Commerce and Industry Minister Piyush Goyal has been quick to clarify his remark on Amazon founder Jeff Bezos not doing India a favour by investing here. He now says all investment is welcome, as long as it complies with India’s regulations. You can’t argue with that.
Although, if read with the fact that monopoly watchdog Competition Commission of India had hauled up Amazon earlier this week for “unfair” trade practices, a move hailed breathlessly by the Swadeshi Jagran Manch and trader/retailer associations, you wouldn’t make such a benign interpretation. It won’t be some diabolical conspiracy either. It’s only pure politics. It will underline the BJP’s inevitable return to its basic instinct: Mercantilism.
This needs explanation. For decades, until the Congress-Left, post-Rajiv Gandhi, began describing the BJP as a Hindu party, Indira Gandhi had avoided doing precisely that. In an earlier National Interest, I had quoted from a conversation with Seshadri Chari, former editor of RSS mouthpiece Organiser, that she only described the BJP as a baniya (trader caste) party. The BJP has shown signs lately of proving Indira Gandhi right and returning to its trader mindset.
This is where the philosophical impulse of swadeshi also comes from. If someone has to profit from trade and entrepreneurship, it better be one of our own. And even if we let an outsider come and do so, he better be grateful to us rather than the other way around. Several strong emotions get meshed in this: Nationalism, protectionism, mercantilism, and arrogance. Who the hell are you to walk all over my market, out-compete my native businessmen and then expect me to say thank-you?
Foreign Direct Investment (FDI) had first started becoming fashionable in 1990-91, just as the Cold War ended. It was also a time when a deep economic crisis was building up in India.
Madhu Dandavate was the finance minister in V.P. Singh’s cabinet. Addressing one of those industry chamber gatherings, he famously — or infamously — said, something like, “I am not against FDI. But I won’t go looking for it”. Since he was a dyed-in-the-red old socialist, even this reluctant acceptance of FDI was seen as something to celebrate. But no foreign investor was impressed.
The reform of 1991 changed things. But attitudes deep down didn’t. India had already had four decades of socialist, protectionist, swadeshi, import-substitution, ‘exports are good/imports bad’ toxification across the political spectrum. The only force of the economic Right, the once-powerful Swatantra Party, had been destroyed and entombed under Indira Gandhi’s populism. Even the Jana Sangh by this time was singing the same socialist song, only fortified by its own economic nationalism. Atal Bihari Vajpayee, the only truly reformist BJP leader in a modern free-market sense, ran with the baton of reform. He had too little time.
Old ideologies, and we say this in a purely non-partisan sense (as in Left or Right, Congress or BJP), are extremely obstinate. Like the proverbial dog’s tail, you can’t straighten or bend these even in a dozen years. Some individual leaders can make a difference: P.V. Narasimha Rao and Manmohan Singh for the Congress, Vajpayee for the BJP. Under others, the ‘tail’ goes back to the way it always was.
Over the past five-and-a-half-years, we have seen the protectionist, anti-MNC, technophobic old notions return with a vengeance. This government now gives a 20 per cent advantage to capital goods made in India over imports, signalling a return to the old regime.
All it meant was that now a foreign company could ship its kits to India and assemble, for example, metro coaches in ‘joint venture’ with an Indian minority partner or even directly, and sell the same coach at a price much higher than an import. In budget after budget, we’ve seen tariffs go up, sectoral protections extended — steel is only the most visible example — and all kinds of government agencies, from regulators to quasi-policing organisations, go after foreign investors, especially in retail. After the last budget and the BJP discourse around it, that happily forgotten old, Indira-esque expression ‘import substitution’ staged a comeback.
That is the reason global business has seen its romance with Modi’s India fade. No one would say so in public, especially those that already have investments in India, or employees and other interests. Who wants ‘panga’ with a strong government? Even the mighty Vodafone CEO has to retreat after saying in agony that he will have to leave India, although he still might do that, after writing off a couple of tens of billions because of regulatory and taxation shocks and unpredictability.
Want more evidence? See how Jeff Bezos’ previous visit to India went in 2014, when he was feted by Modi and others, and his peremptory dismissal now. The explanation also sounds like Dandavate of 1990: I am not against FDI, but…
You still want to know where this sentiment or push comes from? Play back the part of RSS chief Mohan Bhagwat’s Dussehra speech last year where he lays out his economic doctrine. We can describe it in one word out of these: Protectionist, xenophobic, swadeshi. Or, it could also be stated as, ‘We are not against FDI, but only in sectors where we need it, as long as it doesn’t hurt Indian business, and control remains with Indians’.
The most fascinating aspect of Modi in his sixth year with a big majority is how compliant his government has been to Nagpur. It has delivered on all of its big concerns: Cow, Article 370, CAA, triple talaq, anti-Pakistanism, and so on. Yet, it has reversed two decades of reform on trade, FDI in retail, and technology to harmonise itself with the RSS, not defy it like Vajpayee did.
In 2014, and again in 2019, India elected a “strong” government and prime minister because it was fed up of a “weak” one for a decade under Manmohan Singh. It has been stronger and more decisive in many areas, from retaliation for terror attacks to Article 370 to anti-corruption activism. But not on the economy. Besides GST, however flawed, and the IBC, it is difficult to find one big, bold reform, although I recently listed 10 bits of good news even in gloomy times for the economy.
Think about it. A government as weak as Manmohan Singh’s had the courage to deliver the India-US nuclear deal, thereby fundamentally shifting India’s geostrategic posture. Modi’s strong government, meanwhile, is struggling to seal a tiny, partial trade deal with the US, even as it celebrates this ‘strategic partnership’ co-founded by Singh and Bush/Obama. Vajpayee’s weak government ushered in the cotton revolution by permitting genetically modified seeds. Modi’s strong government is pussyfooting on agricultural biotechnology, more respectful of Swadeshi Luddites than a Vajpayee would bother to be.
Which takes us to our old argument: Are strong, full majority governments necessarily good, or do they have a problem? More to lose, no excuses to put off ideological demands and compulsions, and a constant need to save face? Are weak governments actually more decisive and less risk-averse because they have greater flexibility and humility? It is a particularly contrarian and provocative point. Which, indeed, is what it was intended to be.