Along with the implementation of the Insolvency and Bankruptcy Code and an impressive jump in the World Bank ‘Ease of doing business’ rankings, easing rules for foreign investments and attracting foreign direct investments have been the major achievements of the Modi government’s first term.
Another major initiative launched by ‘Modi 1.0’, with much fanfare, was the ‘Make in India’ scheme. Launched in September 2014, global majors were invited to invest in India, with an aim to make the country a major manufacturing hub.
How far the government has moved from this stance was seen last week. When Amazon chief Jeff Bezos visited India he was given the most pointed cold shoulder by the government. Not only did Prime Minister Narendra Modi decline to meet him, Commerce and Industry Minister Piyush Goyal too ignored him.
This is in complete contrast to Bezos’ earlier visit to India, when he was treated almost as royalty.
When Bezos announced his intention to invest $1 billion in India, Goyal’s retort was astonishing. At the Raisina Dialogue in New Delhi, Goyal said, “They may put in a billion dollars. But if they make a loss of a billion dollars every year then they jolly well have to finance that billion dollars. So it’s not as if they are doing India a great favour when they invest a billion dollars.”
No other global business leader has received this kind of a snub from a government Minister in the past. Goyal, however, later sounded more conciliatory and said the government welcomed investments as long as they came from the “right source and under the purview of law”.
Bezos had to be content with meeting a few industry captains in Mumbai and spending some time at the Taj Mahal with his partner.
As if on cue, around the same time, the competition watchdog, Competition Commission of India, announced a probe into Amazon and other e-commerce ventures – including Flipkart – in the matter of ‘predatory pricing’.
Small traders group
There is, of course, a political context to all this. The Confederation of All India Traders (CAIT), an influential lobby group of small traders, has been running a campaign against e-commerce firms operating in the retail space. These traders, who run the kirana, or mom-and-pop, stores across localities, see a threat to their business from these e-comm firms.
They feel particularly threatened by the e-commerce players’ deep discounting methods, which are now under the competition watchdog’s scanner. Members of this influential body are also from the core support base of various political parties and are a source of funds for the latter, so they wield considerable political clout.
In the past, such traders had opposed FDI in retail and were even against big Indian corporates getting into the groceries business by setting up huge department stores.
Another angle
The Delhi State elections are due on February 11. The ruling BJP, after a string of losses in State elections, will be taking on the formidable Arvind Kejriwal’s AAP. As the incumbent Chief Minister Kejriwal will certainly not make life easy for the BJP.
These are the political considerations that the BJP is up against.
But apart from the political factor there seems to be a curious throwback to an earlier era of command and controls. What else can explain the government’s inexplicable decision to restrict the amount of foreign liquor and cigarettes that air travellers can buy from duty free shops at airports?
The Commerce Ministry has recently proposed restricting the purchase of duty-free alcohol to one litre from two litres and scrapping the import of cigarettes, the earlier limit being 100 sticks. The Ministry’s wants to restrict the import of ‘non-essential’ goods.
The Association of Private Airport Operators has, not surprisingly, expressed its dismay, adding that this move would lead to a loss of revenue of ₹650 crore a year.
When the BJP-led NDA stormed to power in 2014 and Modi became the Prime Minister he was feted as the most industry-friendly political leader in the country. This was a well-deserved tag, given his impressive record of industrial and infrastructural development in Gujarat, where he served as Chief Minister for more than 13 years.
Industrialists, both from India and abroad, used to flock to the much-publicised annual Vibrant Gujarat investment summits. Industry captains used to gush about Modi’s pro-business attitude and his zeal in cutting red tape and facilitating investments. The speed with which Modi facilitated Tata’s Nano project in Gujarat after it was kicked out of West Bengal is ample proof of that.
But since he became Prime Minister he seems more keen on projecting his ‘welfarist’ image. As Nobel Laureate Abhijit Banerjee mentioned in a recent interview, the Prime Minister now is more keen on showcasing schemes such as Swachh Bharat, Jan Dhan Yojana and Ayushman Bharat and playing down his pro-business image.
Losing patience
What’s more worrying is that some of the rhetoric of this government seems to be a throwback of the era of controls of the 1970s.
An investment of $1 billion by Amazon is not to be scoffed at, especially at a time when the investment climate in weak and there is a desperate need to create jobs.
Since it came back to power in May 2019, the BJP has been more preoccupied with political issues — the Triple Talaq Bill, scrapping Article 370 and bringing in the Citizenship Amendment Act. The Centre’s strange apathy towards the economy is baffling.
The massive anti-CAA/NRC protests are a sign that people are running out of patience. One hopes that in the Budget, the government comes up with a credible package to kickstart the economy.