The trou­ble with In­dia’s new ‘bil­lion­aire Raj’

A new elite has ac­cu­mu­lated more money more quickly than plu­to­crats in al­most any coun­try in his­tory. By James Crab­tree

The Guardian - Journal - - Front page -

On 3 May, at around 4.45pm, a short, trim In­dian man walked quickly down Lon­don’s Old Comp­ton Street, his head bowed as if try­ing not to be seen. From his seat by the win­dow of a nearby noo­dle bar, Anuvab Pal recog­nised him in­stantly. “He is tiny, and his face had been all over ev­ery news­pa­per in In­dia,” Pal re­called. “I knew it was him.”

Few in Bri­tain would have given the pass­ing fig­ure a sec­ond look. And that, in a way, was the point. The man pac­ing through Soho on that Wed­nes­day night was Ni­rav Modi: In­dian jew­eller, bil­lion­aire and in­ter­na­tional fugi­tive.

In Fe­bru­ary, Modi had fled his home coun­try af­ter an al­leged $1.8bn fraud case in which the ty­coon was ac­cused of abus­ing a sys­tem that al­lowed his busi­ness to ob­tain cash ad­vances il­le­gally from one of In­dia’s largest banks. Since then, his where­abouts had been a mys­tery. In­dian newspapers spec­u­lated that he might be holed up in Hong Kong or New York. In­dian courts is­sued war­rants for his ar­rest, and the po­lice tried, in­ef­fec­tu­ally, to track him down.

It was only by chance that Pal spot­ted him. A standup comic nor­mally based in Mum­bai, he hap­pened to be in Lon­don for a run of gigs.

“My rit­ual was to go to the same noo­dle bar,

have a meal, and then head to the the­atre,” Pal said. “I al­ways sat by the win­dow. And then sud­denly

Modi walks past. He was un­shaven, and had those

Ap­ple ear­phones, the wire­less ones. He looked like he was in a hurry.”

It was an­other month be­fore the press fi­nally caught up with Modi, as re­ports of his where­abouts emerged in June, along with the sug­ges­tion that he was plan­ning to claim po­lit­i­cal asy­lum in the UK. (Modi de­nies wrong­do­ing, and did not re­spond to re­quests for com­ment.) In the process, Modi also gained en­try into one of Lon­don’s more no­to­ri­ous fra­ter­ni­ties: the small club of In­dian bil­lion­aires who seem to end up in the Bri­tish cap­i­tal fol­low­ing scan­dals back at home.

The most prominent among these émi­gré moguls is In­dia’s “King of Good Times”, Vi­jay Mallya, the one­time avi­a­tion mag­nate and brewer, who trans­formed King­fisher beer into a global brand. A few years ago, Mallya was one of In­dia’s most cel­e­brated in­dus­tri­al­ists, fa­mous for his mul­let hair­cut and flam­boy­ant lifestyle. But in early 2016, In­dian au­thor­i­ties filed charges re­lat­ing to the col­lapse of his King­fisher air­line, which went bust in spec­tac­u­lar fash­ion in 2012, leav­ing be­hind moun­tain­ous debts and irate, unpaid staff. And so, fac­ing al­le­ga­tions of fi­nan­cial ir­reg­u­lar­i­ties and of re­fus­ing to re­pay outstanding loans, Mallya qui­etly boarded a plane for Bri­tain, too.

Like Modi, Mallya de­nies wrong­do­ing. Last month he re­leased a long state­ment ac­cus­ing In­dia’s gov­ern­ment of con­duct­ing a witch-hunt against him. And to the ex­tent that this claim has some merit, it is be­cause In­dian prime min­is­ter Naren­dra Modi (no re­la­tion to Ni­rav Modi) has of late been un­der great pres­sure to bring sup­pos­edly er­rant ty­coons such as Mallya to book.

Men like Mallya and Modi were mem­bers of In­dia’s ex­pand­ing bil­lion­aire class, of whom there are now 119 mem­bers, ac­cord­ing to Forbes mag­a­zine. Last year their col­lec­tive worth amounted to $440bn – more than in any other coun­try, bar the US and China. By con­trast, the av­er­age per­son in In­dia earns barely $1,700 a year. Given its early stage of eco­nomic de­vel­op­ment, In­dia’s new hyper-wealthy elite have ac­cu­mu­lated more money, more quickly, than their plu­to­cratic peers in al­most any coun­try in his­tory.

