Business Today

The Battle Within

The Modi governments reform agenda continues to face opposition from the RSS.
By Anilesh S. Mahajan | Print Edition: February 12, 2017
The Battle Within

A host of fresh differences have cropped up between the Swadeshi Jagran Manch (SJM), the economic arm of the Rashtriya Swayamsevak Sangh (RSS) and the Bharatiya Janata Party (BJP) led government - over the functioning of NITI Aayog, over the genetically modified (GM) mustard trials, over Chinese investment in India, over the inroads made by Uber and Amazon, and more.

The SJM has openly expressed its disappointment with Arvind Panagariya and Amitabh Kant, NITI Aayog's Vice Chairman and CEO, respectively, both of whom were handpicked for their current jobs by Narendra Modi himself. "They don't seem to be aware of the realities on the ground or the diversity of India," says Kashmiri Lal, SJM's National Convenor. The SJM leadership has sought an overhaul of Niti Aayog

The SJM, along with several economists and other experts, spent a full day, January 10, reviewing NITI Aayog's performance in the two years since it replaced the Planning Commission on January 1, 2015. The meeting took a uniformly dim view of NITI Aayog's recommendations and the quality of its work. "We analysed 23 reports and it was shocking to see how hollow they were," says Ashwani Mahajan, National Co-convenor, SJM. "They would not even qualify as M. Phil dissertations. Many of them also run counter to the nationalistic commitments and political stances taken by Prime Minister Modi."

A particular peeve of the SJM and RSS is NITI Aayog chiefs' openly expressed enthusiasm, in the wake of demonetisation, for a 'cashless economy'. It maintains that while more digital transactions are welcome, a cashless economy is neither enforceable nor desirable. "Prime Minister Modi talks about a 'less cash' economy, but NITI Aayog officials keep making noises about a cashless economy," says an RSS leader, who prefers not to be identified. "They even claim that debit and credit cards will become obsolete by 2020. Anyone who understands India would not even think of a cashless economy. Either the brief given to them is not clear, or they have been unable to understand it."

NITI Aayog's top functionaries appear bewildered by the SJM's outburst. "If RSS leaders have any doubts about our work, they can ask me questions and I will explain," says Kant. "I've nothing to hide. I hardly interact with RSS leaders. No one can doubt my commitment to nationalism." In different capacities, Kant has been the driving force behind the high profile 'Incredible India', 'Start-up India' and 'Make in India' campaigns, while Panagariya, economics professor at Columbia University, was formerly chief economist at the Asian Development Bank. In September, the government let go RBI Governor Raghuram Rajan after lobbying against him from various quarters of RSS and SJM.

Long Standing Tussle

The SJM and RSS have had differences with the NDA government ever since the latter took charge in May 2014. Their lobbying efforts have had reasonable success - while the government has acceded to them in many cases, it has stood its ground in others. The 2015 decision to withdraw certain controversial amendments to the Land Acquisition Act, for example, were said to have been at the SJM's behest, as also the bringing of certain amendments to the Double Tax Avoidance Accords with countries like Mauritius, Cyprus and Singapore in 2016, which closed a loophole earlier used by many to avoid paying capital gains tax. It is also likely that the longstanding SJM demand to tax foreign institutional investors (FIIs) may be included in the forthcoming union budget.

“We understand that it is a government compulsion to bring in fresh capital from overseas, but it is not our compulsion to welcome it.” Kashmiri Lal, National Convenor, Swadeshi Jagran Manch

A number of welfare schemes the government has introduced have their roots in the late RSS/Jana Sangh ideologue Deen Dayal Upadhyaya's 'Antyodaya' concept - not only the one with the same name, started in mid-2016, seeking to encourage entrepreneurship among the poor through self help groups, but also those relating to providing power, housing, LPG cylinders and bank accounts to all. Two RSS heavyweights, Bhaiyyaji Joshi and Krishna Gopal, are in constant touch with the government on economic issues. The NDA's tenure has also seen a number of members of other RSS-affiliated bodies, such as the Akhil Bharatiya Vidyarthi Parishad (ABVP), being inducted as Officers on Special Duty (OSDs) in various ministries. It is also said that RSS inputs played a key role in shaping Modi's cabinet reshuffle in July last year.

On the question of foreign direct investment (FDI), however, which the SJM and RSS want restricted in certain sectors while being kept out of others, the government has gone in the opposite direction. Modi has been hyperactive in visiting foreign capitals, seeking investment in India. "It is a betrayal of the people's verdict," said Kashmiri Lal after the government opened doors to FDI in September.

