PM Narendra Modi’s move on FDI underlines RSS faultlines

Prime Minister Narendra Modi government’s decision to permit 49 per cent Foreign Direct Investment (FDI) in Air India and allow 100% FDI in single-brand retail with liberalized sourcing norms, may not be economically significant, but is of outsized symbolic importance because of its potential to aggravate the faultlines within the RSS Sangh Parivar.

The degree of government intervention in economic activity, especially the role of foreign investment, has long been a deeply contested matter within the Sangh Parivar. The BJP’s current FDI policy is best summed up by the Prime Minister’s promise of “red carpet, not red tape” for foreign investors.

The liberalization of FDI limits and easing of regulatory requirements, such as permitting greater FDI via the ‘automatic route’, the policy thrust of the Modi government has been unmistakable. The RSS’ economic affiliates, especially the Swadeshi Jagaran Manch (SJM) and its labour union, the Bhartiya Mazdoor Sangh (BMS), have been critical of the government’s FDI liberalization policies.

The SJM has vocally contested the government’s assertion that FDI is a means to boost growth and generate employment. But, unlike during the Vajpayee government, a modus vivendi has been worked out between the Sangh’s economic affiliates and its political arm, the BJP, to air policy differences behind closed doors rather than taking disagreements to the street.

Nevertheless, yesterday’s decisions could exacerbate the aforesaid faultlines because they impinge upon the Sangh’s ideological verities: preferring economic interests of mom-and-pop retail stores. Throughout its history, the BJP has had a robust debate on the role of foreign investment in the economy – a debate that, until recently, lacked a counterpart within the RSS. The RSS was implacably opposed to FDI because it was perceived as inimical to traditional Indian values. The RSS believed that foreign investment would infuse into the national bloodstream culturally alien values of consumerism and sybaritic hedonism.

The RSS feared that an economy dominated by impersonal market forces would undermine local economic activity which, it believed, was key to sustain bonds of family and community.  The SJM was established in 1991 as a response to former prime minister and Congress leader P V Narasimha Rao’s reforms to advocate for economic self-sufficiency because the Sangh feared that greater foreign investment would lead to a ceding of economic sovereignty to multinationals. The “second coming of the East India Company” was a common trope used in SJM’s arguments justifying investment protectionism. Because small traders and North Indian trading communities were the core of RSS’ support base, the opposition of FDI in retail was an ideological totem for the Sangh.

The rapid expansion of the Sangh has changed its social composition. Most of the new entrants into the RSS are urban professionals or members of upwardly mobile social groups. The new joiners do not share SJM’s autarkic or statist proclivities. The younger members of the RSS are more accepting of foreign investment and recognize FDI’s criticality in a resource-constrained economy.