The Taming of Swadeshi

The lack of BJP action on the swadeshi front is because of the realisation that videshi can’t be curbed without also hurting a lot of swadeshi business, says Swaminathan S Anklesaria Aiyar

The most remarkable thing about seven months of BJP rule is not what the party has done but what it ‘has not. India has not become a communal cauldron of hate. Swadeshi economics has not toppled conventional economics. The country carries on much as before.

Now, neither the party nor its critics had predicted this. The party claimed it stood for radical economic and social change. Its critics predicted the emergence of a semi-fascist Hindu state that victimised Muslims and hounded out multinational companies. In fact, little has changed. This vindicates the notion that the best way of taming an extremist Party is to put it in power. When in opposition, political parties indulge in reckless rhetoric. When in power, the realities force them to become circumspect, the more so in an era of coalitions,

During the election campaign, many critics claimed that Atal Behari Vajpayee was simply a liberal mask to disguise the fangs of the party. Seven months of actual BJP rule have shown this is simply not so. Indeed, you could argue the very opposite: that the VHP and SJM are masks worn by Vajpayee to attract fundamentalists to his more liberal platform!

The reality is more complex. In an interview for ET before the election, I asked whether his liberal pronouncements amounted to a dilution of his traditional party platform. Not at all, he replied. Originally the party was a small one representing a few sections of society. As it kept growing, it had to accommodate the concerns of more and more sections.! This, he said, is not dilution. It devolution.

At the time, critics dismissed the statement saying “This is the mask speaking: just see what happens if the party actually comes to power”. The rest is history. Hindu-Muslim riots have not spurted after the BJP came to power. There have indeed been some ugly incidents, especially those involving the Bajrang Dal and Christian missionaries. The BJP has tried to smuggle its ideology into school textbooks, and failed.

None of this is remotely close to the communal carnage predicted by its critics. Such harassment of minorities as we see today occurred when the BJP was out of power too. This was foreshadowed by the performance of the party in states where in came to power. Communal riots actually increased after BJP rule. Critics now sneer that the BJP foments riots when out of power, and then claims to be the party of law and order when in power. Maybe so, but clearly that suggests better rather than worse communal harmony under the BJP.

On the economic side, more change was expected. The swadeshi instinct of old BJP hands runs very deep indeed. Its manifesto had always pledged to curb foreign investment in consumer goods. While in opposition, the party had moaned about cultural imperialism, attacked Kentucky Fried Chicken, lambasted Pepsi for marketing bhujiya.

I did not expect great BJP radicalism in Delhi. Its about-face on Dabhol after coming to power in Maharashtra showed that power would tame its rhetoric. Still, I expected it to curb the expansion of some MNCs in pizza parlours, hamburgers, fizzy drinks. In fact, the BJP has not cracked down on (or even cracked its whip at) a single foreign company, in consumer goods or any other sector. On the contrary, it has allowed 100 per cent foreign equity in sectors like white goods, and is considering a proposal of 95 per cent foreign equity in tobacco.

While in opposition, the BJP said “computer chips yes, potato chips, no”. In power, it has said yes to both(Kentucky Fried Chicken and McDonalds continue to chum out rising heaps of potato chips). It seemed initially that the swadeshi lobby would triumph in insurance. Mr Murali Manohar Joshi scuttled early moves to allow minority foreign equity in insurance. But now a committee of ministers has okayed 26 per cent foreign equity, to which can be added 24 to 30 per cent for foreign institutional investors. If ratified by the Cabinet, this will constitute another BJP about-face (it had sabotaged P. Chidambaram’s insurance bill last year).

Yashwant Sinha’s budget was supposed to give formal shape to swadeshi protectionism. He introduced a wide-ranging import tariff of 8 per cent, which with surcharges became 11 to 12 per cent. Sinha expected kudos from swadeshi businessmen. Instead many complained that the duties had greatly raised their input costs. Ultimately Sinha was obliged to halve the levy. This demonstrated to the BJP what has long been obvious to others: that swadeshi is fuzzy concept you cannot really grip.

The notion of strengthening all swadeshi businessmen assumes they all have common interests vis-a-vis foreigners. This is simply untrue. For example, steel producers welcome additional protection from imports, but steel users will protest bitterly. All machinery and intermediate goods constitute inputs for some industries while being the output of some other industries. Any move that benefits one businessman will hurt other. Consumer goods are the exception: they are not inputs into any other industry. But protection to swadeshi producers will hurt swadeshi consumers. So Swadeshi protectionism turns out to be a hornet’s nest.

The same is true of trying to ensuring Indian control of joint venture companies. The BJP does not like foreign partners buying out Indians, or reducing them to a minority. The CII also protested once against this. Yet one Indian businessman after another has found it exceedingly profitable to sell out to foreigners at prices he could not remotely hope to get if buy-outs were restricted to fellow swadeshis. Analjit Singh is the ultimate example of this: he made over Rs 500 crore by selling out to a foreigner. Lesser piles were made by the Ghais and Jaiswals in selling their ice-cream brands to Hindustan Lever. The Indian promoters in NOCIL and Bausch and Lomb simply did not have the funds necessary to survive, and thought fit to hand over majority control to foreigners rather than go bust.

The lesson is clear. Any curbs on sellouts will hurt as many swadeshi businessmen as it benefits. Here too swadeshi turns out to be a fuzzy concept. So, the lack of BJP action on the swadeshi front is not only because its liberals are in charge of economic ministries, or that its freedom is limited by coalition politics. It also owes something to the demonstration, in practice, that you cannot curb videshi business without also hurting a lot of swadeshi business.

The BJP leadership understands this, but not its cadres as represented by the RSS, VHP or SJM. The SJM really feels let down. So some political theorists are already wondering whether the BJP will split, with the RSS going its own way. I find the idea far-fetched.

More likely are two other outcomes. One is that the BJP will throw some crumbs to its cadres in the form of curbs on pizza parlours and potato chips. That will be unwarranted, yet entirely bearable. The second possibility is that the BJP will satisfy its cadres by belching fire again on the Ayodhya temple again. That is a prospect to worry about.

What do you think?