Opinion Capturing the kirana

The opposition of regional elites is understandable since the current wave of economic reforms threatens their power in two substantial ways. The first is tied to the emergence of a national market in India. The increasing power of national-level firms takes decision-making power over economic issues away from local politicians. Compare this with the United States,where politicians are beholden to national and international firms. We find the opposite of this in India. Reforms are seen as a long-term threat to the power of politicians in many states. There is,however,a graver reason why regional politicians oppose reform — the political economy of campaign finance and corruption in India.

This generation of economic reforms is deeply disruptive of how politicians,bureaucrats and local businesses interact. Observers of corruption in India have noted that local business owners,including kirana shop owners,are often the go-to persons for many local candidates when they want to raise money for an electoral campaign. These local businesses are also at the bottom of the chain of corruption,and money collected from them gradually passes on to higher levels of the bureaucracy and to politicians after the local bureaucrat has taken his share. If these local businesses and shops are gradually replaced by large national,or even multinational companies,the ability of a local bureaucrat and/ or politician to raise funds from these shops will be limited.

In other words,if a big multinational corporation buys out the neighbourhood kirana store and replaces that with an upmarket,professionally run grocery centre,soliciting a campaign contribution from this store or even extorting a bribe is substantially harder and involves more risk. A local politician cannot feasibly expect a campaign contribution from local Reliance Fresh or McDonald’s outlets,which are run by uniformed employees of a larger company who do not own the store and work for a salary. Most transactions in such places are electronic,carefully documented and reported periodically to a central management. This is unlike the handwritten paper bills that owner-operated kirana stores prefer where sales and sales tax can be fudged and used for the purposes of concealing income.

Local low-level bureaucrats who can expect bribes from the kirana store cannot expect the same from a multinational or even a large national chain. Similarly,if a politician or a local government official shows up at the shop to ask for a bribe to help evade some taxes or to make a campaign contribution,the store manager has the capacity to say “talk to my boss”, an indistinct figure typically in a bigger city,farther away from the retail point and who,importantly,is not beholden to a local bureaucrat or politician in the same way. Further,the corporation may have direct links with the top brass of national parties to whom a contribution is already being paid. So the introduction of corporations into the retail market will affect the ability of local candidates to access campaign finance,which in India is typically collected in the market place,sometimes even through the use of implicit and explicit threats. We think politicians already know this and this is what the resistance to FDI in retail is about.

This disruption of local corruption systems that feeds political parties is more likely to negatively affect regional parties. The logic is simple. If a candidate of a national party is unable to raise a lot of local money for his campaign,he can be cross-subsidised by the national party that raises huge funds from across the country independently from large corporations. The national party has the capacity to channel funds raised in other states towards this candidate. On the other hand,local politicians from regional parties have to raise all their money locally. Regional parties also like candidates that can raise their own funds because this reduces pressure on the main regional party to subsidise campaigns for their candidates. Compared to national parties,regional parties are at a competitive disadvantage as far as campaign finance is concerned because their scope of raising funds is geographically contained. Also,large corporations prefer to contribute to national parties and not regional ones.

Reforms in any country need to be under-girded by social and political coalitions that benefit most from them,and often change the structure of these coalitions in the process. In the scenario we describe,the current wave of economic reforms threatens the interests of local elites because it has a direct bearing on the political economy of local corruption and the raising of campaign finance in India. Putting economic reforms in place means creating an alternative economic structure substantially delinked from the state,which will disrupt the tried and tested political balance locally — the balance that makes the difference,for many politicians,between winning and losing an election.

Pradeep Chhibber and Vasundhara Sirnate are at the Travers Department of Political Science,University of California Berkeley,US