MK Venu: Lalit Modi is a Small Symptom of the Continuing Malaise of Crony Capitalism
At the Modi-Obama reception at Rashtrapati Bhawan, about two dozen industrialists had been invited and were seen standing in a queue to greet the US President. About 6 to 8 of those present collectively owe close to Rs. 3.5 lakh crore to banks, mostly PSU banks
There can be no doubt that the NDA government’s image has
been badly dented by the new scandal involving Lalit Modi – a man facing
serious money laundering charges in India – for whom external affairs minister
Sushma Swaraj personally short-circuited the system so that he could procure
travel papers on “humanitarian grounds”.
The government’s defensive attitude was visible on Monday as
the opposition mounted a serious attack on the BJP, prompting the Enforcement
Directorate to issue fresh notices late evening against Lalit Modi. Perhaps
this was the government’s way of signalling that its favour to the
controversial former IPL cricket commissioner was limited to
helping him travel from London to Portugal to see his ailing wife, and
that it did not extend to diluting the serious money laundering charges against
him.
However, this alone may not work as pressure will now
mount on the government to bring to trial Lalit Modi and many other businesses
against whom serious charges are pending. The ED, such as it is, seems to
get clear signals from time to time on how to proceed against well known
businessmen who formally face money laundering charges. The pace of
investigation varies according to how close these businessmen are to the
political establishment.
One just has to look at some of the pending money
laundering cases at the ED and the CBI to understand how the nexus between
the political class and big business operates. This happens across the board, whether it is a BJP or
Congress-led government. For instance, there are serious charges of over-invoicing of imports against
the Adani Group, running into thousands of crores, which may lie dormant at
the Enforcement Directorate for some years as Gautam Adani is seen as very
close to the establishment.
Of course, the Prime Minister and other cabinet
ministers can easily claim later that they have done no favour to the Adanis as
the case will not have been dropped. But then the Adani Group will also not be
proceeded against with much vigour either.In this manner, many cases are kept in suspended animation.
The Lalit Modi case is no different.
However, one exception to this has been
the manner in which a serious money laundering case against Baba Ramdev, who
runs a Rs.1000-crore plus business empire, was dropped recently for “want of evidence”. Ramdev
was ‘gifted’ an island in Scotland, nothing less, by some NRIs. The Enforcement
Directorate had registered a case as prima facie it appeared
to be a money laundering exercise. Again, as is its wont, after keeping the
case going for some years the agency has closed the case.
The CBI, ED and other investigative arms of the government
are looking at money laundering charges pertaining to the 2G scam, Coalgate etc
but it is safe to assume that these will remain in limbo for a long time to
come. It is surprising that the BJP, which rode to power by campaigning around
the 2G scam, has not done anything to speed up the money laundering cases so
apparent in many of the complaints filed by the CBI which are under trial. It
seems most of these cases will die a natural death, as has been the experience
in the past.
The Lalit Modi episode has also badly dented the Prime
Minister’s claims that there is no crony capitalism-driven corruption at the
top level of the NDA. This claim was so tenuous that it was only a manner of
time before it got exposed. The continuing cronyism was bound to emerge because the
systemic, long-term nexus between the political elites and big business will
not go away anytime soon, as has been demonstrated by the Lalit Modi case.
Will an ordinary citizen ever get access to the kind of bespoke, special
treatment that Lalit Modi received?
Actually, when Narendra Modi and Arun Jaitley claim
there has been no crony capitalist-driven scam in the NDA government at
the top level, they make a very narrow interpretation of cronyism. What they
mean is that there is no personal quid pro quo between them
individually and the businesses for whom they make policies.
However, this narrow definition of crony capitalism
does not capture its real essence. The real essence of cronyism flows from how
deeply the link between business and politics is embedded in the larger system,
and no individual politician has the power to alter this.
The Indian banking system, for instance, is today saddled
with about Rs. 5 lakh crore of what may be described as bad and vulnerable
loans. A substantial portion of this is lying in the balance sheets of a
dozen family-owned business houses in the country who are politically
well-connected and have used their clout to set up businesses ranging from
roads, power, telecom and construction largely on borrowed funds from public
sector banks. These businesses are regarded as too big to fail and therefore
get endless support from banks.
RBI Governor Raghuram Rajan took
a dig at such business houses sometime ago, saying they thrive in good
times as well as bad times through what he described as “risk free capitalism”. The real issue is whether Prime Minister Narendra Modi has
the power or will to jettison this system. This is the real test of whether the
government can remove cronyism. It is not about personal corruption, which is a
very narrow way of looking at the phenomenon. Unfortunately, this system has not been touched because the
same family-owned industrialists who have run up massive ‘restructured’ debt –
the euphemism used by bankers to describe the extended repayment period they
enjoy – with public sector banks, continue to enjoy the respect of the state
apparatus.
One telling example will illustrate this point.
At the Modi-Obama reception at Rashtrapati Bhawan, about two
dozen industrialists had been invited and were seen standing in a queue
to greet the US President. About 6 to 8 of those present collectively owe
close to Rs. 3.5 lakh crore to banks, mostly PSU banks. The banking industry in
India has about Rs. 5 lakh crore as total capital and nearly 70% of it is exposed
to just a half a dozen industrial houses. Technically, if these business
houses were to go bust, 70% of India’s banking capital will get wiped out.
In short, they are too big to fail. So they have no worries really, as the
system sustains them.
This is the real cronyism that plagues India. No less an
establishment figure than the RBI Governor has already drawn the attention of
the government to it. Do Narendra Modi or Arun Jaitley have the will to alter
this arrangement? Lalit Modi is just a small symptom of a much bigger malaise.
http://thewire.in/2015/06/16/lalit-modi-is-a-small-symptom-of-the-continuing-malaise-of-crony-capitalism/
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