As a rule, it is best to steer clear of labels and standard definitions. Labels tend to be simplistic and usually reveal their users’ ideological underpinnings. So it’s interesting that terms such as oligarchy and plutocrats are being bandied about increasingly in the Indian context — not by the usual suspects, the Left and their fellow-travellers, but by mainstream economists and institutions such as the Asian Development Bank.
Is India turning into an even more oligarchic society than it always has been? Quite a few analysts believe this is so. Let’s listen first to the Prime Minister’s own adviser Raghuram Rajan who, not too long ago, was the IMF’s chief economist. At the Founders Day celebrations of the Bombay Chamber of Commerce, Rajan said something interesting. In his view India is at the crossroads: “With the right policies and some luck, we will become a middle-income constitutional democracy in my lifetime. But inaction coupled with bad luck could make us an unequal oligarchy or worse, perhaps far sooner than we think.”
His unease stems from analysing a set of figures: the number of billionaires per trillion dollars of GDP for the major countries of the world. Heading the list is Russia with 87 billionaires for its $1.3 trillion of GDP. Coming second is India which has 55 billionaires for the $1.1 trillion of GDP that it generates. Why should this be worrying at all? After all, we did have a booming economy in the last few years. But some perspective would help to see this in the global context. Brazil, which is often cited as an example of very high income inequality, has only 18 billionaires despite a greater GDP than India, while Germany, boasting three times India’s GDP and a per capita income that is 40 times India’s, has just about the same number of billionaires.
For Rajan, who headed a committee on financial sector reforms in India, the numbers are alarming: “Too many people have gotten too rich based on their proximity to the government. If Russia is an oligarchy, how long can we resist calling India one?” It is his contention that reforms have created new sources of rents for the establishment, specially from the allocation of scarce national resources. This means that barring a few exceptions most of India’s billionaires have been created through sweet deals in land, mining, coal, oil and gas.
Now turn to another report released a few months ago. India 2039 – An affluent society in one generation warns that the creation of oligarchies is a common trap that developing countries fall into and one that prevents them from realising their full potential. The report was prepared by Emerging Markets Forum, an American non-profit, for the Asian Development Bank. Its overarching message is grim. “While the expansion of corporate wealth was part of the pro-business policies that helped support growth, there is now a growing risk that parts of the corporate sector will wield excessive influence over the state.”
There is a chance that the report will be taken more seriously since it comes from the ADB — as far removed as one can get from the familiar rants of left-wing politicians, liberal journalists or bleeding heart non-government organisations. Indeed, there is ample evidence of the excessive influence of the corporate sector over the state in the still unravelling drama over Reliance Industries’ (RIL) KG Basin gas price scandal. Playing a key role in this controversy is the Ministry of Petroleum and Natural Gas led by its minister Murli Deora and other state actors like the Director General of Hydrocarbons (DGH). What is clear is that critical public institutions have been subverted to serve powerful corporate interests at a great cost to the nation.
The tragedy is that revelations have not been the result of any crusading efforts by the media or by public servants keen to expose wrongdoing. Instead, much of the expose is based on the dirt that has been dug up by Reliance Natural Resources Limited (RNRL), the company that was hurt by the proximity of RIL to the establishment. Would any of this have come to light if the Ambani brothers had not split and the younger sibling was not at the receiving end of the policy machinations that appear to benefit the elder? The answer is not.
The most damning of the charges relate to the steep escalation in the capital expenditure shown by RIL to develop its DC 6 field. From a capex of Rs 12,000 crore to produce 40 mmscmd of gas in 2004, the figure shot up to Rs 45,000 crore in 2006 for doubling the production. It is possible that the figures are justified. But the point is that the government chose to ignore the warning of its own economic advisory committee to approve the expenditure without any validation. It turns out that the DGH VK Sibal who came out roaring like a lion last week to defend his approval of the costs had not done his due diligence. The independent expert and the international consultancy which he cited as independent authorities who vetted the costs have been exposed as individuals and entities closely linked to RIL. But the most shocking of disclosures has come from another government body, the CAG, which Sibal claimed had audited RIL’s accounts. The CAG says it has not even been able to access RIL’s data so far despite asking for it for a year and a half!
That’s not the worst of the RIL imbroglio. The country’s top law officials, the Attorney General and the Solicitor General have openly criticised Deora’s ministry for having hobbled the public NTPC from pursuing its legal battle against RIL.
In the long history of scams in independent India, rarely has one ministry and its affiliates been so deeply enmeshed in decisions and policies that have so blatantly gone against national interest. Yet, the government has chosen to gloss over these false and untenable claims.
All that it requires for oligarchies to become more powerful is the silence of society, specially that of the business community. And the ADB report has a special warning for them. “The private sector must recognize that many current practices that allow a few powerful business houses to thrive are ultimately against the long-term interests of the business community as a whole. Not only is the current model not sustainable, it is potentially disastrous, as it could bring into disrepute the entire system and launch a popular backlash that will be difficult to contain,” it says.
So what’s in store for a country like India whose state organs are weak and are easily compromised by powerful and unethical business interests? There is a clear risk that India will evolve into oligarchic capitalism in which “the market and political power of major corporations will become a drag on long-term growth and a source of distortion in policy design”.
The silence of those who matter is truly deafening in this case.