No doubt cronyism thrives in India, but is the scourge as bad as Arvind Kejriwal has made it out to be?
Bhupesh Bhandari |
New Delhi
February 27, 2014
Last Updated at 21:44 IST
Last week, while addressing members of the Confederation of Indian Industry (CII), Arvind Kejriwal, the undeclared prime ministerial candidate of the Aam Aadmi Party (AAP), said that he was all for free markets but was against crony capitalism. In the last few weeks, he has made Mukesh Ambani the symbol of cronyism
in the country. The issue can be considered in two parts. To begin
with, does Mr Kejriwal really believe in free markets? In January, a few
weeks before the CII speech, his short-lived government in Delhi had banned foreign direct investment (FDI)
in multi-brand retail. A few days after the speech, at an election
rally in Rohtak, Mr Kejriwal said the (privately owned) media needed to
be fixed. The media's fault is that it doesn't devote enough real estate
and airtime to him. This hardly qualifies as liberal thinking.
The party's economic agenda, as reported by Business Standard last week, does say the right things. (I also agree with Mr Kejriwal that corruption is an invisible tax that raises the cost of doing business.) Thus, the AAP believes in encouraging private investment, promoting a progressive and simple tax structure and encouraging private investment in health and education. But two months ago, when Mr Kejriwal had sought the opinion of the people of Delhi if the party should form the government after the unclear verdict in the elections, his world view was different. In a pamphlet that listed his agenda for Delhi, he had said that the "standard of education in government schools will be made better than private schools" and "government hospitals will offer better treatment than private hospitals". It shows disdain for private enterprise and a misplaced belief in the efficiency of the public sector.
In October 2012, Mr Kejriwal had released a vision document, which makes for very interesting reading. "We must not allow the logic of capital, market mechanism and profit motivation to be the sole drivers of our economy," it had said. While now he wants private investment in education, that document had said unequivocally that "education for profit must not be permitted". As regards private healthcare, this is what it had to say: "The state must take the responsibility of universal healthcare. Public hospitals must be equipped to provide complete and free treatment of every kind of disease." Mr Kejriwal has of late even acknowledged the role of the private sector in providing jobs. In October 2012, he was singing a different tune. "The state must accept responsibility for full employment," his vision document had said.
What has changed between then and now? My guess is this is an attempt to win back the trust of the middle classes who were alarmed at Mr Kejriwal's anarchist ways during his 49-day stint as the chief minister of Delhi. After the CII event, many businessmen made the usual politically correct noises. Some even speculated that Rajiv Bajaj would contest the next elections as a candidate of the AAP. The talk was laid to rest only after Mr Bajaj, never one to mince words, told Business Standard: "The chance of my joining the AAP or fighting election under their banner is as much as Kejriwal making motorcycles for the market." Talk to businessmen privately and they are likely to say they aren't sure if Mr Kejriwal has shed his socialist credentials totally.
The next issue is cronyism, the so-called root cause of all our problems. It's an open secret that cronyism has existed in India for well over six decades. However, not even once does Mr Kejriwal's 2012 vision document mention it. It doesn't even allude to any nexus between businessmen and politicians. By the time the document was released, the spectrum and coal allocation scams had been explored threadbare by investigators. Yet, Mr Kejriwal felt it wasn't amongst the evils that afflict the country. The December letter, too, does not contain any promise to end cronyism. The issue, by all accounts, has only recently been discovered by the AAP - just in time for the coming general elections. Again, in order not to hurt sensibilities, the party has distinguished between honest and corrupt businessmen. In an interview with The Economic Times, Mr Kejriwal, when asked to recall some honest businessmen, could come up with just two names: N R Narayana Murthy of Infosys and Azim Premji of Wipro.
No doubt cronyism thrives in India, but is the scourge as bad as Mr Kejriwal has made it out to be? Last year's instalment of The Billionaire Club, Business Standard's annual listing of stock market wealth (for the next edition, see Weekend on Saturday), showed that the top 100 billionaires came from 23 sectors, which means there is a fairly diversified base of business. The sectors that contributed most to the list were pharmaceuticals and healthcare (15), automotive (11), real estate (10), commodities (9), information technology (8), engineering/infrastructure (8), finance (6) and fast-moving consumer goods(6). Thus, most of Indian billionaires came from productive economic activity and not cosy relationships with the government.
