Tag: Crony Capitalism

Five Things That Happened Last Week: Adani Saga, Union Budget, Pak Terror…

By Sanjoy Narayan

Adani’s Sordid Tale Turns Murkier

If you’re not a filthy rich billionaire, one way to waste some time could be to scan Forbes magazine’s list of real-time billionaires. The list, which tracks the daily ups and downs of the world’s superrich, is designed for those who like to get their pleasures vicariously. Last weekend, I found myself ogling the list to see how Elon Musk had gained $6.1 billion in a day. In late 2021, mainly because of poor performance of his electric car company Tesla’s stocks, Musk (who bought Twitter recently) lost nearly $200 billion in net worth: falling from more than $320 billion to around $140 billion. 

Since then, however, Musk has regained some of his fortune. Last weekend, his net worth, according to Forbes, was $189.2 billion, making him the second richest man in the world, after Bernard Arnault, the French businessman who is the founder, chairman, and CEO of LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury products conglomerate.

The more interesting part of the Forbes ranking was, however, happening at a somewhat lower level of that list. From being the third-richest man in the world barely a few weeks ago, India’s Gautam Adani had slithered down the fickle greasy pole of wealth in a matter of days last week to the No. 17 position on the Forbes list of real-time billionaires. Adani, who heads a conglomerate that includes port management, electric power generation and transmission, renewable energy, mining, airport operations, natural gas, food processing and telecoms, has been in the midst of a controversy recently after a US-based “activist” short-selling investment firm, Hindenburg Research, accused his group of stock manipulation and financial fraud. 

Adani denied those allegations but his group’s listed stocks plummeted in value and the conglomerate is estimated to have lost more than $100 billion in market value, while nearly $50 billion of his own personal net worth was believed to have been wiped out by the market turmoil. Last weekend, at No.17 on the Forbes list, Adani was estimated to have a net worth of $61.7 billion, which, dear reader, is akin to peanuts in the world of the super rich.

The Hindenburg report came just before the Adani group was scheduled to put on offer a public sale of shares to the tune of $2.5 billion in one of its companies. The group went ahead with the public issue and it was fully subscribed, primarily with the help of big investors, including a couple of Indian industrialists and an Abu Dhabi based holding company with links to a member of the UAE royal family. However, last Wednesday in a volte face the group called off its share sale and said that it would return $2.5 billion to investors. 

In response to the Hindenburg report, the Adani group released a voluminous 413-page document that is mostly verbiage and doesn’t really address the allegations of stock manipulation and large-scale financial fraud against the group. Meanwhile, the ripples continued. On February 2, Jo Johnson, the younger brother of former British prime minister Boris Johnson, resigned from an investment bank in Britain that had been accused of using funds to manipulate Adani group company shares. 

The reaction to the Hindenburg Research’s report has been curious. While the international media has picked up on it and done exhaustive reports on it, the Indian mainstream media–with the exception of a few–have produced milquetoast coverage, many publications providing morespace to Adani’s so-called rebuttal than to the issues raised by Hindenburg Research. ‘

Interestingly, even as the Hindenburg report was being put together, in late 2022, the leading Indian magazine, India Today, featured Adani on the cover. He was the magazine’s Newsmaker of the Year and they called him the Growth King. News can be unpredictable as the magazine must have learnt to its chagrin. Adani has been really making news only now. Oh, and before I forget, you could do this: Go to the ndtv.com website (it is India’s leading television and digital news outlet). Type “Adani” in the search box and see what you get. (If you’re perplexed, please remember Adani bought the company recently). 

What Does India’s Budget 2023-24 Have for You?

Apparently, it has “something for everyone”. That is the way many experts described the Budget that was presented by India’s finance minister Nirmala Sitharaman last week. In case you are unfamiliar, the presentation of the Indian Government’s Budget is a big event in the country. And it has been so ever since Independent India’s first Budget was presented by the country’s first finance minister Shanmukham Chetty, on 26th November, 1947. 

