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Mainstream, VOL XLIX, No 51, December 10, 2011

FDI in Retail: Federal Deficit in Decision-making

Monday 12 December 2011, by Amna Mirza

The winter session of Parliament was speculated to be on fire due to debates over the Jan Lokpal Bill and the final outcome of the Team Anna-UPA II Government duel. What emerged surprisingly was the decision to allow foreign direct investment in the retail market. The phenomena saw not only the Opposition coming forward with its sacred exercise of criticising the government but also the key allies of the UPA like the Trinamul Congress and some Congress Members of Parliament expressing displeasure over it. The government has shown its readiness to debate on the issue but the Opposition is firm on its demand for vote on the move to increase the cap on FDI in multi-brand retail to 51 per cent and allow 100 per cent foreign ownership in single-brand stores.

In this spectrum, what was striking was a remarkable degree of voices of dissent from a few States in the Indian federal apparatus. Kerala emerged as the first Congress-ruled State to oppose FDI in retail, followed by the Chief Ministers of Uttar Pradesh and Tamil Nadu— Mayawati and Jayalalithaa, casting doubts over the concealed nature of the proposed benefits tendered by FDI in retail, namely, that it benefits the foreign players vis-a-vis indigenous players. Further, the iron man of Bihar, Chief Minister Nitish Kumar, opposed it with his party JD (U) advancing its demand for an adjournment motion in the Lok Sabha.

India is a federal parliamentary democracy, with a bicameral Union Legislature. The rapid pace of globalisation has had a profound impact on Federalism which seeks to manage sovereignty with the dual rule. The States within the Indian Union are heterogeneous. From the inception of the coalition government of the multi-party system and economic decentralisation, the States have found a new space for themselves as compared to the past. This idea of States as independent sites of growth can be captured from the imagination of the globalisation theorist, Kenichi Ohmae, where she argues that the rise of States/sub-units, in the global era needs to be seen as geographical clusters and as potential engines of huge regional economic growth.

In the Indian context, the process of liberalisation juxtaposed with rise of coalition forces has tilted the balance towards a more decentralised federalism where the States have renewed concern for their distinct development The nucleus of power lies in New Delhi; yet a certain atmosphere has been created whereby States vie for their due space in policy matters that cast a spell on the issues at stake. Further, one can sense that there is a certain degree of reordering of state-market relations with the rise of the States’ independent demands.

IN the ongoing debate what was thrown up was the mosaic of a complex idea of national interests. If the idea of containing inflation and making our retail market catch up with international standards was underscored by the Union Government, the States debunked the notion. The differences of opinion came up when Kerala Congress leader Ramesh Chennithala feared how this decision will give political advantage to the Left forces to factor in small and retail players. Uttar Pradesh and Tamil Nadu opposed it primarily to gain political mileage over the current regime at the Centre by injecting the ‘foreign’ factor and in this they left no stone unturned. Bihar echoed the idea of larger public interest wherein the State Government did not allow Special Economic Zones (SEZs) in the past and as a matter of principle agreed to stick to its policy principles and opposed the thought process of Prime Minister Manmohan Singh. Further amongst the political circles in New Delhi, the Left parties debated how the executive acts in a manner that is at odds with the collective responsibility of the Cabinet as enshrined in a parliamentary democracy. There were also factions that pointed out how employment, productivity and technology were not being catered to by allowing FDI in retail.

In a democracy, the differences are often irreconcilable and the idea of fully rational consensus is too tough a goal to reach. This instance showed how federalism and globali-sation are leading to a movement away from the single actor in decision-making with a quest for balancing unity and diversity and calling for constant co-operation in policy-making. The thrust of federal foreign affairs in India has been changing according to the changing global conditions.

Innovation in negotiations and consultations are certain basic principles to be followed in the process of the federal bargain. India is poised to become an economic superpower in the coming years. It is hence necessary to fine-tune its national interests with those of the States, thereby avoiding any unnecessary clash in the articulation of ideas. The consensus achieved for negotiations was vertical amongst the executive branch, rather than horizontal. The multipolar world needs a broadbased decision-making paradigm. The nation has to a debate how we must act to correct this federal deficit in the decision-making process.

The author is a Ph.D Research Scholar, Department of Political Science, University of Delhi.

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