Prime Minister Narendra Modi government’s decision to permit 49 per cent Foreign Direct Investment (FDI) in Air India and allow 100% FDI in single-brand retail with liberalized sourcing norms, may not be economically significant, but is of outsized symbolic importance because of its potential to aggravate the faultlines within the RSS Sangh Parivar.
The degree of government intervention in economic activity, especially the role of foreign investment, has long been a deeply contested matter within the Sangh Parivar. The BJP’s current FDI policy is best summed up by the Prime Minister’s promise of “red carpet, not red tape” for foreign investors.
The liberalization of FDI limits and easing of regulatory requirements, such as permitting greater FDI via the ‘automatic route’, the policy thrust of the Modi government has been unmistakable. The RSS’ economic affiliates, especially the Swadeshi Jagaran Manch (SJM) and its labour union, the Bhartiya Mazdoor Sangh (BMS), have been critical of the government’s FDI liberalization policies.
The SJM has vocally contested the government’s assertion that FDI is a means to boost growth and generate employment. But, unlike during the Vajpayee government, a modus vivendi has been worked out between the Sangh’s economic affiliates and its political arm, the BJP, to air policy differences behind closed doors rather than taking disagreements to the street.
Nevertheless, yesterday’s decisions could exacerbate the aforesaid faultlines because they impinge upon the Sangh’s ideological verities: preferring economic interests of mom-and-pop retail stores. Throughout its history, the BJP has had a robust debate on the role of foreign investment in the economy – a debate that, until recently, lacked a counterpart within the RSS. The RSS was implacably opposed to FDI because it was perceived as inimical to traditional Indian values. The RSS believed that foreign investment would infuse into the national bloodstream culturally alien values of consumerism and sybaritic hedonism.
The RSS feared that an economy dominated by impersonal market forces would undermine local economic activity which, it believed, was key to sustain bonds of family and community. The SJM was established in 1991 as a response to former prime minister and Congress leader P V Narasimha Rao’s reforms to advocate for economic self-sufficiency because the Sangh feared that greater foreign investment would lead to a ceding of economic sovereignty to multinationals. The “second coming of the East India Company” was a common trope used in SJM’s arguments justifying investment protectionism. Because small traders and North Indian trading communities were the core of RSS’ support base, the opposition of FDI in retail was an ideological totem for the Sangh.
The rapid expansion of the Sangh has changed its social composition. Most of the new entrants into the RSS are urban professionals or members of upwardly mobile social groups. The new joiners do not share SJM’s autarkic or statist proclivities. The younger members of the RSS are more accepting of foreign investment and recognize FDI’s criticality in a resource-constrained economy.
Moreover, the political needs of the BJP, especially the imperatives of employment generation for sustained electoral success, also moderated the RSS’ stance on FDI. Younger BJP leaders with RSS provenance – Transport and Highways Minister Nitin Gadkari, Maharashtra chief minister Devendra Fadnavis or Haryana chief minister Manohar Lal Khattar, for example – have been enthusiastic supporters of greater foreign investment.
Unlike during the time of former RSS chief or ‘Sarsanghachalak’ K S Sudarshan (2000-2009), the current RSS leadership rarely delivers rhetorical broadsides against FDI. Signaling a reevaluation of the RSS’ stance on FDI and economic liberalization, the current ‘Sarsanghachalak’, Mohan Bhagwat, had contended in November 2013 that the organization was not “bound by dogma” and was willing to change with the times.
The softening of the RSS’ once implacable opposition to FDI created a faultline between pragmatists and traditionalists within the RSS, and exacerbated disagreements between the BJP and RSS’ economic affiliates.
Notwithstanding a greater acceptance of FDI, the RSS remains firm in its opposition to FDI in retail, especially multi-brand retail. Apart from hurting the economic interests of a key part of its support base, that is North Indian trading communities, the RSS believes that undermining the economic viability of small traders would be inegalitarian.
The RSS prefers small trading businesses because it believes that these enterprises treat employees as an extension of the owners’ family (‘jajman’), and a concern of employee welfare is at par with pecuniary considerations. To be sure, the tweaks to the Modi government’s policy in retail announced yesterday are relatively minor. Earlier 100% foreign investment in single-brand retail was already permitted, albeit with government approval for increasing stake beyond 49%. Now, government approval will no longer be needed as all 100% FDI in single-brand retail will be cleared “automatically.”
Similarly, allowing 49% FDI in Air India could hasten its privatization – a hot potato the Modi government had been careful to avoid in its first three years. Privatization had long been a sticking point within the BJP and the Sangh Parivar.
Ram Naik, the current governor of Uttar Pradesh and Petroleum Minister during the regime of former prime minister Atal Behari Vajpayee, had reportedly resisted Vajpayee’s attempts to privatize public sector oil companies. In fact, Dattopant Thengadi, an influential Sangh ideologue and the founder of the SJM, had termed Vajpayee government’s move to privatize BALCO as ‘anti-national’.
Certainly, the battle isn’t over yet. As the privatization of Air India neared fruition over the last several months, the BMS warned the government of a “major confrontation.” Air India’s privatization, especially to a partly foreign-owned entity, will be vehemently opposed by it and the SJM, because these issues have been an ideological totem for the RSS.
Perhaps Prime Minister Modi’s decision to open up FDI could deepen faultlines over economic issues within the RSS and among its affiliates. But it is certainly a manifestation of the PM’s determination to push through another liberal economic reform in the face of rising demands for a shift in government’s focus to alleviating economic discontents. Does this mean that the PM has taken this decision with the support of the RSS’ highest decision-making body?
The answer to that question could make the politics of the BJP-RSS clearer as the Modi government moves to present its last full Budget before elections are held just over a year from now.