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The cult of cronyism
S ID D H A R T H V A R A D A R A JA N
WHO does Narendra Modi representand what does his rise in Indian poli-tics signify? Given the burden hecarries of the 2002 anti-Muslim mas-sacres, it is tempting to see the Gujaratchief minister’s arrival on the nationalstage as a watershed moment in theescalation of communal politics. Cer-tainly the cult-like following he hasamongst the Sangh Parivar faithfuland a wider section of the Hindu mid-dle class is due to the image he has of a leader who knows how to ‘showMuslims their place.’ For these sup- porters, his refusal to do somethingso simple – and tokenistic – as expressregret for the killings that happened under his watch is seen not as a handi-cap but as further proof of his strength.And yet, Modi’s rise and rise hasless to do with his Hindutva credentialsand appeal than his secular criticswould like to believe. Modi is where heis today – on the cusp of power – not because the country is becoming morecommunal but because the Indian cor- porate sector is becoming more impa-tient. Every opinion poll that shows himinching towards power sets off a bullrun on the Bombay Stock Exchange.In a recent dispatch for the
Financial Times
, James Crabtreenoted the exceptional gains notched up by Adani Enterprises – the compa-ny’s share price has shot up by morethan 45 per cent over the past monthcompared to the 7 per cent rise regis-tered by the Sensex. One reason, anequities analyst told the
FT
, is thatinvestors expect a government headed by Modi to allow Adani to expand hiscrucial Mundra port despite the envi-ronmental complications involved.‘So the market is saying that, beyond the simple proximity of Mr Adaniand Mr Modi, these clearances mayno longer be so hard to get under aBJP regime,’ the analyst is quoted assaying.
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The word ‘clearances’ sounds benign but what it really signifies isModi’s willingness to accommodatethe desire of capital to expand in any
1. ‘India Elections: Adani Enterprises SharesSoar on Modi Hopes’,
Financial Times
,11 March 2014.
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way it wants – horizontally, across land and field, vertically, above and belowthe earth, and laterally, in terms of accommodating the demands of for-eign investors, including for the open-ing up of the insurance and retailsectors.
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And if environmental rules,livelihoods, farmsteads or communityinterests intervene, they must perforcemake way with the vigorous backingand assistance of the government. Itis this promise of ‘decisiveness’ thathas made Modi such an attractive proposition for Indian – and global – big business today.
H
ow and why the country’s top busi-nessmen switched allegiance fromthe ‘indecisive’ Congress to NarendraModi is a story that reflects the inner rhythms of life at the base of Indian politics. But it is also a cautionary taleabout the deep crisis that rent-seekingand cronyism have engendered in theIndian economy, now that the immedi-ate gains made possible from liberali-zation have reached their natural limit.For all the changes that neo-liberal poli-cies and the end of the ‘license-permitraj’ were meant to usher in, the levelof rent that can be earned by compa-nies that are close to the governmenthas reached astronomical levels.As N.S. Siddharthan of the MadrasSchool of Economics argues, ‘Under the existing business environment,the path to amass wealth is not throughmanufacturing but through exploita-tion of resources under governmentownership.’
3
Even if some of the estimatesgenerated by the Comptroller and Auditor General in his reports on the2G spectrum and coal scams appear to be on the high side, it is evident thatthe preferential allotment of resourceshas become a huge source of profit for companies that might otherwise earnonly a ‘normal’ rate of return throughtheir brick-and-mortar ventures.These resources include not just coalor spectrum or iron ore but, most cru-cially, land and water too. And here,the poster boy for the brave new world that Modi represents is Gautam Adani,whose emergence as a major business-man closely mirrors the rise of theGujarat chief minister himself.
4
At the January 2009 ‘VibrantGujarat’ summit, two of India’s biggestindustrialists, Anil Ambani, who waslocked in battle with Mukesh Ambaniover the issue of gas pricing, and SunilMittal, chose openly to bat for Modi as prime minister. ‘Narendrabhai hasdone good for Gujarat and [imagine]what will happen if he leads the nation,’Anil Ambani was quoted as saying.‘Gujarat has seen progress in all thefields under his leadership. Now, ima-gine what will happen to the countryif he gets the opportunity to lead it …Person like him should be the nextleader of the country.’