Naren­dra Modi won an over­whelm­ing elec­tion vic­tory in 2014, hav­ing promised to put a stop to the spate of cor­rup­tion scan­dals that had dogged In­dia for much of the pre­vi­ous decade. Many in­volved prominent in­dus­tri­al­ists – some di­rectly ac­cused of cor­rup­tion, while oth­ers had sim­ply mis­man­aged their fi­nances and mirac­u­lously man­aged to es­cape the con­se­quences. Vot­ers turned to Naren­dra Modi, the self-de­scribed son of a poor tea-seller, hop­ing he would de­liver a new era of clean gov­er­nance and rapid growth, rid­ding In­dia of a grow­ing rep­u­ta­tion for crony cap­i­tal­ism.

Naren­dra Modi pledged to end a sit­u­a­tion in which the coun­try’s ul­tra-wealthy – some­times called “Bol­ly­garchs” – ap­peared to live by one set of rules, while In­dia’s 1.3 bil­lion peo­ple op­er­ated by an­other.

Yet as they con­tinue to hide out in ci­ties like Lon­don, men like Mallya and Ni­rav Modi have come to be seen as rep­re­sent­ing the fail­ure of that pledge; the In­dian au­thor­i­ties “have a long road ahead”, as one head­line put it in the Hin­dus­tan Times last year, re­fer­ring to a “long and ar­du­ous” fu­ture ex­tra­di­tion process in Mallya’s case.

And as Naren­dra Modi gears up for a tough re-elec­tion bat­tle next year, he is fight­ing the per­cep­tion that In­dia is un­able to bring such men to heel, and that it has been pow­er­less to re­spond to the rise of this new mon­eyed elite and the scan­dals that have come with them. “This on­go­ing bat­tle to get In­dia’s big ty­coons to play by the rules is one of the big­gest chal­lenges we face,” says Reuben Abra­ham, chief ex­ec­u­tive of the IDFC In­sti­tute, a Mum­bai-based think­tank. “Get­ting it right is cen­tral to In­dia’s eco­nomic and po­lit­i­cal fu­ture.”

In­dia has long been a strat­i­fied so­ci­ety, marked by di­vi­sions of caste, race and reli­gion. Prior to the coun­try win­ning in­de­pen­dence in 1947, its peo­ple were sub­ju­gated by im­pe­rial Bri­tish ad­min­is­tra­tors and myr­iad ma­hara­jas, and the feu­dal re­gional monar­chies over which they presided. Even af­ter­wards, In­dia re­mained a grimly poor coun­try, as its so­cial­ist lead­er­ship fash­ioned a no­tably in­ef­fi­cient state-planned eco­nomic model, closed off al­most en­tirely from global trade. Over time, In­dia grew more equal, if only in the limited sense that its elite re­mained poor by the stan­dards of the in­dus­tri­alised west.

But no longer: the last three decades have seen an ex­tra­or­di­nary ex­plo­sion of wealth at the top of In­dian so­ci­ety. In the mid-1990s, just two In­di­ans fea­tured in the an­nual Forbes bil­lion­aire list, rack­ing up around $3bn be­tween them. But against a back­drop of the grad­ual eco­nomic re-open­ing that be­gan in 1991, this has quickly changed. By 2016, In­dia had 84 en­tries on the Forbes bil­lion­aire list. Its econ­omy was then worth around $2.3tn, ac­cord­ing to the World Bank. China reached that level of GDP in 2006, but with just 10 bil­lion­aires to show for it. At the same stage of de­vel­op­ment, In­dia had cre­ated eight times as many.

In part, this wealth is to be wel­comed. This year In­dia will be the world’s fastest-grow­ing ma­jor econ­omy. Dur­ing the last two decades, it has grown more quickly than at any point its his­tory, a record of eco­nomic ex­pan­sion that helped to lift hun­dreds of mil­lions out of poverty.

None­the­less, In­dia re­mains a poor coun­try: in 2016, to be counted among its rich­est 1% re­quired as­sets of just $32,892, ac­cord­ing to re­search from Credit Suisse. Mean­while, the top 10% of earn­ers now take around 55% of all na­tional in­come – the high­est rate for any large coun­try in the world.

Put an­other way, In­dia has cre­ated a model of de­vel­op­ment in which the pro­ceeds of growth flow un­usu­ally quickly to the very top. Yet per­haps be­cause In­dian so­ci­ety has long been deeply strat­i­fied, this dra­matic in­crease in in­equal­ity has not re­ceived as much global at­ten­tion as it de­serves. For nearly a cen­tury prior to in­de­pen­dence, In­dia was gov­erned by the Bri­tish Raj – a term taken from the San­skrit rājya, mean­ing “rule”. For half a cen­tury af­ter 1947, a sys­tem dom­i­nated by per­nick­ety in­dus­trial rules emerged, of­ten known as the Li­cence-Per­mit-Quota Raj, or

Li­cence Raj for short. Now a sys­tem has grown in their place once again: the bil­lion­aire Raj.

