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Grubs wreck India’s dreams

by Kevin Rafferty

Special To The Japan Times

My old friend Manmohan Singh has just suffered a devastating and very public defeat. Is it time for him to step down as India’s prime minister and take a well-earned retirement after more than 40 years of top-level public service?

Is it time for Singh and Sonia Gandhi’s Congress Party coalition government to call elections in the hope that a new younger wave of politicians may emerge with fresh ideas to drag the ancient civilization of India to meet its 21st-century potential?

These suggestions are prompted by the recent extraordinary political events, which saw Singh promise that India’s massive retail market, worth close to $500 billion and expected to double to $1 trillion in the next five years, would be open to 100 percent foreign direct investment.

Yet within days Singh reneged. The disastrous U-turn is worse than any damage to the retail sector or even the fear that, as one BBC commentator claimed, the message is that India was closing the door to all foreign investors. However, it does raise questions as to whether India’s reform process has shuddered to a halt.

The main damage is political: How could a government with a sufficient majority to push through any measures in Parliament have so misunderstood opposition from within its own ranks as well as from outside? How can any government which says one thing and then changes its mind so quickly be trusted on anything? The questions are about government and governance.

Shopping mall mania has hit the suburbs of India’s big cities hard. Huge sprawling glass palaces for leisure, with cinemas, cheap restaurants, including McDonald’s, KFC, and clothing stores galore are springing up. In several places in Delhi, Mumbai and other metropolitan cities, the malls cast a lurid light on slums in their shadow.

But India is proof that anecdotal journalism is unreliable. Overall, the modern sector of the retail business is somewhere between small and tiny, ranging from a high of 23 percent in the clothing and fashion business to 11 percent in furniture and furnishings to a miniscule 1 percent modern penetration in food and grocery items. Food still accounts for more than 40 percent of household spending.

Crawford Market (now officially renamed Mahatma Jyotiba Phule Mandai, though everyone still calls it Crawford, after Bombay’s first municipal commissioner), in downtown Mumbai, offers a cornucopia of the wonders of India. The Norman-Flemish style building sells almost everything from cats, dogs, parrots endangered species of snakes, billowing wigs of human hair to spices and all sorts of food. If you slip and slither through the stench of the vegetables and meat to ask for eggs, they may still be hot and grubby from being freshly laid.

Outside metropolitan India, markets sprawl in the open air with endless opportunities for spoiling and wastage. Montek Singh Ahluwalia, vice chairman of India’s Planning Commission, estimated that 40 percent of India’s food is spoiled even before it gets to market because of lack of village roads and wretched storage facilities. Hence, the idea of bringing in foreigners to supply expertise, quality control and purchase agreements to ensure fresh-quality produce and fair prices for farmers, supply chains, procurement and distribution systems, modern management from the field to the shop and refrigeration to keep food fresh at the point of sale.

Indians who are opposed have got themselves into something of a lather concerning the threat from foreigners, seeing a latter-day army of British East India companies ready to march in and steal their country. It seems ridiculous, especially when the initial reaction of the big foreign retailers was how neatly the investment deal would be wrapped in red tape. Nevertheless, it is reasonable to ask what foreigners could bring to the party.

After all, it is not rocket science to understand the complex of simple steps to get food from the farmers’ fields to the shops. And Indians know better than any foreigners that it is the hardest thing in the world if you don’t know what the farmer is producing because of his financial stringency and exigencies of weather, there are no roads from the fields, storage is limited and the electricity supply is uncertain.

India is a huge and complex country with 14 major languages, many more varieties of cuisine, religious and dietary restrictions, a growing middle class of 300 million people greedy for 21st-century fashions and goodies, a mass who can barely make ends meet and a growing underclass of barely literate people who struggle to find work and stay alive. Unequal India was revealed in all its shame this month when the OECD revealed that the Gini coefficient, which measures inequality, is 54 in India, higher than anywhere in Asia.

The argument about whether foreigners can bring the competitive edge to unleash India’s retail revolution is bogus. The only strong claim is that the government should be cutting red tape and deploying imagination and investment to empower people and their intelligence and energies, not suffocating talent with regulations.

Work from the bottom up: Fix the roads, provide the schools, empower the farmers so that they are not cheated by middlemen, and Indians will soon show any foreigners the way to the hypermarket.

By all means let them form partnerships with foreign retail giants to tap management expertise and let the foreigners learn the wonders of India.

Unfortunately, grubby middlemen who dominate Indian politics hijacked the debate. They presented themselves as defenders of mom ‘n’ pop shops, ignoring that in the poorest villages there are no shops, and in the cities moms and pops might like to upgrade to a pleasant air-conditioned environment.

In the same way, Indian politics as a whole has been hijacked by grubby middlemen who play with caste, regionalism, religion, language, to enrich themselves. About 30 percent of lower house members of parliament have criminal cases pending against them, including rape and murder charges.

The surprise is that Singh allowed himself to be suckered in, distracted from the main task of reforming India from the bottom up, from the fields of those peasants, about whom Singh himself spoke eloquently, who don’t have time to let tears run because they are desperately struggling to stay alive.

I don’t want to damn Manmohan Singh with faint praise. I have known him, very much on and off, though increasingly from a security barricaded distance, for 40 years since he was chief economic adviser to the government, a senior job for economist and bureaucrat, not a politician. As finance minister, he rescued India from the brink of bankruptcy by opening the door to economic reforms. He remains an upright, highly moral and uncorrupt gentleman, probably capable of wielding the stiletto of bureaucracy, but a stranger to the criminal thuggery and corruption that is now part of India’s democratic deficit.

Until recently, Singh’s political back was protected by Sonia Gandhi with her control of the Congress Party machine and funds. Gandhi, ominously, has not made the headlines since she came back from the US recently after treatment for cancer. The retail debacle suggests that Singh is tiring and it is time for Gandhi’s son Rahul and his companions to prove their worth. But Rahul Gandhi, who is Congress general secretary has also been strangely silent.

Kevin Rafferty was executive editor of the Indian Express newspaper group.