The excitement and anticipation about the Budget has two dimensions. The ordinary salaried citizen looks to see what tax reliefs she or he will get on income tax rates, rebates and incentives to save. And also to see how the rates of indirect taxes levied on goods and services will affect the cost of living. Then, there are business–large, medium, and small–who also wait to see the changes in tax rates on the goods and services they produce and the changes in policy that are implicit in the annual Budget.

There was a time when such changes could be quite wide-ranging. In the pre-1990s era when Indian industry was regulated and followed a sort of socialistic pattern where the public sector was the commanding heights of the economy and private entrepreneurs pretty much depended on the government to stipulate what and how much they could produce, the Budget resembled an annual lottery where luck (and, of course, clout) determined which businesses benefited and which ones didn’t. 

Post-liberalisation, things have changed somewhat. With large-scale privatisation, economic activity is pretty much market driven. Yet, the excitement over the Budget each year continues. Mainly, it is pervasive in the media, which believes it is a hugely important event that their readers and viewers are dying to know about.They are probably wrong. With the government eschewing the practice of using the Budget to make policy changes and the new indirect tax regime becoming a simpler one, the only thing the general public is likely interested in is income tax rates and whether they are going to change.

In this year’s Budget they, unsurprisingly, have. Unsurprisingly because this will be the last Budget before the Parliamentary elections are held and the current regime is keen to offer citizens something to remember it by while voting next year. Hence, the income tax exemption limit has been raised. Now, people earning less than Rs 7 lakh will not have to pay taxes (it was Rs 5 lakh before). Tax rates for taxpayers have also been reduced, providing relief mainly to the middle-income groups. 

The government also announced savings schemes for women, credit guarantees (basically funds) for medium and small enterprises, and more benefits for the really poor. 

In other words, this year’s Budget can be viewed as one of the first steps of the current regime’s bid to return to power after the next elections. 

Terror Strikes in Pakistan Again

Last week a dastardly suicide bomber attacked a mosque in Pakistan’s Peshawar city, killing an estimated 100 people while they were praying. Investigations have revealed that the bomber might have been dressed in a police uniform. The mosque is located in the city’s Police Lines area and it is believed many of the people killed were policemen. 

According to Pakistan’s Dawn newspaper, “The outlawed Tehreek-i-Taliban Pakistan (TTP) claimed responsibility for the attack. It later distanced itself from it but sources earlier indicated that it might have been the handiwork of some local faction of the outlawed group”. 

There has been a resurgence of violence in Pakistan after the Taliban seized power in Kabul in 2021 after American troops exited that country. The mosque bombing has been described as Pakistan’s deadliest assault in several years. Terrorism is now back in focus in a country where political turmoil has been ongoing and, for all practical purposes, the army controls the government. It would be interesting to see how the current regime, headed by prime minister Shebaz Sharif, counters the resurgence of terror.

Lost & Found: The Curious Story of a Radioactive Capsule

The media was agog last week over the strange tale of how a tiny radioactive capsule (its dimensions were smaller than a coin’s) got lost and was then found in Australia. The Caesium-137 capsule was lost in transit more than two weeks ago in Australia’s outback area. 

Although exactly how the capsule got lost is not yet known, it was part of a gauge used to measure density of iron ore in a mine in Western Australia. The mine is supposedly one of the world’s most highly technological ones and is highly automated. The gauge was apparently being transported to another facility when it fell off a truck. 

Last week, the authorities recovered the tiny capsule after a week-long search using specialised detection equipment. The exercise has been compared to finding a needle in a haystack. 

Can Whisky’s Ingredients Keep Your Skin Healthy?

Every now and then we come across stories in the media about drinking and health. Such as the one that says drinking wine in moderation can be good for your heart. Or the one about drinking beer in moderation to avoid kidney stones.The truth is that there are as many reports about the benefits of moderate drinking as there are about the harmful effects of doing so. That doesn’t stop the constant flow of “wisdom” about the effects of drinking, though.

