Having put off FDI in retail, the UPA government is likely to postpone some more reform steps until the Uttar Pradesh Assembly elections are over in April. The crucial elections have become the new alibi for deferring a host of reform measures including disinvesting public sector units (PSUs) and letting foreign airlines buy stakes in domestic carriers. This virtual freeze on reforms is akin to the one that preceded the West Bengal elections, which saw the land acquisition policy in cold storage for fear of a backlash from the Trinamool Congress.
?The decision to permit 51% FDI in multi-brand retail trade is suspended until a consensus is developed through consultations among various stakeholders,? finance minister Pranab Mukherjee said in a statement in Parliament on Wednesday. Mukherjee said state governments and allies of the government are stakeholders, without whom the decision ?cannot be implemented?.
Corporate India did not mask its unhappiness, with Ficci calling it ?deeply disappointing?. Opposition parties, which have stalled Parliament for nine days on the issue, claimed victory. While BJP MP and leader of Opposition in the Lok Sabha Sushma Swaraj claimed the government bowed to the wishes of the people, the CPI?s A Raja said that the decision amounted to a rollback.
On the upside, putting the retail plan on hold has got Parliament back to work.
Participating in a debate on supplementary demands for grants in the Lok Sabha on Wednesday, members from BJP, JD(U), BSP, Left and Samajwadi Party criticised the government’s economic policies, alleging these were not friendly to farmers and common people. There was an urgent need to tackle issues like increasing inequality, import-export imbalance and falling industrial growth, they said.
There was, however, despondency in Treasury benches. Senior ministers told FE that ?there is no possibility of this (retail FDI) being revisited before the UP elections.? The elections are due in April and several Congress MPs from the state too had raised objection when the policy was announced.
Other reforms are in jeopardy too. Mamata Banerjee has already pitched for mandatory assured returns in the Pension Funds Regulatory and Development Authority (PFRDA) Bill, a demand that could potentially thwart reforms in the sector.
A final decision on FDI in aviation is hanging fire and even the divestment of Scooters India which was cleared unanimously by the Union Cabinet has not got off the ground due to union issues, which the government appears reluctant to take on at this point.
?The government says it will build consensus before taking up the issue. But they need to understand the fundamental reasons why Trinamool Congress opposed FDI in retail. This was not because of a West Bengal package, but because small retailers are an important pressure group in the state. Just to say that any state can stop FDI in their particular state is not enough; if three neighbouring states of West Bengal have it and the economic surge is seen, there will be pressure on West Bengal too. We can’t have that,? said one Trinamool MP. Panchayat elections are due in West Bengal next year.
?Besides, the Congress was arrogant. It didn’t bother to check that we have opposed FDI in retail in our manifesto,? he added for good measure. While the government says that the decision to allow FDI in retail has only been put on hold for a while, the general sense in the government is that it will take a while before the matter will be revisited.