Saturday, 25 June, 2022
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Here are some tricky questions we need to face, even if we cannot convincingly answer them. Is UPA 2 the most entrepreneur-unfriendly government since the reform of 1991? Or, is it the most crony capitalist regime in India’s history? Or could it, indeed, be a bit of both? And, if so, how do you explain, or rationalise, that incredible contradiction?

Let’s now turn these questions around. Do India’s businessmen detest UPA 2 more than any other government in three decades except V.P. Singh’s (mercifully) short raid-raj interlude in 1989-90? And then, have so many Indian businessmen fattened themselves more under any other regime in post-reform India than under this one, even while showing no particular entrepreneurial spark, raping their bankers and vacuum-cleaning minority shareholders? Or, to repeat the earlier question, can both be true? If so, to repeat again, how do you explain, or rationalise, that incredible contradiction?

The fact is there is nothing incredible or contradictory about this. You don’t need a PhD to understand or explain how crony capitalism is the very death of genuine entrepreneurship. It snuffs out the virtuous animal spirits of enterprise that the prime minister is so fond of talking about. It also provides a permanent do-nothing excuse and an ATM for the political class. Worst of all, it ruins public opinion for businessmen as it confirms the worst old fears of all of them being carpet-bagging robber barons or vicious oligarchs of some sort. The reason reform not only succeeded but prospered in India for two decades was that its success was widely visible, and also available to be shared by a wide section of our people. Why has the picture then changed so dramatically? Could it be just a consequence of the global commodity boom fired by easy liquidity flooding the larger Western economies after the 2008 financial crisis? It has created windfall-billionaires overnight all over the world, including in India: the Reddy brothers of Bellary are an example. Or, could it be something more complex?

Let’s look at some of the new Indian entrepreneurial class before we turn on the usual suspect, the government. This decade of commodity and property price boom has seen the rise of a new generation of businessmen, or rather fixerpreneurs, with the unique talent and connections to work on that most lucrative cusp of finance, politics and natural resources. Many of these quickly got listed on the stock markets in boom times, and kept leveraging their balance sheets as if the train will never stop. But the underlying asset value was not that of their brands or products, but of land banks, political connections, mining leases and, in one specific case, telecom spectrum. That heady success story the markets have now sorted out, and brutally so. Most such asset” companies are now penny stocks and the bankers are chasing after their promoters with auction notices provided much remains to be auctioned. The big collateral losers in the process are some half-decent infrastructure companies, even those with a reasonable record of efficient delivery. The two companies building and running private airports in India, Delhi-Hyderabad and Mumbai-Bangalore, are valued at no more than Rs 2, 500 crore and Rs 1, 500 crore and carry a debt burden almost 15 and 40 times that much, respectively. Whether they deserve this plight, endangering their bankers, shareholders and the vital projects they are implementing, is not the point. This is precisely what you expect when the market and its customers the investors and lenders lose faith in governance, political as well as economic.

To go back to our original questions, the economy and markets have floundered not because UPA 2 is pro- or anti-business, but because it has been so hypocritical about private economy. Because of the Congress’s internal political reasons, conflicts and ideological confusions discussed earlier in this column (‘Dirty business’, IE, December 11, 2010,; ‘That sinking feeling’, IE, December 10, 2011,; ‘Anybody out there?’, IE, May 19, 2012,, UPA 2 decided to generally avoid even being seen in public with entrepreneurial India, while indeed working closely with them behind closed doors. It resulted in yet another fascinating contradiction: at an institutional and larger policy level, Indian business has never been as un-influential as it is now since 1991. Yet, at operative” levels, many of them have been able to work with government and the political class at various levels. Think of a situation where, except in the odd instance, the prime minister and the leading lights of UPA don’t go to formal CII/FICCI-type functions, or even an IIM convocation, when the prime minister has spoken only rarely with Indian business formally and in public in this term, and yet one group after another can troop into 7 RCR for meetings and problem-solving. Not just that, individual businessmen can visit the capital on fixed days and meet who they want in the PMO and elsewhere. It is nobody’s case that only irregular deal-making and fixing take place behind closed doors. But when the establishment makes such rich, povertarian virtue of staying away from businessmen while it cultivates them fondly in dark corridors, people do wonder what is going on. Particularly when the value of their hard-earned savings has been, meanwhile, dwindling.

If you draw a simple chart of the large companies that have lost the most value on the stock markets over the past three years, you’d notice that almost all of these were doing business on the same cusp of politics, finance and natural resources. To that extent, you have to admit that the market has been the first to sense the rot and has applied a stunning self-correction, severely punishing those responsible for it. Many of those who called themselves masters of the universe until just the other day, flaunting Bentleys, private jets, yachts, Swiss chalets and more, are now hiding from their bankers and shareholders and blaming the system”. Obviously, there can be no sympathy for them or for their bankers. The small shareholder is always the victim of hype. So the markets, at least, have responded to this multi-layered crisis of governance.

But what about the government? Let’s not call it anti-business. Let us just say that compulsions of the return of ideological nostalgia made it shy of being seen to be engaging with business. When it came to an impression of big-ticket match-fixing, it even tried to separate the cronies and the capitalists here and there. But it is because it was such a weak government that a completely different quality of businessmen, or rather fixerpreneurs, moved into that space, in the company of some rampaging politicians, carrying their own preferences or hit-lists. Transparency, fair regulation, clearly stated policies, open communication are the engines of a reformed free-market economy. But underlying all of that has to be a strong, decisive and clear-headed government, which UPA 2 has most certainly not been. So you have seen the kind of cronyism visible in some mine and spectrum allocations as well as the selective targeting of some of India’s largest, most substantive business houses, particularly in the field of minerals, and oil and gas. A remarkable illustration of this destruction by crony capitalism in reverse is the loss of value of India’s three largest showpiece oil and gas exploring companies RIL and Vedanta (Cairn Energy) in the private sector and ONGC in the public sector. Manmohan Singh’s reform 20 years ago brought Indian entrepreneurship —and passports global respect, admiration, and $300 billion of reserves. Today it’s all in a shambles. Can he, and the political class, now pick up the pieces and rebuild this wreck? Or, the India story is gravely in danger of going the way of Russia, and of course, without any of its stupendous riches.

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