For a football fan, an own goal is sacrilege. It is inconceivable that a player boots the ball not between the opponent’s goal posts, but over his own team’s goal line. But if you extend that analogy to national politics, a novice bystander would be stunned by the number of apparent own-goals scored by allies in the coalition government. There are many instances, from Trinamool Party chief Mamata Banerjee recently making the UPA government bend on the Rail Budget, which was presented by her own party nominee who apparently turned hostile by hiking passenger fares, to the DMK, among others, opposing the government’s proposal to bring in 51% FDI in multi-brand retail.
Surprisingly, it was the Shiromani Akali Dal (SAD) from the Opposition National Democratic Alliance camp that supported the move and, in fact, immediately wrote a letter to the government welcoming it. It’s a different matter that the party changed its public stance after some coaxing from its embarrassed ally, the BJP. So, is there a rationale behind regional parties’ seemingly arbitrary moves or do they just react randomly?
For corporates, the answer to that question is critical. The reality of Indian politics has been the decline of national parties and the growth of regional parties. There’s been a coalition government at the Centre since 1989, barring the Narasimha Rao government (where a minority government changed status by merging into it a regional party, the JMM). “For the next 10 years too, no national party is likely to get a majority by itself,” says Sushma Swaraj, Opposition Leader, Lok Sabha. More importantly, regional players are at the helm in many large and smaller states and the recent Assembly polls in UP and Punjab just reiterated that.
With regional parties’ influence over policy decisions becoming more apparent by the day, India Inc needs to understand not just what makes the government at the Centre tick, but also what drives regional parties, their satraps and their ideologies. “It is important for companies to have a constant dialogue with regional parties. This is a must to create a proper ecosystem for governance,” says TV Mohandas Pai, chairman of Manipal Universal Learning. Rahul Bajaj, chairman of Bajaj Auto, agrees, “No large-sized company can today afford to be unaware of the political happenings in the states where it operates and at the Centre. The industrial development in the country is largely influenced by political events.”
Sometimes, even international events can be influenced by regional politics, with a direct bearing on corporate India. The recent development in Indo-Sri Lankan relations is a case in point. On March 22, 2011, India was among the two-dozen countries that voted against Sri Lanka at a session of the United Nations Human Rights Council in Geneva. This was on a US-sponsored resolution for ‘promoting reconciliation and accountability’ in Sri Lanka after it defeated the Liberation Tigers of Tamil Eelam in a long-drawn civil war. There were 15 votes against and eight abstaining.
Normally, India would have abstained but for pressure from UPA ally DMK, which threatened to pull out of the coalition if the government did not vote against. The AIADMK, though not officially a UPA partner, also joined in. With huge sympathy in Tamil Nadu for Sri Lankan Tamils, this was a critical issue for both the Dravidian parties. The UPA government, already facing ire from Banerjee during the Budget Session, caved in.
The impact was felt a few days later, when the Sri Lankan government increased custom duty, among other tax hikes, on motor vehicles (including two-wheelers and three-wheelers), cigarettes and liquor. The import duty on petrol- and diesel-powered three-wheelers was hiked to 100% from 51% and 61%, respectively. And on motorcycles from 61% to 100%. The reason for higher taxes apparently was to prune the fiscal deficit, improve the trade deficit position, cut fuel import expenses, reduce the number of vehicles on the road and so on. But the decision affected Indian automotive companies such as Bajaj Auto and TVS, which have substantial exports to Sri Lanka.
It’s not as if regional parties are intrinsically anti-industry or anti-growth. It’s just that the compulsions driving them may be hugely different from those of a national party. “I don’t think Delhi people understand local issues,” said TMC leader Mamata Banerjee in a television interview, referring to the differences between the Congress and its allies. She’s right, in a way. A national party like the Congress or the BJP necessarily takes a pan-India perspective on many matters — its voters aren’t limited to a single state or region, after all. Even a state government ruled by a national party is likely to be overruled when provincial issues are pitted against national issues.
But regional parties are completely focused on local issues. “Regional parties represent the region’s aspirations for change and development,” says JD(U) Rajya Sabha MP NK Singh. “To them, it’s a question of survival,” adds Ashok Kheny, managing director of Nandi Infrastructure Corridor Enterprises (NICE). Kheny launched a regional party called Karnataka Makkala Paksha last year. He claims a membership of 800,000.
Also, a Nitish Kumar, for instance, would want Bihar to get a Special Category status; the implications on the Centre of such a move may matter little to him. Similarly, different regional parties may react differently to the same issue. For instance, the DMK was one of several parties that opposed foreign direct investment in retail, terming it “dangerous”. But Shiromani Akali Dal president Sukhbir Singh Badal wrote to the commerce minister saying that it would “offer tremendous benefits to farmers and the people of Punjab”. To him, it was not foreign investment per se that mattered, but perhaps that the relatively prosperous farmers from his state saw it as advantageous.