M
ittal, head of the Bharti Groupwith major interests in telecom, had this to say: ‘Chief Minister Modi isknown as a CEO, but he is actually nota CEO, because he is not running acompany or a sector. He is running astate and can also run the nation.’ Tata,who was present at the event, alsosang Modi’s praises. ‘I have to say thattoday there is no state like Gujarat.Under Mr Modi’s leadership, Gujarat ishead and shoulders above any state.’Again, the question of ‘clearances’took pride of place. The
EconomicTimes
reported: ‘A state, Mr Tatagushed, would normally take 90 to 180days to clear a new plant but, “in the Nano case, we had our land and app-roval in just two days”.’
5
Two years later, at the 2011Vibrant Gujarat meet, the prize for florid rhetoric went to Mukesh Ambani:‘Gujarat is shining like a lamp of gold and the credit goes to the visionary,effective and passionate leadership provided by Narendra Modi. We havea leader here with vision and determi-nation to translate this vision into real-ity.’ In 2013, it was again the turn of his estranged brother. Anil Ambanihailed chief minister Narendra Modias the ‘King among Kings’, the Eco-nomic Times reported, and requested the audience to give the CM a stand-ing ovation. ‘The audience readilyrelented.’ Others who spoke included a who’s who of top industrialists.
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If there was no repeat of the ‘Modi for PM’ chant this time around, it was only because India Inc had already madeits choice clear.
L
ooking back, a major turning pointin this evolving matrix of business and political interests was surely the NiiraRadia tapes drama of 2010. Comingclose on the heels of the CAG’s dra-matic exposé of the 2G scam, the Radiatapes brought out into the open theinner connections between big busi-ness, politicians, policymaking and even the media. With the SupremeCourt now joining the CAG in seekingto stop the loot of public resources, it became clear that the era of easy‘clearances’ was now coming to an end.It was around this time that corporateIndia started accusing the Congress-led Manmohan Singh government –
2. Modi Signals Shift in Favour of Big Retail’,Reuters, 27 February 2014. http://in.reuters.com/article/2014/02/27/narendra-modi-fdi- bjp-congress-retailers-idINDEEA1Q05B201402273. N.S. Siddharthan, ‘Reforms, Yes, But of theRight Type’,
The Hindu
, 14 June 2012.4. Sunit Arora, et al., ‘All Along the Water-front’,
Outlook
, 10 March 2014.5. http://articles.economictimes.indiatimes.com/2009-01-15/news/28403878_1_modi-lambi-race-ka-narendra-modi-gujarat-chief-minister 6. Vibrant Gujarat 2013: Industrialists aud Gujarat CM Narendra Modi But Shy AwayFrom ‘Modi for PM’ Chorus’,
EconomicTimes
, 11 January 2013.
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which they had strongly backed, and profited from, until then – of ‘policy paralysis’, ‘drift’ and ‘indecisiveness’.
S
ince his name had figured in theRadia tapes, it was only natural thatRatan Tata should lead the charge.Warning that India was in danger of becoming a ‘banana republic’, the head of one of the country’s largest con-glomerates hit out at the governmentfor failing to maintain a conducive cli-mate for industry.
7
He was soon joined by Deepak Parekh, the influential head of HDFC Bank, who raised the spec-tre of capital flight since land acquisi-tion and mining leases were becomingmore difficult.
8
‘Talk to businessmanafter businessman’,
Times of India
reported, ‘and one of the first thingshe’ll tell you, off the record, is, “Thegovernment’s come to a halt. Bureau-crats, bankers, everybody’s scared totake decisions.” The next thing he’lltell you: “We are now looking at invest-ing abroad rather than in India”.’
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Sharad Pawar, the business-friendlyUnion Agriculture Minister, also lenthis voice to this chorus of protest.
