What does Low Priority mean?

Now that it seems certain Mr Atal Behari Vajpayee will become the Prime Minister, the BJP\’s version of swadeshi will attract a lot of attention. Its stalwarts declare that foreign investment will be allowed in microchips but not potato chips. The official BJP manifesto is more long-winded. It says it will welcome foreign direct investment (FDI) in high-priority areas like infrastructure and high-tech industries, but restrict it in non-priority areas (meaning pizzas, soft drinks, radios and other consumer goods).

Now I readily agree that investment in infrastructure is far more important than in hamburgers. Yet this leads to policy prescriptions that are the very opposite of the BJP\’s. How so? Because the BJP is very mixed up about high and low priority.

A low priority item is something of little consequence, which can be shrugged aside or ignored. The problems of Nagaland, for instance, are of low priority to Mr Bhairon Singh Shekhawat. He may have views on the subject, but will not waste much time persuading the Nagaland government to adopt one course or another. On the other hand a high priority item (like irrigation from the Indira Gandhi canal) is one on which Mr Shekhawat will spend a lot of time, and insist on firm rules being followed.

Apply this logic to McDonalds or Kentucky Fried Chicken. If the BJP regards these as of low priority, it should shrug its shoulders and ignore them as of little consequence. In fact, the BJP regards them as of considerable consequence. It has launched agitations against foreign investment in foods, and believes Indian cultural values will be subverted by foreign hamburgers and pizzas. It is determined to curb this.

This surely means that the BJP actually attaches high priority to this issue. Low priority implies indifference, high priority implies strong passion. So, contrary to what its manifesto claims, the BJP actually looks on consumer goods as a high-priority area where detailed rules must be laid down to prevent the subversion of Indian values by nefarious foreign investment.

I, on the other hand, truly regard investment in junk food as a low priority issue. I therefore do not care a damn who invests how much: This can safely be left to consumers and producers to sort out in the market place. No special policies are needed, no scarce government time should be devoted to so inconsequential a matter.

\”Oh stop this semantic quibbling,\” some BJP supporters will say. \”Precisely because junk food is inconsequential, we must take pains to channel FDI into infrastructure, instead of being frittered away on hamburgers.\”

This, I am afraid, is the old lump-of-investment fallacy, the notion that a fixed amount of money is available for investment and should be channelled into priority areas by wise and noble planners. The lump-of-investment notion implies that more money for hamburgers means less for ports.

In fact it is absurd to think that if McDonalds or Pepsi are stopped from expanding, then more FDI will become available for investing in roads or power plants. There is no such thing as a fixed lump of foreign investment, which can be directed wherever the BJP chooses. On the contrary, if the BJP halts pizzas and fizzy drinks, some risk-averse foreigners might just feel that the ruling party is ga-ga, and so avoid investing even in infrastructure. Less FDI in hamburgers does not mean more for infrastructure, and could mean less.

That\’s just fine by us, say hardliners in the BJP (and Samata Party, and CPM). These hardliners believe all foreign investment is detrimental, will open the way for foreign domination, and needs to be stopped altogether or reduced to a bare minimum.

That is a logically consistent line, but leads to policies very different from the official BJP ones. If FDI is fundamentally undesirable and subversive, it should be limited to irrelevant areas like hamburgers, and barred in important areas like infrastructure. India is a huge market for infrastructure, and can easily absorb $ 10 billion a year. By contrast it is a small market for branded consumer goods (Korea\’s 45 million people consume more soft drinks than India\’s 950 million). So if you want to limit FDI as a form of incipient foreign domination, you should channel it into consumer goods and not allow it at all in high-priority infrastructure or basic goods.

This was precisely the line taken by Jawaharlal Nehru. He wanted to give top priority to the commanding heights of the economy, and not waste time on low-priority matters. And so he reserved infrastructure, steel, oil, coal, and many other basic industries for the public sector. On the other hand he did not curb or devise special policies for consumer goods. In his time both Coca Cola and Pepsi entered India. Cadbury started manufacturing chocolates, Hindustan Lever expanded soap production, Warner Hindustan made chewing gum. None of this bothered Nehru who had no time to waste on low priority matters: he was too busy building up the commanding heights.

The BJP now seeks to do the very opposite. It is willing to give up the commanding heights to foreigners, but absolutely insists that only Indians can make potato chips. This is utterly hilarious.

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