Seen through the lens of regional politics, even Didi’s chasing away the Tatas from Singur and the Salim Group from Nandigram doesn’t seem so much “anti-industry” as it is “pro-farmer” (read: voter). Indeed, Banerjee rode to power in the state on that very premise. And, to give credit where it’s due, it was her protest that prompted the Centre to take a much-needed re-look at the draconian Land Acquisition Act of 1894 and the country’s land acquisition policy. Besides, driving out two big groups from the state need not mean Banerjee is against industrial growth. It is perhaps to change this perception that she has inducted former Ficci secretary general Amit Mitra as her finance minister.
Going by Trinamool’s reaction to the Railway Budget, it may seem that the party is against reforms. However, the West Bengal Budget placed on March 23 provides for tax reforms and stresses on industrial and agricultural growth. So, perhaps it’s early days yet. “Industry should not go by rhetoric,” says NICE’s Kheny.
Perhaps one reason big business expects regional politicos to not understand its point of view is their often unapologetically non-urban persona. Many regional politicians are more comfortable in their native attire and speaking in their mother tongues, leading corporate professionals to conclude that they will be ignorant when it comes to business and administration. Not true. RJD supremo Lalu Prasad revels in his rustic image but he brought about reforms in the Indian railways — awarding licences to private players
for operating container trains and innovative ways to increase revenues such as by increasing load capacity of goods — when he was the railway minister. (It’s another matter that the turnaround numbers are now disputed.) Similarly, when this reporter did an impromptu interview with Ram Vilas Paswan of the Lok Janshakti Party in 2007, the then-Union minister for chemicals, fertilisers and steel didn’t need to refer to data about any of his departments. Sure, he spoke only in Hindi, but how was that relevant compared with the fact that he had all the numbers on his fingertips and clarity on his ministry’s stand vis-a-vis all major national issues?
There’s the other extreme, too, where companies openly express their admiration for regional parties’ attitude towards industry and the corporate sector.
It is no secret that some regional satraps have been the flavour of the corporate world over the years. Telugu Desam supremo Chandrababu Naidu, for instance, was known more as the “CEO” of Andhra Pradesh for his approach to administration. He was seen as investor-friendly and pro-reform by the industry and his hold over his party was unchallenged. “Decision making is quicker with the regional parties as they are their own masters,” explains Cho Ramaswamy, veteran political observer and editor, Tughlaq. He points out that if an investor goes to Tamil Nadu CM Jayalalithaa with a proposal and she likes it, then it is only her approval that matters. It’s a reality of Indian politics that most regional parties are centred around one leader or family.
Didi and Jayalalithaa aside, there are several other present-day examples of such unopposed regional leaders: Nitish Kumar in the Janata Dal (United); Mayawati in the Bahujan Samaj Party; and Parkash Singh Badal, SAD. That’s not necessarily a good thing; but if the party in power approves a project, chances of it getting clearances are far better than with a coalition or a national party at the helm in the state.
But there’s a limit to even the powers of an unchallenged regional party. The Posco project in Odisha, for instance, has had the unqualified support of the Naveen Patnaik government since the beginning. But even the Biju Janata Dal hasn’t been able to get around troubles relating to land acquisition and
Also, times have changed a lot. Companies can no longer expect governments to provide them land on a platter. Civil society has been active, and that has to be factored in at all times as not taking cognisance of local factors can jinx projects from the word go.
There may be some infrastructure bottlenecks, too. For instance, since he took over in 2005, Bihar CM chief minister Nitish Kumar has changed the law and order situation in the state to a large extent, and there are better roads being laid. But that has not really brought in much major investment into Bihar. The problem is that there is a crippling lack of power in the state. Though RJD Rajya Sabha MP Ramkripal Yadav disputes the achievement on the law and order scenario, he admits: “The state’s overall power situation can’t change till the Centre does something substantial.”
It is a fact that the rapport between a state and the Centre can help in achieving economic goals. Banerjee is said to be bargaining for funds for West Bengal at every step, and her political manoeuvring is said to be in that direction. (Of course, if the funds, when they do come, go largely towards non-capital expenditure, it will not achieve much.) Samajwadi Party general secretary Mohan Singh is clear, “We want cordial relations with the Centre. We have already said we will not allow any force to break the UPA government.”
Centre-state cordiality aside, the important takeaway for corporates is that while most regional parties appreciate the growth imperative today, each one’s way to achieve these goals may differ radically. Indian businesses can make the most of the situation only if they understand these differences and make their pitch accordingly.