Home / Opinion / Online-views /  Opinion | 2019: The year when local clashes with global

The year has barely begun and there are already signs of how 2019 will be cleaved into discrete but connected units. The New Year has inspired a review of globalization and its new mutated forms are likely to be forged in the developed world’s authoritative and inward-looking regimes.

There’s another on-going review: the role of external agencies or foreign regimes in influencing a country’s elections. At least one of these trends—perhaps globalization 2.0—is likely to exert itself in India in 2019.

In a column in this newspaper, UK’s former prime minister Gordon Brown wrote: “Whether or not one realizes it, 2018 may have been a historic turning point. Poorly managed globalization has led to nationalist ‘take-back-control’ movements and a rising wave of protectionism that is undermining the 70-year-old US-led international order." He then concludes: “Globalization is at a crossroads." While the rich world’s leaders exercise unilateralism in world affairs and close their doors to external influences, India’s engagement with globalization is being tempered by realities of the impending April-May general elections. What’s more, a curious strain of schizophrenia has coloured policy announcements coming out of Delhi over the past couple of weeks.

Predictably, most of the economic decisions at this point seem to have been fashioned keeping in mind the interests of domestic voting groups, or population cohorts with aligned economic interests and considerable political bargaining power. The best example is the government’s belated moves to recompense units in the small-scale sector, which have been broken by the twin blows of demonetization and a flawed introduction of the goods and services tax. These units are bunched under the umbrella moniker of micro, small and medium enterprises (MSME).

The government has announced a series of measures to compensate for the havoc. While some are designed to gratify and some to heighten expectations of imminent remedial measures, the overarching intention is to mollify and appease. The best example is circumscribing the marketing clout of e-commerce giants Amazon and Flipkart (owned by Walmart) in the hope of providing local kirana stores succour and sufficient motivation to vote for the ruling party. There are other moves also: getting the Reserve Bank of India (RBI) to design a loan restructuring plan to compensate for the twin shocks, a promise to resolve near-term problems through a face-to-face meeting with RBI governor Shaktikanta Das and a commitment to alleviate long-term problems through the constitution of an RBI-convened committee. There are, of course, the occasional well-intentioned but confused announcements, which do not amount to much.

The MSME loan restructuring scheme follows competitive claims for farm loan waivers from all political parties. It will be reasonable to expect some more sharply-targeted incentive announcements or regulatory forbearance schemes for other politically influential voting blocs.

But something inexplicable is going on which might be construed as the government’s compulsion to indulge in a spot of high-wire act. The day after Christmas, the government came out with a press note barring marketplace e-commerce companies from selling products of subsidiaries, or entities in which they have an equity stake, on their platform. Designed ostensibly to prevent breach of existing rules which govern foreign direct investment (FDI) in business-to-business e-commerce through the marketplace model, the real intention of this Boxing Day note was not lost on anybody: shackle the actions of Flipkart and Amazon to help provide a protective cover for domestic brick-and-mortar shops.

Here’s where things begin to get muddy. Before the ink could dry on this note, press reports said the government had issued a clarification stating that there were no restrictions on the nature of products e-commerce companies could sell; in effect, this was interpreted as the government creating a policy wiggle room by allowing them to sell private labels. Instead of providing clarity, this has created further confusion, apart from the fact that this clarification is now difficult to locate. In policy circles, this is being viewed as patchwork repair to counterbalance the damage from hastily shooting off an arrow from a protectionist bow.

The second curious incident is the sudden about-turn in the government’s pharmaceutical policy. Having blown hot over pharma MNCs’ predatory pricing over the past few years, a recent Mint exposé revealed the government has abruptly lifted price controls over innovative drugs developed by foreign pharma companies, including drugs used for treating rare medical conditions. The move has caught everybody by surprise. In a bizarre turn of events, the health ministry has now locked horns with department of pharmaceuticals over this unexpected change of policy.

The above examples illustrate the schism between the government’s political rhetoric and actual policy intent. It also underscores an ideological conflict: the need to balance an economic policy premised on foreign investment and free markets (largely pushed by its non-resident support base) with the vocal nationalist-protectionist forces within the ruling party. What could be additionally worrying is the nature of globalization foisted on India while the rich countries erect walls and fences.

Rajrishi Singhal is consulting editor of Mint. His Twitter handle is @rajrishisinghal.

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