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.

Southasia - - CONTENTS -

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.

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