India’s government is increasingly for, of and by its biggest businessmen

Mihir Sharma writes this scathing criticism of the way government runs in this country.

It is all for oligarches for whom bulk of the decisions are made..

The takeover of India’s politics by its oligarchs is almost complete. In an election season that is marked by anger and despondency about corruption and crony capitalism, it is striking how neither of the two largest political parties – and none of the others, barring the Left and the Aam Aadmi Party (AAP) – think it in their interest to take on big business.

What, precisely, is the disease? The symptoms are obvious, the outbreaks frequent. Consider, for example, the decision by the Congress-led United Progressive Alliance (UPA) government to raise the price at which gas from fields in the Bay of Bengal will be sold, from $4.2 per million metric British thermal units to well over $8 per mmBtu. This will, of course, massively benefit Reliance Industries Ltd (RIL). Remember, when Reliance bid for the gas a decade ago, it agreed to supply it at $2.34 per mmBtu. Since then RIL hasn’t just demanded higher prices, but also claimed without evidence that there just isn’t enough gas in the fields to supply the gas-fired plants that are lying empty across South India.

Pushed into a corner, the government has come up with a “formula” for gas prices devoid of economic or common sense – it uses import prices for gas in places like Japan to set the well-head price in the Bay of Bengal. That’s like saying the price of tea by the kilogramme in the middle of an Assam tea garden should be the same as if the tea were on a shop shelf in the Royal Borough of Kensington and Chelsea. Reliance is ruthlessly exploiting India’s dependence on a resource that it itself once argued is the state’s property and not its own; and the UPA has run away from the fight.

He says this practice is widespread whichever mainstream party one looks at..

These examples pile up endlessly. India’s overextended corporate promoters need never regret a decision; they are all thought of as too big to fail. The upside of their decisions is the promoters’ own, and they’re insured against the downside by friendly politicians and weak regulators.

And that’s one major cause even of the slowdown India has observed in the recent past. The policy paralysis-investment freeze stories ignore that the investment component of gross domestic product (GDP) hasn’t really fallen that much. What has seen a precipitous fall is the return on capital – it’s far less productive than it used to be. Why? Partly because too much of India’s capital is tied up in unproductive projects that a more efficient market would abandon; and with big businessmen with terrible balance sheets and reputations, struggling to find money to tide their investments over the lean patch. Which responsible investor would lend more money to cash-strapped people who appear eminently untrustworthy?

In a properly run market economy, these assets – licences, permissions, half-built plants, brand names, factories – would be taken away from those equity-holders who have made bad bets or aren’t trusted by the market, and given to others who could operate them better and more efficiently. But we don’t run a real market economy. We have no real bankruptcy law. Instead, we bail out losers – as long as they’re rich and powerful.

Well the problem is with media as well. It supports any government which can boosts markets taking half baked measures. We need a complete overhaul in the way things work here. The hype starts too soon and ends too soon. Y’day’s hero is dumped as a villain too soon. There is hardly any patience and it has all become a stock market game..

What choices we have?

And so we return to where we started: the sad and simple fact that few in politics are likely to take on incompetent India Inc on behalf of the market. The Congress has rolled over and kept on rolling over. And Great Reformist Hope Narendra Modi is so disapproving of oligarchs that he travels across the country denouncing the Congress in a private airplane with a giant sign saying “Adani” on the side. (Adani Enterprises, the Gujarat government has admitted, has received 55 square kilometres of prime industrial land from the state and paid the princely sum of Rs 60 crore for it, at rates between Rs 1 and Rs 30 a square metre.) Even as far back as 2003-07, Mr Modi’s own government estimated that 68 of 100 flights he took were in planes chartered for him by Reliance, Adani or their peers. After all, the big guys help him fix his numbers – all, yes all of Gujarat’s incremental manufacturing growth under Mr Modi has come from two ultra mega refineries, owned by Essar and by Reliance. (Together they employ perhaps 3,500 people. That’s it, the Gujarat manufacturing miracle.)

And if not the Congress or Mr Modi, who are we left with? The wild-eyed FIR-filers of the AAP, who seem to think essential commodity prices can be set by mohalla committees? Sorry, voters and free-market fans: either way, we’re stuck with the oligarchs for another five years.

Infact this talk of free market itself is hype. Which country has managed to have so called free markets? We have soon realised it has been oligarches all over. All the Tigers which were seen as free market followers were just cronies.

People keep talking about how so called reforms lead to freeing up of some enterprise spirit and healthy competition. In reality the big guys keep becoming bigger. This is the big irony. The big guys stumble initially but quickly regroup and grow bigger. They realise this so called freeing up does not really mean additional competition but more resources for the latter. Either the competition dies or is gobbled by the big guys. So things look shaken up initially seeing new names and media creates hype. And soon things go back to the same older stage.  The more things change, the more they remain the same.

The problem does not end here. Much of the economic system is owned by a few oligarches as well. The same set of people keep doing the rounds from one position to other. Look back 20-25 years of so called India’s reform and how many economists/thinkers have emerged? All committees, reports etc are chaired or based on their views. Some new that do emerge have to go through this approval by the same oligarches. This somebody new creates hype as well but deeper analysis reveals the same favoritism game is going on. And very quickly the new one becomes just like the older pack.

The stranglehold on Indian economic policy is also way too much.  There is no retirement age for these guys once they become part of the club. Unlike the west, where nobody cares where you go once the role is over. Here, once you are part of the club lifetime employment is a certainty. And all great fancy jobs. The requirement of whether there is any subject matter expertise is disregarded.

This has become a nice trinity with all of them supporting each other. So one  set of oligarches  says to other – you scratch my back and I scratch yours..And this whole game keeps repeating. It is a much wider problem…

The media makes the task easier as well by choosing to ignore these developments. They just react on short term fixes. And many a times, much if the media ends up being owned by the same oligarches…

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One Response to “India’s government is increasingly for, of and by its biggest businessmen”

  1. Corruption Free Says:

    Let the price of oil and cooking gas which are below subsidy levels(there is no more need for subsidy as the international commercial prices are lower than subsidy levels), the benefits of which let it be passed on directly to the common man and let the bank account and aadhar card and other such harassment of the common man by the government be removed else let the government be removed and voted out forever.

    Natural Gas Price 3.15 USD/mmBTU (2.58 EUR/mmBTU) 24 Dec 2014, which is very much lower than what is set by government of India reported the paragraph below.( International price of gas gathered from www dot infomine dot com)

    The government has reworked the gas pricing formula approved by the previous Congress-led government and restricted the rise in local gas prices to $5.61 per mmBtu from Nov. 1. The prices will be revised after every six months. (price of gas gathered about the present government in India 2014 from in dot reuters dot com)

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