India's Common Man Party Rides Populist Wave

Jan 28 2014, 9:06pm CST | by

India's Common Man Party Rides Populist Wave

It’s anybody’s guess if Meera Sanyal, who also sits on AAP’s seven-member economic policy committee, will succeed, but she’s clear as to her motivation: “It’s important to take a stand and participate in the political process rather than just criticize the system.”

As for throwing in her lot with the AAP, Sanyal and her husband campaigned for the party in Delhi’s local elections held last December in which AAP was contesting against the incumbent Congress and the opposition Bharatiya Janata Party (BJP). In a stunning performance that few had predicted, the upstart snatched 40% of the seats, albeit fewer than the BJP, and was thrust into power backed by the Congress.

The “idealism” of AAP’s leader Arvind Kejriwal, a trained engineer from the elite Indian Institute of Technology (IIT) and a former tax officer who’s now ensconced as Delhi’s chief minister, is a big draw for the Sanyals, and, indeed, it seems now for millions of others. Kejriwal’s mission of cleaning out corruption–his party’s election symbol is a broom–has struck a chord among voters. Gaining traction by the day, AAP has been dubbed the fastest-growing startup by an IITian, having notched up 5 million members to date.

Says Sanyal: “AAP’s victory has sent a clear message that Indian people will no longer accept the closed club of dynastic politics or candidates with criminal backgrounds. More important, money and muscle power are no longer an automatic route to electoral success.”

On becoming chief minister Kejriwal has shunned such trappings of office as a sprawling bungalow residence in Delhi’s Lutyens area and retains his small Maruti Suzuki car that sometimes doubles as a mobile office. As tractor tycoon Anand Mahindra noted in a tweet, “AAP’s dramatic debut shows we want desperately to be idealistic and not cynical. That honesty isn’t just the best policy but the best politics.”

Kejriwal’s Delhi success drew more supporters, including well-known names such as G.R. Gopinath, founder of budget airline Air Deccan, and V. Balakrishnan, the former chief financial officer of Infosys who quit the outsourcer’s board in December to start a private equity fund. Writing in his blog as to why he joined the AAP, Balakrishnan admits that the Delhi elections were “an eye-opener” and that “AAP’s crusade against corruption is a breath of fresh air. … I genuinely want to be part of such a change and revolution.”

But the hope for change has already been partly belied. On assuming office Kejriwal, 45, who sports a Gandhi cap with “I am a common man” inscribed in Hindi on it, announced new year freebies for Delhi’s residents such as free water and a 50% cut in power rates. He then went on to ban foreign supermarkets in the capital on the logic that their entry would lead to job losses.

After much debate and dithering, India had finally approved the entry of foreign big-box retailers in 2012 but gave the power to individual states to grant approval. Fewer than a dozen states, mostly Congress-ruled, permit foreign supermarkets. (The BJP, which counts small shopkeepers among its voters, is against foreign retail.) AAP’s rollback and what appears as a leftist agenda hasn’t gone down well with “India Inc.,” though the party has yet to outline its economic policy.

Legendary American investor Jim Rogers says that corruption and India’s hidebound bureaucracy are major roadblocks for foreign investors, so a party that promises a cleanup is a good development. But that is outweighed by the negative signal of Kejriwal’s unwelcoming stance toward foreign capital. “In the current scenario I don’t consider India a good place to invest in at all,” Rogers declares.

Some view these concerns as overblown, saying that foreign investment in the retail sector is a nonissue. “Foreign retailers are not exactly beating a path to India’s door,” argues Arvind Singhal, who recently enrolled with the AAP and chairs Delhi-based consumer goods consultancy Technopak Advisors. So far only U.K.’s Tesco has come forward to invest $110 million for a 50% stake in Tata-owned Trent, which operates a chain of hypermarkets. Other global retailers, discloses Singhal, are holding back until after the elections.

Galvanized by the Delhi verdict, AAP has declared its broader ambition of seeking a national mandate and reportedly plans to contest 400 out of the total 543 seats in the federal elections. A January survey by the Times of India newspaper revealed a surprising trend: 44% of those polled in the country’s top eight cities said they would vote for the AAP. This could endanger predictions by the likes of Moody's and Japanese brokerage Nomura of a decisive victory for the BJP, led by prime ministerial candidate Narendra Modi, the controversial but action-oriented chief minister of Gujarat favored by the business elite.

A paralyzed Congress, whose government has been stained by scams in its decadelong rule during which economic growth touched a high of 9.3% but has now nearly halved to under 5%, is weighed down by an anti-incumbency wave. Its prospects are further weakened by Congress boss Sonia Gandhi’s unwillingness to name a prime ministerial candidate, although she’s confirmed that her son Rahul Gandhi will lead the election campaign.

“The AAP’s emergence has caused more confusion as to the election outcome,” observes Hugh Sandeman, managing director of Langham Capital, a corporate finance advisory firm in London that focuses on cross-border deals with India. While AAP has garnered support for its anticorruption agenda–all staff in Langham’s Delhi office have signed up with the party and their cars sport AAP stickers–Sandeman is doubtful about its ability to evolve from an old-style protest movement.

Some insist that AAP isn’t likely to grow outside Delhi nor is it prepared enough to play a national role. “I would be surprised if it spread like wildfire,” says Andrew Korner, group chief executive of Asian Capital Partners, an independent Hong Kong investment bank with clients in India. With elections a couple of months away AAP has no time to build a national presence, insists Korner, “and organization is not their middle name.”
This came to the fore recently when Kejriwal took to the streets to demand control over Delhi’s police force, which reports to the federal home ministry, and declared himself an “anarchist.” The 33-hour sit-in, which caused chaos in the capital on the eve of the country’s Republic Day celebrations, drew a torrent of criticism even from Kejriwal’s supporters./>

“An administrator can’t simultaneously be an agitator. Kejriwal’s theatrics are diminishing his position,” notes industrialist Harsh Goenka, chairman of RPG Group. In a recent editorial AAP member Gopinath slammed Kejriwal for joining “the mob.” Reportedly, online donations to the outfit have fallen following the street drama. Kris Gopalakrishnan, cochairman of Infosys and president of industry body CII, remarked in a television interview that AAP needs to become “more mature.”

Source: Forbes Business


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