A Run for the Money
In this Indian election, money from big businesses is likely to play an important role in the battle for political power.
Money, especially big money, has nearly always proved to be the most effective solvent for ideology in any country. As India’s political parties edge closer to elections, scheduled to be held from April 7 to May 12, money from big businesses will once again play an important role in this contest for political power. In fact, it is already being dubbed as the ‘epic battle’ between the Congress and the Bharatiya Janata Party. The Aam Aadmi Party, the new horse on the track, is fighting the elections on the basis of popular national sentiments of anti-corruption. The party, however, is unlikely to dislodge the wellentrenched political order which will
By Taj M. Khattak pander exclusively to the demands of big businesses.
On their part, the captains of India’s various industries feel that they have an historic responsibility to bring in economic stability through the creation of more wealth as India drifts away from the trajectory of BRIC economies – an acronym for a group of rapidly developing countries – Brazil, Russia, India and China – that have the potential of becoming leading economies of the world within a few decades. How much of that newly created wealth will serve the interests of some influential individuals and how much of it will benefit the country can only be determined over a longer timeline as any assessment after one or two elections could be misleading.
If big money has been able to make a slow but steady ingress into the Indian political system, the country has only itself to blame for this phenomenon. This is so because soon after independence, it didn’t suitably amend the 1913 Companies Act, which had no statuary provisions to ban donations being made by business houses to political parties. The judiciary, to its credit, had voiced its concern on more than one occasion about damage to the country’s political life if those with wealth were allowed to influence politics. Its warnings were ignored.
Far from the much-needed course correction, in 1960 the Indian parliament further added Section 293-A to the Companies Act, permitting businessmen and industrialists to contribute up to 5 percent of their net profits to political parties. In 1985, Section 293-A was further amended to authorize board of directors of companies to make donations to political parties.
It didn’t take long for the negative effects of these steps to surface. They also resulted in strengthening the public perception about the rise in high-level political corruption, especially during electioneering. It is strange that while democracies the world over are closing the door on big business money entering politics, the biggest democracy in the world continues to allow this unhealthy trend to continue.
India started the liberalization of its economy in 1991 during the tenure of Prime Minister P.V. Narishmha Rao, when the current Prime Minister Manmohan Singh was finance minister. There has been some success in unshackling the economy from compulsions of what had been derogatively called the ‘License-Permit Raj’ of the 1950s and 1960s as the country peaked to 10 percent growth at one point.
But the slowing down of growth to less than 5 percent for the second year running has raised doubts about the effectiveness of liberalization reforms. It is, therefore, sad to see Manmohan Singh, the architect of the modern Indian economy, facing at the fag end of his public service, prospects of the electorate showing preference for Narendra Modi, who is better known for his authoritarianism and strong-arm tactics than a deeper understanding of economics.
Under Manmohan Singh, the Indian state has transitioned from being a benevolent provider of all necessities of life till only recently to confining itself to the minimalist role (though not as much as big businesses would like it to be) of facilitating the full energies of private enterprise to inter-play. This accelerated the economy from what had been called India’s ‘Hindu Rate of Growth’ for years. But the problem with big businesses in India is that they rarely, if ever, know where ‘deregulation’ ends and ‘no regulation’ begins.
Call it influence of big players on politics or a nexus between money and politics, the consistency in India’s economic policies has paid off as there have not been any major back and forth adjustments in the taxation regime, whether direct or indirect, which has moved downwards and towards simpler formats for filling returns. The parity of the Indian Rupee with international currencies has been relatively stable. And most significantly, the regulatory framework of greater freedom for trade and industry has moved on towards leniency of rules and dismantling of stringent controls – a hallmark of the Indian economy for decades.
An unmistakable downside of India’s liberalization policies has been the fact that it has not been able to produce a new breed of entrepreneurs espousing good corporate governance and honesty. Quite the reverse, the increased opportunities for creating wealth have created more greed and far too many economic power houses which tread the narrow path between right and wrong. The key to success in business in India has often not been in real entrepreneurship but in influencing major functions of the state such as taxation and permission to borrow money from abroad which can make a substantial difference to their balance statements over shorter periods.
The Indian businessman knows his ropes and invests generously in influencing policies and policymakers, in creating lobbying institutions such as the FICCI, the Confederation of Indian Industry and the Assocham (Associated Chamber of Commerce, an influential group of older foreigncontrolled firms which have since largely gone native) and in building personal relations with patronizing political leadership. The approach has generally been three-pronged and spread over bribery, getting nominated to advisory bodies and determining appointments of senior officials to influence high-level decision-making. This has correspondingly shrunk the space for politics based on the country’s constitutional values.
The man mainly responsible for this change was Dhirubhai Ambani of Reliance Industries Limited (RIL) and the patriarch of the Ambani brothers, who showed how the regulatory mechanism could be bent to his advantage when other industrial barons symbolizing ‘old money’ remained glued to conservative strategies of perpetuating their control and frequently blamed pervasive state control for the lackluster performance of their business houses. He was able to widen shareholder stakes through equity ownership and to pull around an agglomeration of corporate and civic voters with significant political leverage. Ironically, today, his son Mukesh Ambani is embroiled in a scam and is under investigation for manipulation in natural gas prices from the Krishna-Godavari Basin off the coast of Andhra Pradesh.
Yet there are older industrial groups like the Tatas and the Aditya Group, which are beholden to greater transparency in political donations and have set up trusts to fund elections in a transparent and accountable manner. Whether the rest of the pack will follow their lead to keep the country’s politics clean remains to be seen, especially when liberalization of the economy and doing away with license-quota has rendered such action to be of limited benefit.
Not long ago, India surprised the world when it produced a few billionaires on top of business houses with global reach. The bubble of ‘Shining India’ has burst as the performance of the Congress-led UPA government is regarded as dismal. People now want the economy to veer starboard. It is no secret that when a businessman makes a donation to a political party, he expects a quid pro quo. For the time being, India’s ‘New Money’ is giving the ‘Old Money’ a run for the money. The writer is a retired Vice Admiral of the Pakistan Navy and former Vice Chief of Naval Staff.