Seeds of Conflict

A crucial victory for the SJM was halting the move to start commercial sale of GM Mustard, or Dhara Mustard Hybrid 11 (DMH 11) as the local product, developed by Delhi University's Centre for Genetic Modification of Crop Plants, is called. Opponents of DMH 11 claim it can damage human and animal health and will increase the country's dependence on GM mustard seeds, sold by multinationals led by US-based Monsanto. Supporters maintain that it has no adverse health effects and its 25 per cent higher yield of mustard oil will reduce India's dependence on canola oil, of which the country imports around 350,000 litres annually. The SJM and RSS spearheaded the protest against DMH 11, roping in even diehard ideological rivals such as the Communist parties, the CPI and the CPI (M) as well as Left leaning intellectuals like Prashant Bhushan and Vandana Shiva. Interestingly, RSS leaders absolve Minister of Environment and Forests Anil Dave of any role in the matter, blaming instead environment ministry officials and NITI Aayog for the attempt.

The RSS and SJM, along with the RSS's agricultural arm, the Bharatiya Kisan Sangh (BKS) have been opposing GM crops for a long time, even when the previous United Progressive Alliance (UPA) government was in power. The Genetic Engineering Approval Committee (GEAC) of the Environment Ministry had cleared the cultivation and sale of Bt Brinjal, but public pressure, including that of the RSS bodies, led then Environment Minister Jairam Ramesh to withhold permission. In July 2014, when the BJP-led government had just taken over, the SJM-RSS-BKS combine also halted further field trials of 13 GM crops, including GM cotton, mustard, brinjal, rice and chickpea, which again had been cleared by the GEAC. (While Bt Cotton has been sold in India since 2002, none of the others have yet been allowed.) "We opposed GM crops under UPA rule," says the RSS leader. "How could we allow them under BJP rule?"

Chinese Conundrum

Perhaps the biggest gainer from the demonetisation exercise has been the e-wallet company Paytm, which has also lately received the Reserve Bank of India's approval to start a payments bank. But the RSS and SJM are far from pleased with this particular digital push, since one of the key investors in Paytm is the Chinese-owned Alibaba group. Indeed Chinese investors are negotiating with rival mobile wallet companies such as FreeCharge and MobiKwik as well. "The government must ensure that the financial data and banking details these companies collect are not shared with foreign players (read Chinese) at any cost," says Sundaram, South Zone convenor of the SJM. "We should never hand over bank details and credit card information of Indian customers to Chinese companies."

Vijay Shekhar Sharma, Paytm's founder and CEO, has noted that Paytm is as Indian as Maruti Suzuki India Ltd, which, while once a joint venture between the Indian government and Suzuki Motor Corp, is now majority owned by the latter. (Sharma did not respond to Business Today's queries.) But the SJM is unmoved, pointing to recent cyber attacks on Indian banks in which Chinese involvement is suspected. "There is a difference between Japan and China," adds Sundaram. "I don't think our government is dismissive of the Chinese threat." Indeed, the SJM-RSS disapproval of Chinese involvement in the Indian economy is creating a dilemma for chief ministers of BJP-ruled states as well as bureaucrats, who are anxious to woo foreign investment. "Investments from China are not taboo," says a top bureaucrat, not wanting to be named. "Dumping of Chinese products is a worry, not investments from that country. But convincing the RSS of this is not proving easy."

But dumping too cannot be easily curtailed. The bulk of solar panels used in India, for instance, come from China and any restrictions on their being 'dumped' will push up the cost of solar power, which the government is keen to bring as low as possible to compete with thermal power. India's own manufacturing capacity of solar cells and panels is miniscule. Indeed, the RSS has expressed reservations about a pet project of Modi's - to have 100GW of installed solar capacity by 2022 - in the absence of a robust plan to boost local panel manufacturing.

Start-up Nationalism

Even successful Indian start-ups such as cab aggregator Ola and e-tailers Flipkart and Snapdeal, are facing the heat from global competitors - Uber in the first case and Amazon in the second. RSS and SJM are not particularly enamoured even of the local start-ups, since most of them also have foreign private equity investors, including Chinese ones. They are also apprehensive of e-commerce ventures adversely affecting the traditional kirana stores. But they recognise that the huge infusion of capital into India by the likes of Uber and Amazon, coupled with their predatory pricing, could crush local e-commerce endeavours and want the government to impose curbs on them.

