Is Narendra Modi a crony capitalist or just best friend to business?

Author: Nikita Sud, University of Oxford

With interests in ports and logistics, energy, agri-business, mining and real estate, the Adani Group is one of India’s business powerhouses. Its chairman, first-generation entrepreneur Gautam Adani, has a net worth of US$4.5 billion and regularly makes it to international rich lists. Adani is reclusive by nature, but has recently found himself thrust into the spotlight. It is believed that the rise of his business empire coincides with the ascent of Narendra Modi, the man who could be India’s next prime minister.

Adani began his professional life as a plastics trader in 1988. By the mid 1990s, he was looking to diversify in India’s liberalising economy. He was the local partner to MNC Cargill, which was allotted 3000 acres of coastal land for salt manufacture in Mundra (in Gujarat) by the government of Chief Minister Chimanbhai Patel. When political protest prevented Cargill from setting up shop, Adani was left with the land. That is the base of the Group’s flagship Adani Port and Special Economic Zone, which spans over 15,000 hectares and is projected to handle cargo worth 250 million metric tonnes per annum by 2025.

Anyone undertaking a project as large as Mundra would need tremendous political goodwill to secure permission for land, environmental impact, energy use and the like. One critique of Adani’s business is its garnering of disproportionate rents from sweetheart deals in land. Gautam Adani has made no bones about his proximity to the political establishment, across party lines. But he has derived most political capital from his closeness to Narendra Modi, who became Gujarat’s chief minister in 2001.

Does the Adani–Modi relationship represent crony capitalism, and if so, what might this say about policy should Modi come to power?

To give one example from Gujarat, its Infrastructure Development Act was amended in 2006 to make way for ‘direct-negotiation’ instead of competitive bidding for innovative public–private partnerships and private infrastructure projects. The definition of innovation is left open, as is the window for political-bureaucratic discretion. In the very least, this is ‘business friendly’ — if we think of this to mean narrow state–business alliances, with private growth being pursued in the name of the public good.

India’s post-liberalisation attempts at business friendliness, which have succeeded the most in states like Gujarat, Maharashtra, Haryana, Tamil Nadu, Andhra Pradesh and Karnataka, are not unique. History holds very successful examples of state–business alliances, with attendant rapid economic growth. Twentieth-century Japan, South Korea, Taiwan and Singapore are cases in point. In South Korea, for instance, partnerships between a centralised bureaucracy and corporations such as Samsung and Daewoo laid the base for growth under a state-led developmental regime, and subsequent progress under a market regime. Modi, in fact, has compared Gujarat’s growth story to the South Korean model.

There are similarities between Gujarat and South Korea, but there are also crucial differences. South Korean developmentalism depended on an autocratic leader, who ruled in a time of national and international insecurity during the Cold War. The largesse distributed to some businesses was accompanied by the repression of labour and democratic rights. However, there was a counteracting social contract based on investment in human development.

In Modi’s 13-year reign as Gujarat Chief Minister, colleagues have described him as dictatorial. Within months of taking over the state’s leadership, his administration presided over protracted inter-religious violence, with Muslims being the main victims. Since then, Modi has moulded himself as a Hindu hriday samrat, or king of Hindu hearts, and a protector of that community. His Hindu nationalist BJP party has promoted anti-Pakistan rhetoric, especially during elections. Even as big business has thrived in Modi’s Gujarat, the wage and work conditions faced by labour are poor. Human development is not a priority. Instead, since 2002, the state–citizen contract has been forged on the promise of big-business-led development on the one hand, and polarising Hindu nationalism on the other.

The specific economic and political conditions of growth in Modi’s Gujarat will not be easily replicable nationally.

Unlike Gujarat, with its long history of trade and enterprise, Modi will face an uneven landscape of development across India. His model of growth is already being criticised in Gujarat, and this will be more so the case in Delhi. Indeed, the current Congress-led UPA government has lost popular support precisely because of its crony capitalist attempts at privileging some businesses in telecom spectrum and coal block allocations. The regulatory environment can be stronger in Delhi than at the sub-national level. And many of the privileges that Modi’s government could dole out to businesses like the Adani Group — for example, cheap land — are state responsibilities under the Constitution. This means that states, not the central government, will be responsible for decisions that directly affect business.

Politically, Modi will face a more dynamic environment in Delhi. While the Gujarat opposition largely comprises an ineffectual state Congress party, nationally, India has a vibrant multi-party system that will keep watch on the new government. Several of these regional and ethnic identity-based parties may well be supporting a BJP-led coalition government, as Modi’s party is unlikely to get a majority on its own. Modi will find it challenging to balance the varied economic interests and expectations of his coalition partners. And even if he manages to create a consensus around business-friendly growth, he will not be able to ignore human development. Ethnic polarisation as a strategy of rule is unlikely to work across India, even if it is attempted in pockets of the country where the BJP and its affiliates dominate.

There is no reason to believe that India’s uneven and imperfect attempts at business-friendly development will be discontinued in the near future. However, like the present Congress-led government, any future government will need to balance growth-orientation with political contingency and wider social welfare schemes, food subsidies and the like. Even if Modi manages to realise his ambition of becoming prime minister in May 2014, he will find India very different from Gujarat.

Nikita Sud is Associate Professor of Development Studies at the University of Oxford, and Fellow of Wolfson College. She is author of the book Liberalization, Hindu Nationalism and The State: A Biography of Gujarat (Oxford University Press, 2012).