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The Billionaire Raj: Riveting chronicle of crony capitalism…

In paper, developers met the required investment of 30 per cent equity, which was actually not their capital. They diverted it from another company, which had taken loans from another bank.

I was browsing through the book in the country library. The comment by Jagadish Bhagwati on the back cover of a book. “it is bound to become a classic” caught my attention. Then, the index page kindled more interest: Ambani Land, The Good Times Begin, Rise Of the Bollygarchs,
India Modified, The Season of Scams, Cronyism Goes South, House of Debt, The Anxious Tycoons, More Than A Game, The Nation Wants To Know, The Tragedies of Modi, and Conclusion: A Progressive Era?

Reign of the Bollygarchs…

The story begins on 3 December, 2013, with a totally ruined, super-expensive (costing over $700,000) car, an Aston Martin Rapide, lying near Beach Candy, Mumbai. The Reliance group owned it. Media tried to its best to conjecture who the actual driver of the car was but never succeeded. Crabtree was trying to communicate that in this gilded age of India, Bollygarchs (like the yester year’s robber barons of the US) could get away with murder. Fortunately, no one died in the three-way accident.

The author, James Crabtree, as correspondent of the Financial Times at Mumbai, had a ringside view of the rapid rise of the Indian oligarchs he turned Bollygarchs.

Three critical elements…

The book charts three critical elements in India’s recent history. The first deals with the rise of the super-rich resulting in income inequality and entrenched corporate power. Today, India has over one hundred twenty billionaires; more than any other country bar America, China and Russia. One per cent of Indians own over 50 per cent of national wealth. It is one of the highest concentrations of wealth in the world.

The second critical element is the rise of crony capitalism, which results in collusion between political and business elites to capture valuable public resources. When after 1991 old central planning and state controls of licence – permit – quota raj were replaced ushering a new free-market era, there was much expectation on a better and more honest government. Instead, there were mega scams.

The third critical element describes the boom and bust cycle of India’s industrial economy as a result of the above two factors. The bollygarchs were able to borrow tons of money. When the financial crisis hit the country, overstretched businesses struggled to repay the debts. It is sad to read how the highly connected managed to invest in power plants with no equity by hoodwinking the public sector banks.

It’s not their money…

On paper, developers met the required investment of 30 per cent equity, which was actually not their capital. They diverted it from another company, which had taken loans from another bank. And project costs were literally inflated with handsome scope for taking care of the promoter’s contribution. The recent banking fraud by Nirav Modi looks like a small change potato compared to these scams of the industrialists. ‘The rot at the heart of Indian capitalism was exposed in a report, “House of Debt” by Ashish Gupta of Credit Suisse.’

Crabtree spoke to Vijay Mallya in exile in London, to get his side of the story. Mallya said the government forced him to repay the loan quickly without giving him a chance to restructure, leading to bankruptcy. It is fascinating to read the interview with the ‘Big Bull,’ Rakesh Jhunjhunwala as he was sipping $450 Johnnie Walker in his Mumbai office. A self-made man without any ties to politicians, Jhunjhunwala, India’s Warren Buffet, has decided to give 25 per cent of his wealth to charities.

Power imbalance between creditors and tycoons…

While there is some mention of demonetisation in the book, there is not much discussion. Crabtree has high praise for former RBI Governor, Raghuram Rajan. According to Rajan, graft is not the real problem of the banking sector. It is the power imbalance between the creditors and tycoons to whom they lent.

There’s still hope…

Despite all the problems seen in India, Crabtree sees a bright future for India. According to him, Modi has reset the balance between politics and business, which should result in less cronyism and less corruption. Despite being amazingly corrupt, China has achieved enormous social and economic progress because of its capable state machinery. While India should continue to fight crime, it should work on strengthening the ‘state capacity.’ This is what happened in the US more than a century ago. After the corruption-ridden, gilded age came the progressive era when the middle class cleaned up politics and gained control over the government.

Crabtree believes that the largest democracy in the world can do it.

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