The rise of In­dia’s su­per-rich – the first and most ob­vi­ous man­i­fes­ta­tion of the bil­lion­aire Raj – was pro­pelled by do­mes­tic eco­nomic re­forms. Start­ing slowly in the 1980s, and then more dra­mat­i­cally against the back­drop of a wrench­ing fi­nan­cial cri­sis in 1991, In­dia dis­man­tled the dusty stock­ade of rules and tar­iffs that made up the Li­cence Raj. Com­pa­nies that had been cos­seted un­der the old regime were cleared out via a mix of dereg­u­la­tion, for­eign in­vest­ment and height­ened com­pe­ti­tion. In sec­tor af­ter sec­tor, from air­lines and banks to steel and tele­coms, the ranks of In­dia’s ty­coons be­gan to swell.

Noth­ing sym­bol­ises the power of this bil­lion­aire class more starkly than An­tilia, the res­i­den­tial sky­scraper built in Mum­bai by Mukesh Am­bani, In­dia’s rich­est man. Ris­ing 173 me­tres above In­dia’s fi­nan­cial cap­i­tal, the steel-and-glass tower is ru­moured to have cost more than $1bn to build, loom­ing over a city in which half the pop­u­la­tion still live in slums.

Am­bani owns Re­liance In­dus­tries, an em­pire with in­ter­ests stretch­ing from petro­chem­i­cals to tele­coms. (His fa­ther, Dhirub­hai, from whom he in­her­ited his com­pany, was one of the main ben­e­fi­cia­ries of the eco­nomic re­forms of the 1980s.) At An­tilia, Am­bani en­ter­tains guests in a grand, chan­de­liered ball­room that takes up most of build­ing’s ground floor. There are six storeys of park­ing for the fam­ily’s car col­lec­tion, while the tower’s higher lev­els fea­ture op­u­lent apart­ments and hang­ing gar­dens. Fur­ther down, in sub-base­ment 2, the Am­ba­nis keep a recre­ational floor, which in­cludes an in­door foot­ball pitch. An­tilia be­came an in­stant land­mark upon its com­ple­tion in 2010. The city had long been a place of stark di­vi­sions, yet the Am­bani’s home al­most seemed to mag­nify this seg­re­ga­tion. (A spokesman for Re­liance did not re­spond to a re­quest for com­ment.)

The emer­gence of the In­dian su­per-rich was bound up in larger global story. The early 2000s were the hey­day of the so-called “great moder­a­tion”, when world in­ter­est rates stayed low and in­dus­tri­alised na­tions grew hand­somely. This was also when the for­tunes of In­dia’s new ty­coons be­gan to change. Pumped up by for­eign money, do­mes­tic bank loans and a surg­ing sense of self­be­lief, in­dus­tri­al­ists went on a spend­ing spree. Am­bani dumped bil­lions into oil re­finer­ies and petro­chem­i­cal plants. Vi­jay Mallya spent heav­ily on new fleets of

Air­bus jets. Ni­rav Modi be­gan build­ing a global chain of jew­ellery stores. Stock mar­kets boomed. From 2004 to 2014, In­dia en­joyed the fastest ex­pan­sion in its his­tory, av­er­ag­ing growth of more than 8% a year.

The boom years brought ben­e­fits, most ob­vi­ously by rein­te­grat­ing In­dia into the world econ­omy. Yet this whirl­wind growth also proved eco­nom­i­cally dis­rup­tive, so­cially bruis­ing and en­vi­ron­men­tally de­struc­tive, leav­ing be­hind what the writer Rana Dasgupta de­scribes as a sense of na­tional trauma. In­dia’s new wealth has been shared re­mark­ably un­evenly, too. Its rich­est 1% earned about 7% of na­tional in­come in 1980; that fig­ure rock­eted to 22% by 2014, ac­cord­ing to the World In­equal­ity Re­port. Over the same pe­riod, the share held by the bot­tom 50% plunged from 23% to just 15%.

Un­sur­pris­ingly, some feel re­sent­ful. “You walk around the streets of this city, and the rage at An­tilia has to be heard to be be­lieved,” Meera Sanyal, a former in­ter­na­tional banker turned lo­cal anti-cor­rup­tion cam­paigner, told me in 2014. Six years be­fore that, in 2008, as the scale of In­dia’s bil­lion­aire for­tunes were be­com­ing clear, Raghu­ram Ra­jan – an econ­o­mist who would later be­come the head of In­dia’s cen­tral bank – asked an even more pointed ques­tion about his

In­dia’s old sys­tem of bribes for ba­sic ser­vices was triv­ial com­pared with the grand scan­dals of the 2000s



Naren­dra Modi, above; the An­tilia tower in Mum­bai, right

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