Compare this with Russia, where two-fifths of all billionaires (the oligarchs) have interests in the natural resources sector. In Mexico, Ruchir Sharma tells us in his book Breakout Nations (Allen Lane, 2012), private monopolies control 50 to 80 per cent of the beer, telecom and cement markets. Private cartels, according to Mr Sharma, "produce 40 per cent of the goods that Mexicans consume and charge prices that are 30 per cent higher than international averages". The top 10 Mexican families, according to him, account for more than a third of the country's stock value. Is the situation as bad in India? You decide.
The party's economic agenda, as reported by Business Standard last week, does say the right things. (I also agree with Mr Kejriwal that corruption is an invisible tax that raises the cost of doing business.) Thus, the AAP believes in encouraging private investment, promoting a progressive and simple tax structure and encouraging private investment in health and education. But two months ago, when Mr Kejriwal had sought the opinion of the people of Delhi if the party should form the government after the unclear verdict in the elections, his world view was different. In a pamphlet that listed his agenda for Delhi, he had said that the "standard of education in government schools will be made better than private schools" and "government hospitals will offer better treatment than private hospitals". It shows disdain for private enterprise and a misplaced belief in the efficiency of the public sector.
In October 2012, Mr Kejriwal had released a vision document, which makes for very interesting reading. "We must not allow the logic of capital, market mechanism and profit motivation to be the sole drivers of our economy," it had said. While now he wants private investment in education, that document had said unequivocally that "education for profit must not be permitted". As regards private healthcare, this is what it had to say: "The state must take the responsibility of universal healthcare. Public hospitals must be equipped to provide complete and free treatment of every kind of disease." Mr Kejriwal has of late even acknowledged the role of the private sector in providing jobs. In October 2012, he was singing a different tune. "The state must accept responsibility for full employment," his vision document had said.
What has changed between then and now? My guess is this is an attempt to win back the trust of the middle classes who were alarmed at Mr Kejriwal's anarchist ways during his 49-day stint as the chief minister of Delhi. After the CII event, many businessmen made the usual politically correct noises. Some even speculated that Rajiv Bajaj would contest the next elections as a candidate of the AAP. The talk was laid to rest only after Mr Bajaj, never one to mince words, told Business Standard: "The chance of my joining the AAP or fighting election under their banner is as much as Kejriwal making motorcycles for the market." Talk to businessmen privately and they are likely to say they aren't sure if Mr Kejriwal has shed his socialist credentials totally.
The next issue is cronyism, the so-called root cause of all our problems. It's an open secret that cronyism has existed in India for well over six decades. However, not even once does Mr Kejriwal's 2012 vision document mention it. It doesn't even allude to any nexus between businessmen and politicians. By the time the document was released, the spectrum and coal allocation scams had been explored threadbare by investigators. Yet, Mr Kejriwal felt it wasn't amongst the evils that afflict the country. The December letter, too, does not contain any promise to end cronyism. The issue, by all accounts, has only recently been discovered by the AAP - just in time for the coming general elections. Again, in order not to hurt sensibilities, the party has distinguished between honest and corrupt businessmen. In an interview with The Economic Times, Mr Kejriwal, when asked to recall some honest businessmen, could come up with just two names: N R Narayana Murthy of Infosys and Azim Premji of Wipro.
No doubt cronyism thrives in India, but is the scourge as bad as Mr Kejriwal has made it out to be? Last year's instalment of The Billionaire Club, Business Standard's annual listing of stock market wealth (for the next edition, see Weekend on Saturday), showed that the top 100 billionaires came from 23 sectors, which means there is a fairly diversified base of business. The sectors that contributed most to the list were pharmaceuticals and healthcare (15), automotive (11), real estate (10), commodities (9), information technology (8), engineering/infrastructure (8), finance (6) and fast-moving consumer goods(6). Thus, most of Indian billionaires came from productive economic activity and not cosy relationships with the government.
Compare this with Russia, where two-fifths of all billionaires (the oligarchs) have interests in the natural resources sector. In Mexico, Ruchir Sharma tells us in his book Breakout Nations (Allen Lane, 2012), private monopolies control 50 to 80 per cent of the beer, telecom and cement markets. Private cartels, according to Mr Sharma, "produce 40 per cent of the goods that Mexicans consume and charge prices that are 30 per cent higher than international averages". The top 10 Mexican families, according to him, account for more than a third of the country's stock value. Is the situation as bad in India? You decide.
http://www.business-standard.com/article/opinion/bhupesh-bhandari-really-mr-kejriwal-114022701269_1.html
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