“If RSS leaders have any doubts about our work, they can ask me questions and I will explain. I’ve nothing to hide. I hardly interact with RSS leaders. No one can doubt my commitment to nationalism.” Amitabh Kant, CEO, Niti Aayog

Amazon India, for example, reported a loss of Rs 3,572 crore in 2015/16 against Rs 1,724 crore the previous year, despite its revenue rising to Rs 2,275 crore from Rs 1,022 crore in the same period, mainly due to the heavy discounts it offers. It can afford such losses initially, while its Indian counterparts cannot. "If predatory pricing persists, India will eventually become just a market for US digital companies," says the CEO of a leading local e-commerce venture, who prefers to remain anonymous. "Latest technologies will be furiously patented and protected. Companies like Google and Apple have sued scores of companies across the world for supposed patent infringements. Indian companies will never have access to these technologies or will have to pay hefty price for them." The SJM and RSS could not agree more. "We are aware of the challenges faced by local start-ups and they cannot be left to fend for themselves," says Kashmiri Lal.

"The digital business is not like a conventional one. The whole strategy is to capture a large chunk of the market and in this game there is no runner up," says Subhash Sharma, Director, Centre for Economic Policy Research, an RSS backed think tank. The government has taken the first step of barring all e-commerce companies with foreign funding from offering discounts, allowing only the merchants who sell on their websites to do so. But the RSS and its affiliates feel more needs to be done. "There is hardly any European heavyweight in the digital space, because all of Europe has been captured by US companies," says Sharma. "But in China, which restricts US companies, there is an Alibaba in e-commerce, a Baidu in internet search or a Renren in social media." Uber and Amazon officials rebutted charges of predatory pricing verbally, but would not provide any formal, detailed response.

Making Adjustments

Overall, the Modi government has been much more accommodative of the RSS-SJM's views than its predecessor BJP-led government headed by Prime Minister Atal Behari Vajpayee from 1998 to 2004. Vajpayee gave short thrift to the RSS. "Unlike that time, there has been no breaking point with the Modi regime," says an RSS leader, unwilling to be named. "There is give and take." Though unwilling to impose anti-dumping duty on solar panels, for instance, the government is contemplating placing imported and indigenous solar panels in different tax slabs under the Goods and Services Tax (GST) rules. "This may allow circumvention of WTO norms, but will give domestic players a more level playing field," says a top government official.

Again, the government last year took three crucial steps the RSS and SJM were dead opposed to: it allowed 74 per cent foreign investment through the automatic route in already existing pharma companies, 100 per cent foreign funding in private security agencies and a similar 100 per cent multi-brand retail in food items. The last move in particular, the RSS and SJM fear, will centralise the food and agriculture industry, and limit farmers' choice of crops. But even in this case, caveats have been put in place. While global retailers, for instance, can sell food products in India through both traditional stores and online channels, these have to be sourced and manufactured within the country. Similar sale of non-food items like soaps and shampoos, which are money spinners, has not yet allowed, though leading retailers like the US's Walmart and the UK's Tesco have been lobbying hard to sell these as well up to 25 per cent of their turnover. The government is also making further efforts to allay RSS-SJM concerns. At a recent top level meeting with RSS leaders attended by Finance Minister Arun Jaitley and a number of other ministers, it was decided that no further concessions to foreign investors in the food sector would be made.

In the pharma sector, although the announcement regarding increased foreign investment in brownfield companies was made months ago, the RBI has not yet notified the change under the Foreign Exchange Management Act (FEMA), which means such investment proposals as still being assessed on a case-by-case basis as before. "India is the home of generic drugs," says Kashmiri Lal. "Allowing 74 per cent investment through the automatic route will enable big pharma giants to buy up Indian companies and control drug pricing in the country." He is equally concerned about the country's security being compromised by the step to allow 100 per cent foreign funding in security agencies. "But the fear that this will lead to snooping by foreigners is misplaced," says Ashok Bajpai, Managing Director of G4S, the country's biggest such agency. "It will only improve security in India and will bring in more technology."

But the RSS remains sceptical. "We understand that it is a government compulsion to bring in fresh capital from overseas, but it is not our compulsion to welcome it," says Kashmiri Lal. "FDI is not only killing Indian business, but also reducing employment." ~


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