Here’s a new one that is not exactly connected to drinking but to whisky. According to a study by Robert Gordon University’s (RGU) School of Pharmacy and Life Sciences in Scotland , pot ale, a residue from the whisky-making process, has antioxidant benefits that could be used in skincare. The scientists doing the study placed nutrients and polyphenols from whisky in skincare products as a basis for their research and found that they could reduce  inflammation and puffiness and redness and fight free radical damage from the environment.

There is a caveat though: the Inverness-based natural skincare firm Zaza & Cruz was involved in the study and now uses the ingredient in its products. So, go figure!

Upsurge 2.0: Farmers Take To The Streets

By Amit Sengupta

On Friday, as the sun set in large parts of India, the day-long farmers’ protests and Bharat Bandh passed off peacefully with no police violence, lathi-charge or teargas reported, no mass arrests or detentions, and no forcible eviction of farmers, many of whom had blocked highways and roads, and railway tracks and trains, albeit peacefully, and in a collective, resolute show of non-violence. Even while the so-called Godi media chose to ignore it, social media was replete with images and commentaries of the mass protests all over the country; significantly in the South, in cities like Hyderabad and Bangalore, where thousands thronged the streets in militant non-violent protests against three agriculture-related bills.

The Centre in the recently-concluded Monsoon Session of Parliament passed three bills rather arbitrarily: the Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020; the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 and; he Essential Commodities (Amendment) Bill, 2020.

Farmers believe these bills will have long-lasting and negative effects on farming as they will give a free run to big industrialists, global sharks, cartels and multinationals. Powerful hoarders will have a field day, the minimum support price of farm produce will be manipulated pushing the farmers to abject starvation, debt and total dependence, and all kinds of dubious and sleazy market forces will be allowed to capture Indian agriculture.

The belligerent BJP-led central government, who chose to care little for dialogue or consensus in pushing the three bills, and which was so sure of its absolute and one-dimensional power, now not only finds itself on a sticky wicket – it is clearly on the back foot.

WATCH: ‘Farmers Will Become Bonded Labours Of The Rich’

Indeed, the street has once again become a metaphor for non-violent protests, for the first time since the lockdown, which was preceded by massive peaceful protests against the Citizenship Amendment Act and Citizen Registry (NRC) that rocked the nation with demonstrations and prolonged sit-ins across small towns and big cities for more than three months during winter last year and thereafter. Surely, after the massive Shaheen Bagh protests, which were replicated across the nation, and with the farmers coming on the streets physically, breaking all forms of collective phobia or the fear of a Police State, the use of the pandemic to crush democratic dissent can no more be used. The tide is rising again, this time with farmers in the lead.

On the first day of protests, the farmers’ life began earlier than most people in India, much before sunrise. There was fear that there could be a crackdown, especially in the states ruled by the BJP. Even now, there have been apprehensions that the central government, which has been rather uncompromising, might actually choose to crack down using the pandemic as an excuse, as it has done with peaceful dissenters against the CAA, which the protesters have condemned as discriminatory, communal and against the basic tenets of the secular Indian Constitution.

By morning most of Punjab was up in arms. Indeed, what found sharp resonance in Parliament earlier, especially in the Rajya Sabha, where the three bills were pushed by a voice vote in the din (with Rajya Sabha TV volume muted) and a division of vote was not allowed, and which the Opposition called as the murder of democracy, became resonant yet again on the streets all over India. Trains and highways were blocked but without any untoward incident.

At the Haryana-Punjab border, tractors blocked the roads even as ambulances and locals were allowed to move, and youngsters in thousands assembled in solidarity with the farmers. Punjab being the epicenter, the strong protests were spread across the state, with the farmers refusing to budge till the three bills are taken back, lock, stock and barrel, and the minimum support prices for farm produce legalized.

At the massive Nabha protests, again on railway tracks, men and women marched from long distances, to join in solidarity. A woman told BBC News (Hindi), “Narendra Modi tells his Mann ki Baat. So what about our Mann ki Baat? Another woman said, “The movement will be sharpened if the bills are not withdrawn. They are liars.”