10
It is a fact that outward invest-ment from India has been growingsteadily, except for a fall in the slumpyear of 2009-10. Companies investabroad for a wide variety of reasons.Some look for resources like coal or oil to feed their industries at home,others for technology or a means of more easily accessing protected mar-kets. Domestic constraints on profit-ability can also be a factor. As HarunR. Khan, Deputy Governor of theReserve Bank of India has noted,‘There exists a school of thoughtwhich apprehends that overseas in-vestment by Indian corporates is atthe cost of on-shore investment. Oneof the discernible reasons acting as anobstacle for companies to undertakeon-shore investment could be the policy and procedural constraints.’
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But domestic investment is also con-strained by supply bottlenecks, espe-cially in infrastructure, and domesticdemand, which, in turn, are functionsof public investment and expenditure,investor confidence, and the poor dis- persion of income, which affects thespending power of the population.
A
s long as the Indian economy wasmaintaining a high rate of growth dur-ing the first term of the ManmohanSingh government, the biggest Indiancompanies were able to enjoy both‘normal’ profitability and a ‘crony pre-mium’. But the joint effect of the 2008global slowdown of 2008 on inflation,and interest rates, and the blow thatRadiagate, the CAG, public opinion,and a more vigilant judiciary havedelivered from 2009 onwards hasfatally compromised this cosy revenuemodel. The arraignment of the Saharagroup by the Securities and ExchangeBoard of India and the jailing of its boss,Subrata Roy, by the Supreme Court oncontempt charges is perhaps the mostdramatic example of how the terrainfor big business is changing.To be sure, Manmohan Singhand Finance Minister P. Chidambaramwere aware of the brewing disquiet inthe corporate sector and tried to tacklethe problem at the easier end by cre-ating the Cabinet Committee onInvestment and making rent-friendlychanges in key ministries like Petro-leum and Natural Gas and Environ-ment and Forests.
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But this has not been enough to restore the confidenceof India Inc in the Congress party’sability to restore the status quo ante.It is hardly surprising that this isthe time the name of Narendra Modias a potential prime minister of Indiaenters public discourse in a deter-mined fashion. Egged on by corporatesponsors as well as by the personal preferences of their proprietors, bigmedia swung into action to take the process of ‘normalizing’ Modi to itslogical conclusion.
B
arely nine years earlier, the Gujaratchief minister and the massacres hefailed to prevent, were universallyacknowledged by the media as having played a key role in the defeat of the National Democratic Alliance govern-ment at the Centre in 2004. The prob-lem was how to convince the sameurban middle class India, which isrepelled by the spectre of communalviolence, that the solution to India’s problems lies in Modi’s leadership.This is how the myth of the ‘Gujaratmodel of development’ came in handy.‘Today people are talking about theChina model of development in Guja-rat,’ Anand Mahindra of Mahindra and Mahindra told the 2013 Vibrant Gujaratsummit. ‘But the day is not far when people will talk about Gujarat model of growth in China.’
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Enough has been said and writ-ten about the statistical legerdemainthat underlies Modi’s fanciful claims as
7. ‘Act or We Could Become Banana Repub-lic: Tata Strikes Back’,
Indian Express
,27 November 2010.8. ‘The Government Must Reconnect WithCorporate India. There is DisillusionmentAmong the Old Corporate Houses’,
Indian Express
, 10 December 2010.9. ‘Government Paralysis Forcing Indians toInvest Abroad, says Deepak Parekh’,
TheTimes of India
, 7 July 2011.10. ‘The Corporate Sector is Nervous…ButI’m Confident the PM Will Intervene’,
Indian Express
, 21 December 2010. 11. Outward Indian FDI – Recent Trends and Emerging Issues. Address delivered by HarunR Khan, Deputy Governor, Reserve Bank of India at the Bombay Chamber of Commerce& Industry, Mumbai, 2 March 2012.12. Nitin Sethi, ‘PMO Pulled out all Stops toWeaken Eco, Forest Norms’,
The Hindu
,27 February 2014.13 ‘India Inc Hails Narendra Modi “Vision”,’
Business Today
, 11 January 2013. http:// businesstoday.intoday.in/story/india-inc-hails-narendra-modi-vision/1/191452.html