to play the populist card to stay on the right side of voters.
* Then, the retail value chain is very well-entrenched and politically powerful. They are united in opposing FDI in multi-brand retail and so, are able to rally support from political parties.
* And finally, the highly dispersed farm lobby is not yet on board. There is always resistance to change and in a country where education and awareness levels are poor, it is easy to whip up fear and anxiety about transformational policies that can turn age-old power equations on their head.

My feeling is that as the benefits of the decision become visible, more and more states will fall in line – just as the PM and his advisors are hoping. But that could take years, even decades. The opportunity lost won’t come back.

So why isn’t the Congress aggressively selling the FDI-in-retail decision to farmers and the middle class? Your guess is as good as mine. But sold well, it can potentially do for the Congress what land reforms did for the Left in West Bengal.