The upsurge spread across the country, with thousands of rallies and dharnas. Farmers, workers, locals, trade unions, civil society organisations and students came out in hundreds of rallies in small towns and cities, in every state, holding red, green and other flags, marching in a disciplined and peaceful manner. ‘Standwithfarmers’ kept trending on social media. In Kolkata, the students of Jadavpur University marched through the streets singing songs in support of the farmers. There was overwhelming support for the agitation all over Bengal with the Left, the Congress and the ruling Trinamool Congress coming out in support.

The CPI-ML (Liberation), which is strong among the poor peasantry in Bihar, led protests across the state, led by its general secretary Dipankar Bhattacharya. The CPI (M) organized rallies in several parts of the country even as its national protests have been continuing since the last few weeks demanding the scrapping of the bills, Rs 7,500 in every bank account of jobless workers, food for the poor from the public distribution system, an end to the selling of public sector assets like the railways and airports, and the release of students, intellectuals, activists and peaceful protestors from prisons.

Surprisingly, the CPI (M) organized massive and militant protests in Tripura, especially in Agartala, whereby thousands of people came out and broke the physical barricades enacted by the police at several points. People trickled in streams across locations, very angry and vociferous, though the clashes with the cops were never violent with the police giving way to the surging crowds.

ALSO READ: Can BJP Take On Punjab Farmers?

Several highways were blocked, including the important Bombay-Ahmedabad highway, where hundreds of women of the All India Democratic Women’s Association (AIDWA), blocked traffic. Ashok Dhawale, president of the CPI(M)-led All India Kisan Sabha, came to the site to give a solidarity speech. Dhawale, indeed, was the leader of the massive march of lakhs of farmers to Mumbai earlier from the remotest interiors of Maharashtra, including Adivasi areas, when the BJP government was ruling in Mumbai.

That long march of kisans with a sea of red banners struck a chord across the nation with round-the-clock coverage, including on social and international media, with the people of Mumbai coming out in total support. Indeed, the farmers deliberately chose the route and timing in such a manner so as to not to disturb the school students in their exams, or the locals in their daily affairs. Doctors, students, housewives had rushed in then with food, medicine and even chappals. Mumbaikars showered flowers on the annadaatas from their balconies and doors when they marched through the lanes. AIKS said 50,000 farmers protested across Maharashtra on Friday.

Over two dozen farmers’ organizations backed by scores of political parties have joined the protests. The Bharat Bandh was coordinated by the All India Farmers Union (AIFU), Bharatiya Kisan Union (BKU), All India Kisan Mahasangh (AIKM), among others, with the All India Kisan Sangharsh Coordination Committee (AIKSCC) leading the protests. Ten central trade unions, all Left students’ organizations, joined the strike. Farmers’ bodies from Karnataka, Tamil Nadu and Maharashtra called for a shutdown. The RSS-affiliated organizations like the Bhartiya Kisan Sangh and Swadeshi Jagran Manch did not take part.

Clearly, these mass protests are now likely to resurrect a new wave of peaceful resistance in civil society and by the Opposition parties, especially against the daily hounding and arrests of students, professors, intellectuals, journalists and dissenters, particularly from the Muslim community, on fabricated and flimsy charges.

Yes Bank Debacle & Crony Capitalism

By Sanjoy Narayan

The recent debacle of the Indian private sector bank, Yes Bank, whose board was suspended and superseded by the Reserve Bank of India (RBI), once again brings into sharp focus the extent and depth to which crony capitalism continues to prevail in the country’s economy.

Yes Bank was founded in 2004 by Rana Kapoor and his brother-in-law, the late Ashok Kapur. Early this month, the Central Bureau of Investigation (CBI), registered a criminal case against Kapoor, who was the CEO of Yes Bank; Dewan Housing Finance Ltd. (DHFL), a non-banking financial services company; and its promoter, Kapil Wadhawan. The CBI charged them with criminal conspiracy, cheating and corruption under the Indian Penal Code and the Prevention of Corruption Act.

