The Achilles’ heel of big-business philosophy

IT was during the Atal Bihari Vajpayee government’s 1999-2004 term that Arun Jaitley expounded the party’s philosophy of big business after he did the official briefing at Shastri Bhavan. He argued that the Monopolies and Restrictive Trade Practices Commission (MRTPC) was a vestige of socialist economy and it did not allow Indian businesses to grow and expand. He said Indian companies must grow in size to compete in the global markets. At that time, the company that was growing and expanding was Reliance Industries.

The Competition Commission of India (CCI), which had replaced the MRTPC, was considered to be a better option, removing the obstacles created by the MRTPC in the expansion of businesses of Indian private companies. The argument of the need for big companies was extended to the banking sector, too, and the need was felt to amalgamate the many small public sector banks into big ones so that they could be counted in the global arena. The example was, of course, provided by China, and it was said that the Chinese government had three big banks which were making things happen at the global level.

The BJP’s philosophy of a capitalist economy has to be kept in mind in understanding the Modi government’s attitude to, if not relationship with, business and industrial houses like Reliance and the Adanis. Prime Minister Narendra Modi has displayed an ambiguous view of the economy. While he wants the government to withdraw from the economy, he is, at the same time, loath to give up the government’s hand in the economy. He wants the government to guide and control the economy without being a player as it was in the socialist phase. It is a far-Right idea of the economy, which was adopted by Benito Mussolini in Italy in the 1920s and 1930s and by Adolf Hitler in the 1930s.

Here we have to separate authoritarianism and the diabolical impact of the fascist and Nazi regimes from their economic thinking. We know that Mussolini created an upper chamber in the Italian parliament which represented business interests as well as trade unions. It is also necessary to remember that the right-wingers had their own version of labour politics, and Mussolini was said to have been influenced by French syndicalist thinker Georges Sorel and his idea of ‘general strike’ and violence.

German industrialists had fallen in line with Hitler’s ultra-nationalist position because they saw that their business interests coincided with that of the dictator.

Prime Minister Modi has adopted the right-wing approach to the economy where the state gets out of the economy — because that is socialism and communism and it is a ‘bad thing’ — but it will set the national targets for the private companies in different sectors. And the system would not follow the free market idea where many players would throw their hat in the ring, and it would be a case of the survival of the fittest. The right-wing political party in power would choose and cultivate a few business players and facilitate their growth which would then make the economy strong. In many ways, it is guided capitalism.

So, the charge of crony capitalism is not an effective way of describing the relationship of the government with big businesses in India and abroad. Global tech giants such as Facebook, Amazon, Google and Microsoft are a part of the government’s strategy for India’s economic growth. It is not confined to Indian biggies like Reliance, the Adanis and the Tatas. The Modi government wants all the big enterprises, Indian and foreign, to be a part of India’s growth story, and the government is only too willing to facilitate these businesses to play the required role.

So, crony capitalism becomes something patriotic in the new framework. The government supports an Indian company because it wants India to be strong. And it would follow that if an Indian company is in trouble, the government would want to rescue it as well. The old malicious government-big business nexus resurfaces and the nationalism card is a fig leaf.

So, how is the government dealing with the issue of Adanis’ corporate governance and ethics, which were partly exposed by short-seller Hindenburg Research in its report? That it is a motivated investigation of the Adanis’ corporate practices is there for all to see, but that it cannot be brushed aside because the market avalanche it has caused is a little too huge to be ignored has also become evident. The crisis could pass and the Adani conglomerate could survive and even prosper despite the bruises inflicted by the report. But it could not be dismissed out of hand.

The Adani group has responded by returning the fully subscribed FPO (Follow-On Public Offer) of Rs 20,000 crore to the investors, and the company has paid back debt before it is due in two instances. It was the Adanis’ strategy to revive their credibility. The Adanis could not ignore the Hindenburg report.

The Modi government wanted to keep itself aloof, but it did not succeed. The market roiled and the government had to do its bit of tut-tutting, with Finance Minister Nirmala Sitharaman assuring that the Indian regulatory system was sound and it would take care of questions that would arise from the Adani issue; the government, the Reserve Bank of India, the State Bank of India, the Life Insurance Corporation of India, the Securities and Exchange Board of India said things were under control. Of course, every one of them, including Sitharaman, scrupulously avoided to mention the Adanis, though all the statements were with regard to the latter.

The real issue then is not the Adanis and their alleged relationship with the BJP and Prime Minister Modi. The issue is the BJP’s naïve market philosophy that it could create business biggies imitating the Chinese model. In an interview a few years ago, Sitharaman said Modi did not fully favour a free market. It would have been better if he had done so because then there would have been competition for the Adanis and they would not have grown too big too soon and without enough economic muscle.