Of Aam Aadmi Party and the Aam Aadmi

In India, the Aam Aadmi Party, or Common Man’s Party, has shaken the establishment. A successful appeal to many can rely on promises of quick fixes and protection of special interests. “While AAP has plenty of positive attributes and is doing important work in terms of promoting transparency and accountability, not everything it stands for is necessarily in the country’s long-term economic interest,” suggests Nayan Chanda, editor in chief of YaleGlobal Online in his column for Businessworld. “Its opposition to foreign direct investment in retail trade is one such policy.” The political upheaval occurred just after a measure, opposed by AAP, allows Indian states to give global retailers up to a 51 percent stake in running stores. Multinational firms considering such joint ventures may assess the political landscape and pull back. India’s leaders must decide if the common man prefers low prices and diverse shopping options or protection of small, inefficient retail outlets. Once in office, politicians often fear the desires of the common man. – YaleGlobal

Of Aam Aadmi Party and the Aam Aadmi

The common consumer won’t benefit from the populist approach of AAP and other political parties in India that resist retail FDI
Nayan Chanda
Friday, January 24, 2014

A rare bit of good news for economic reform in India was obscured by excitement over the emergence of the Aam Aadmi Party (AAP) — Common Man’s Party — and its agenda of easy fixes.

Early last month, British retailer Tesco became the first multinational to dip its toe in the super-charged field of Foreign Direct Investment in retail by announcing a joint venture with the Tatas. But this news was eclipsed by AAP, which defied the received wisdom of political pundits to dislodge Congress from the Delhi administration and to shake up the country’s political establishment. One of the key platforms of AAP’s agenda is its opposition to the Congress-led government’s decision to allow increased foreign investment in underdeveloped retail trade. 

While AAP has plenty of positive attributes and is doing important work in terms of promoting transparency and accountability, not everything it stands for is necessarily in the country’s long-term economic interest. Its opposition to foreign direct investment in retail trade is one such policy.

In 2012, in the face of bitter opposition, including from its own allies, the Congress-led United Progressive Allowance mustered the political will to allow states to decide whether to permit global retail majors up to 51 per cent stake to run multi-brand stores. But with the stunning victory of AAP in Delhi, the prospect of local residents buying their groceries from a well-stocked supermarket chain has receded. And with it, perhaps, the image of an India open to business with the world has also taken a blow.

A year ago, the founder of AAP Arvind Kejriwal demanded a plebiscite on the issue FDI in multi-brand retail, saying that he did not believe companies like Walmart would build cold storage when “the government itself failed to do so in the last 65 years”. Such statements suggest that, despite his deep knowledge of how venal and inefficient India’s government can be, Kejriwal believes that market forces are worse. After his victory in Delhi, he reaffirmed his opposition to FDI in retail, telling businessmen and traders that he is, in fact, one of them because “he hail(s) from a business family” and most his “relatives are involved in small-scale business activities for their livelihood”.

That small traders would be apprehensive of the arrival of big retailers is understandable — but surely the aam admi, who turned out all over the capital to vote him into office would prefer to have wider choice and lower prices. 

The setting up of cold storage and logistical network to feed the big department stores that FDI would bring, will also ensure higher earning for farmers and stop nearly 40 per cent of fresh produce going waste. Large-scale distribution networks will open up growth prospects for a variety of ancillary trade and create new jobs. Contrary to the fear expressed by Kejriwal, despite FDI in retail in a country of small towns (where big box stores will not be allowed in any case), small traders will always have customers and, in fact, may benefit from an efficient distribution system.

But the fear is that the coming election may herald a further closing of India as it is not just the populist AAP but opposition parties in general that have taken up strong positions on the FDI issue.

Indeed, ironically, the Bharatiya Janata Party’s ostensibly ‘business-friendly’ PM candidate Narendra Modi has, like AAP, taken up the cause of small traders and manufacturers afraid of competition.

“Cheap goods produced elsewhere will be dumped in India,” he said, “and it will affect the manufacturing sector of the country as manufacturers of small items will find it difficult to survive”.

As political parties facing elections push for all-out populist policies, from food subsidies to closing doors to foreign competition, the interests of the common man and the long-term national economic interest are taking a back seat. Which is an ironic and unfortunate twist in a campaign where everybody is claiming to represent the aam admi.


The author is editor-in-chief of YaleGlobal Online, published by the MacMillan Center, Yale University.

Copyright © 2014

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