ALSO READ: How To Pull Up Indian Economy

The allegations are that between April and June 2018, Yes Bank subscribed or invested Rs 3700 crores in DHFL’s short-term debentures. This financial assistance subsequently turned into non-performing assets as the bank was unable to recover the funds. More seriously, the allegations are that in lieu of the amount extended to DHFL, a company, Do it Urban Ventures, promoted by Kapoor’s three daughters, and received kickbacks in the form of loans amounting to around Rs 600 crores. In other words, the CBI alleges that Kapoor and DHFL entered into a conspiratorial quid pro quo: DHFL got the assistance (that have now turned into bad loans) and he and his family benefited from the kickbacks.

Rana Kapoor in custody of Enforcement Directorate

The agency has alleged that Rana Kapoor extended financial assistance to DHFL to get substantial undue benefit for himself and his family members via companies held by Kapoor and his family. On March 5, India’s central bank, the Reserve Bank of India, announced that it had suspended and superseded the board of Yes Bank. Customers were prevented from withdrawing more than Rs 50000 from their accounts and rating agencies downgraded the bank’s core bonds.

Yes Bank’s debacle turns the focus sharply on the continued prevalence of crony capitalism in India’s economy: an unholy nexus between banks, financial institutions (FIs), and business enterprises. Banks and FIs—and not only privately owned ones—in India are known to have cosy relationships with promoters of large and medium sized Indian companies and quid pro quo arrangements of the sort that Kapoor and Yes Bank are accused of are not uncommon. Rather, it is quite the opposite. Examples of misuse of bank funds are galore in the Indian economy.

One high-profile case is that of liquor baron Vijay Mallya who is currently in the UK while the Indian government is trying to get him extradited so that he can face investigation into charges levelled against him. Mallya is accused of misusing around Rs 9,000 crore (US$1.3 billion), which are loans that his companies, including a now-defunct airline that he started, took from 17 Indian banks. The allegations are that Mallya siphoned off these funds to 40 other companies that he controls around the world.

ALSO READ: Nirav Modi Arrested In London

In another headline-grabbing case in 2018, the CBI began an investigation into Nirav Modi, a high-profile Indian jeweller, on allegations that he and his partners defrauded the Punjab National Bank of Rs 28,000 crore, which he is alleged to have siphoned overseas by fraudulently obtaining letters of undertaking for making payments to overseas suppliers. Modi is absconding and is believed to be in the US even as the Interpol is looking for him.

More recently, in December 2019, another high-profile executive, Jagdish Khattar, the former managing director of Maruti Udyog Ltd., India’s largest carmaker, was booked by the CBI for charges against him of cheating the Punjab National Bank of Rs 110 crore. That case is still being investigated although Khattar has not been arrested.

These few examples are really the tip of the iceberg. Nefarious deals between banks and influential entrepreneurs abound in India. Not long ago, a private sector steel company was embroiled in a similar controversy when a partly government-controlled financial institution was believed to be lending it vast sums of money although past loans taken by the company had turned into non-performing assets.

The curious paradox about such cases is that in many of the cases, the authorities, including investigative agencies, wake up when it is already too late. In Yes Bank’s case, the RBI has been issuing warnings about financial inconsistencies in the bank’s reports. Doubts about Mallya’s ability to run his airline and manage his finances have been floating around long before he fled India.

The other, more disheartening, aspect of all this is the hagiographical treatment that the media have meted out to some of these controversial promoters and businessmen. Vijay Mallya, now 64, has had countless laudatory cover stories or “puff pieces” about him. Rana Kapoor, an aggressive publicity seeker, has found similar success with the Indian media. Jagdish Khattar was routinely lionised by India’s business press during his stint as managing director of Maruti between 2002 and 2007.

The truth is that India’s institutions, particularly in the financial sector, are prone to misuse—either because of the clout of powerful corporate borrowers or because of complicit bank officials, or both. India’s government has various laws, organisations and agencies that have been established to prevent financial fraud. Yet, with regular frequency, shocking instances of brazen misuse of the financial system come to light. What is needed is a will to break the cronyism that plagues the nexus between financiers and their corporate clients. And when frauds come to light, swift dispensation of justice could work as a deterrent.