Will saffronomics win the day?

The BJP views on the economy came through first in a shocker of a media lead, immediately denied through the sage voice of finance minister-to-be Jaswant Singh, that a six month-long lock-in period would be imposed on foreign institutional investments.

The frivolity of the suggestion does not merit a serious consideration of the disastrous implications. Singh made it clear the very next day that this would never happen if the BJP came to power. Nonetheless, it was a not-so-nice wake up call for foreign fund managers.

Then came the manifesto itself. No foreigners in anything but infrastructure, says the document, which keeps talking about defending Indian business interests. It does not say what would happen to those foreign companies who have already invested in Indian consumer goods heavily, but a fair assumption is that they will not be unduly disturbed. It says foreign companies will be welcome in infrastructure. The areas that will, if a BJP government comes to power, be really and truly cordoned off would include insurance, media and probably aviation.

Then came an interview purely on the economics of a future BJP government with Atal Behari Vajpayee, the future prime minister-designate of the BJP (remarkably, the only politician who seems to be in a mood to declare open ambitions to the hot seat). The interview stresses on the fact that the BJP is not against foreign investors at all, that the party will further reforms in every respect, and that such a strategy will comprehend foreign investment, not exclude it.

This, roughly, has been BJP talking to the liberal business constituency. It has not spoken irresponsibly, it has not rashly talked about excluding foreign investors. Insurance companies in the US in particular, who appeared to be making headway with previous governments, have reasons to feel frustrated, but otherwise, foreign investors do not feel necessarily unwelcome.

But this has been the carefully considered, cautiously framed and diluted stuff that the BJP business sense is made of. As with their political views, the BJP suffers from an internal contradiction of having a split personality: a virulently foreign company-bashing, xenophobic, culturally aggressive and intolerant base (mouthing empty inanities on Swadeshi which lack even school textbook economic sense) that is in direct contrast to the politically sage, and acceptable top brass that drafted the manifesto.

This base will operate at two levels: at the level of competing small business, and at the level of labour which the foreign companies will seek to employ. Representatives of this intolerant base will also have important positions among regulators, lawmakers and state-level politicians who will be important due to their contacts with bigger leaders in power in Delhi. It is also difficult to rule out that hardliners among the otherwise sensible top brass will never raise their hackles during a full BJP tenure.

The problem with this kind of opposition is that because it does not come at an official level, it tends to be selective in which project to hurt. A chance PPA can find disfavour, a single CEO’s statement can invite brickbats, even an advertisement out of place can ruin a product launch with saffron protests splashed all over. The other problem is that when the investor runs to the government with his complaint, the foreign investor can not hope for immediate redress, because a well-worn cliche will come into force by then: the search for a "political solution". A political solution to a business crisis need not always be as acceptable as the one, say, regarding the Dabhol Power PPA was.

This is where the BJP constitutes a major challenge to foreign investors, not at the level of Mr Vajpayee’s suave protestations that his party is in fact pro-reform, pro-foreign investment. When the small or medium-sized uncompetitive businessman calls for BJP support against foreign "usurpers", or when a BJP union fights entry of MNCs, or, a patriotic BJP leader finds in an advertisement the ultimate disaster for a million years of Indian culture, how will the BJP government react? That is the million dollar question now.