Here are two columns I wrote late last year, reflecting on the political process and economic analysis associated with India's attempt to open up multi-brand retailing to FDI. The first column also has some thoughts on developmental objectives and social opportunity, based on some new work by Yale economist John Roemer.
Development and Opportunity
The furor over the attempt to open up FDI in multi-brand retail reminds us of several things about India. But the true lessons may not be the seemingly obvious ones. It is certainly possible that the government’s handling of the policy change was not the best it could have been. On the other hand, those with long memories will recall numerous occasions where policies have been floated, reversed, modified or even transformed. At one time, all FDI and disinvestment were controversial—now the discussions are more nuanced (even if political rhetoric remains strident).
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Retailing and Reform
In my last column, I mused on India’s economic reform process and inclusive growth, in the context of opening up multi-brand retail to FDI. I want to return to the question of political capital, and policy thinking about reform in the retail sector.
On using up political capital, I think ongoing events have proved me wrong. Opposition to opening up multi-brand retail has come from the same quarters as opposition to other reform measures, including the Pension Bill and Companies Bill. On all these, the government has openly looked for compromises that will lead to acceptance of the reforms. If that is the case, then moving on multiple fronts may give the government more chance of getting some changes through, not less. The government has also reset its approach to FDI in retail, marshaling interest groups that might benefit, and saying more to make the case for the positive consequences of the change. So even if it lost some political capital initially, it should recover it quickly.
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