If the decision to liberalise foreign direct investment, or FDI, in the retail sector was supposed to dissipate the widespread feeling that policy-making and governance have become paralysed under the second United Progressive Alliance (UPA) government, then it has quite spectacularly failed to accomplish that task. Instead, angry allies of the UPA are complaining they were not consulted, there are murmurs of dissent within the ruling Congress, and the Opposition is unitedly determined to make a weak government pay — whether inside Parliament or outside. West Bengal Chief Minister Mamata Banerjee has insisted that the Trinamool Congress is not on board with any opening up of multi-brand retail, and talk of a rollback is getting louder. But the UPA’s leaders must not think that reversing this decision will get them out of a mess. No, it will merely cause another question to be asked. And that question is: Why is this government in power, anyway?
In the two years and some that this iteration of the UPA has been ensconced in North and South Blocks, FDI in retail is the first and only significant, big-ticket reform it has undertaken. It isn’t surprising, therefore, that it has developed a reputation for paralysis. And if this reform, too, has to be rolled back, what good does it do to have this government atop Raisina Hill at all? Remember, this is a reform that requires no complicated floor management, given that it is an executive decision. It has a clear set of benefits, directed at the urban middle class and suppliers of produce — groups of people whose support should not be difficult to gauge and mobilise. Support for the idea flows in from academic studies and corporate leaders. Its main features are similar to what the principal Opposition party has committed to in the past. And in spite of all these supportive factors, the UPA can’t seem to get it done. Instead of managing an uncomplicated reform decision, it has allowed itself to appear more powerless, given the Opposition another handle to beat it with, and put the entire, crucial, winter session of Parliament at risk.
In this mess is visible the nature of this government’s failures: a lack of preparation and an incomplete political commitment. The government failed to anticipate the effect of allowing the Opposition an easy excuse to further disrupt Parliament, and so chose to clear retail FDI while it was in session. It failed to convince some of its smaller, less liberal constituent parties that a reform that allows state-based exceptions would not be a threat to their political programmes and positioning. It failed to give the impression that the Congress was solidly behind the decision. The prime minister did indeed speak up and call it “well-considered”, sensibly linking it to inflation and investment. But where were the other senior voices from the ruling party? With such mixed signals on reform, reform won’t happen. If this decision – easier to implement and defend than most – is rolled back, then how will any other decisions survive? UPA-II has shown no ability to lay necessary groundwork, convince allies, placate the Opposition by face-saving mechanisms in Parliament — or to make even the slightest case for a reformist, open worldview. It will be a lame duck for the remainder of its term, unable to govern and too terrified to reform. The coalition’s leaders must realise they have only two options: reform or perish.