Cronies and capitalists

Written by Dilip Bobb | Updated: Feb 23 2014, 11:03am hrs
Arvind Kejriwal should be corporate Indias worst nightmare. His scattergun approach has targeted any number of businessmen, starting with the very top, industrialist Mukesh Ambani. Earlier, he had accused Anil Ambani and Naresh Goyal of Jet Airways, plus a number of others, for corruption or having illegal Swiss accounts, but heres the catch. His recent meeting with members of the Confederation of Indian Industry (CII) turned out to be something of a love fest. Industrialist Rajiv Bajaj declared himself a fan of Kejriwal, adding; I resonate very strongly with his thoughts and ideologies. Kejriwals one liner, I am against crony capitalism, not capitalism, had seemingly won them over.

Heres the irony. We are heading for a no-holds-barred election, where money power will play a central role, and that money can only come via campaign contributions to political parties from business houses. Like it or not, crony capitalism is a fact of Indian political life. There is no way the 2G scam and Coalgate would have taken place without it, and there are other examples to testify as to how deeply entrenched it is in what Rahul Gandhi calls the system. A recent study of contributions to Indias political parties offered a telling insight into the nexus between politics and money. Companies in technology and other service businessesindustries that require few government licences or permissionscontributed virtually nothing. The biggest donors were involved in mining, power and other sectors dependent on the government to obtain rights to natural resources. Another study shows that Indias main political parties earned R4,662 crore over the last seven years, mostly in donations. The study shows the Congress earned R2,008 crore between 2004 and 2011 and the BJP, in the same period, earned R994 crore.

The study, conducted by two NGOs, analysed the income-tax returns of political parties and documents made available to the Election Commission. Most of the funding that was declared came from six electoral trusts, which had made contributions totalling R105.86 croremostly to the Congress and BJP: General Electoral Trust of the Aditya Birla Group, Electoral Trust of Tata Sons, Bharti Electoral Trust of Bharti Enterprises, Satya Electoral Trust, Harmony Electoral Trust and Corporate Electoral Trust. Other companies that were listed showed that generosity was spread between BJP and Congress. Torrent Power gave R14.15 crore to Congress and R13 crore to the BJP. Under existing electoral laws, if the amount donated is below R20,000, parties need not reveal the source of the funds. Three-quarters of the funds garnered by them in recent years are in this category. This is not charity and it demands a return on investment.

The worst-kept secret in India are the weekly appointments that a handful of favoured businessmen have in South and North Block, and the army of well-paid lobbyists representing the cream of India Inc,who roam those same corridors on a regular basis. Ratan Tata once observed that the government has issued policy which vested interests, quite often in private sector, has changed, delayed or manipulated that policy. So for one reason or the other, the government has swayed with these forces. The fact is, despite the occasional headbutting between corporates and the state, there is clear collusion between big business and big government. Their common interest lies in centralised power, where crony capitalism flourishes. In that sense, Kejriwal, with his obsession with small government and devolving power to local bodies, is anathema to big business. The collusion can only increase leading up to the 2014 election. Today, even second-rung leaders use private jets or helicopters to trawl for votes. What that implies is that electoral spending has increased dramatically in recent years, as has the requirement of donations. The Election Commission is looking at increased expenditure levels for candidates following demands from political parties. In 2011, the maximum poll expenditure for parliamentary constituencies was increased to R40 lakh for Lok Sabha and R16 lakh for assembly constituencies for most states. The earlier ceiling was R25 lakh and R10 lakh.

In his book, Power, Inc, David Rothkopf argues that while the Soviet economic model had too much state interference, the pendulum has swung too far the other way in the US model of capitalism. Part of the problem is that when government power is rolled back, the void is filled by other power centres, most notably corporations. Rothkopf argued that the balance between public and private power will be struck within the framework of capitalism, and that the real question is which species of capitalism. In India, that will depend on who forms the next government. Traditionally, the BJP has had the support of small entrepreneurs, while Congress has been backed by big business. Now, with Narendra Modi in the reckoning, that equation is changing. Modi has always courted big business and the response from India Inc, hesitant at first post-2002, is now an open embrace. Modis pro-business credentials suggest the playing field will be more even. A fractious coalition of various parties, however, will mean everyone demanding a share of the pie. The future of crony capitalism, it appears, lies in the hand, or finger, of the Indian voter.

The writer is Group Editor, Special Projects & Features, The Indian Express