Demonetisation Was a Huge Mistake By Modi: Author James Crabtree

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At the height of the anti-corruption movement in 2011 (led by Anna Hazare), an article in the Financial Times by Ashutosh Varshney and Jayant Sinha sparked a huge debate. Titled ‘Time to rein India’s robber barons’, the piece talked about the ‘unholy’ nexus between India’s business tycoons and the political class.

India’s extraordinary economic boom has developed a split personality. Driven by energy, skill and ambition, India’s entrepreneurs are scaling new heights, but the underbelly of corruption in business and government has also surfaced with alarming clarity........Both in its rot and heady dynamism, India is beginning to resemble America’s Gilded Age (1865-1900).

Excerpt from ‘India’s robber barons’ published in Financial Times, January 2011

At a time when a series of scams was making headlines under the then-UPA regime, Varshney and Sinha seemed to have hit a raw nerve.

Seven years later, author and former Mumbai bureau chief of the Financial Times, James Crabtree, revisits that theory as he profiles India’s super rich in his latest book, ‘The Billionaire Raj: A Journey Through India’s New Gilded Age’.

Rise of India’s Billionaires Post Liberalisation

Why focus on India’s richest business tycoons? Because the stupendous rise in the number of billionaires in India exposes the wide gap between the rich and poor. Forbes recorded this jump best when it listed 120 Indian billionaires in 2017, up from just two billionaires in the 90s – proof of the massive wealth accumulation at the top of the pyramid.

Critics began to point to the rise in inequality with millions struggling for basic amenities daily.

People outside India have always seen it as quite an unequal country. You have the caste system, inequalities of region and religion and I think that has blinded people how much more unequal the country has become over the last ten or twenty years.

James Crabtree, former correspondent, FT

But what’s the problem with making money, some might ask? What’s the harm in admiring the Tatas and the Ambanis (and their ilk) for their swanky mansions, impressive bank balances and luxurious lifestyles?

Problem is, as Crabtree mentions, several business houses, in their rush to make the most of the liberalised regime, have been accused of striking deals under the table. So, while India bade farewell to the License Raj – a period marked by red tape – what followed was a phase referred to as the Resource Raj, which witnessed the explosive 2G scam.

The latter saw the Supreme Court intervening in order to stop the ‘loot of natural resources’.

From the beginning of 2000s, the Indian economy globalised very quickly and that meant the things that were previously not very valuable, like the coal mining licences, iron ore licences and telecom spectrum suddenly became very valuable. Resource Raj is a subset of a crony state that has been a problem in India’s economy.

James Crabtree, former correspondent, FT

‘Gilded Age’ Under Modi Regime

‘The Gilded Age: A Tale of Today’ was a satirical novel by Mark Twain and Charles Dudley Warner published in 1873 that highlighted graft in America at a time when the country had just tasted the fruits of industrialisation. While ‘gilded’ literally means gold plating, in this case it refers to the veneer of prosperity that hides beneath it problems like poverty, illiteracy, hunger, etc.

Cut to 2014, to a majority government led by Narendra Modi. Are the days of the ‘Gilded Age’ numbered? Not by a long shot!

Perhaps it was easy to promise that all black money would be routed back to India, resulting in every citizen getting richer by Rs 15 lakh in their accounts. The NDA government-initiated move of demonetisation, too, failed to achieve its objective.

I’m on the side of the people who think that demonetisation was just the craziest thing ever. I think it was completely nutty, a huge mistake and the worst thing that Narendra Modi has done in his time as prime minister.

James Crabtree, former correspondent, FT

While commentators like Crabtree appreciate legislative measures such as the Bankruptcy Act, they admit that the Indian economy has still a long way to go.

The other things that he (PM Modi) has done in office have been much better. The bankruptcy law does seem to tackle, belatedly, the problem of excessive corporate debt. Grand scams, to some degree, have disappeared; there’s a lot more that needs to be done.

James Crabtree, former correspondent, FT

An interesting anecdote in the book is that of liquor baron Vijay Mallya, who left India in 2016 and is currently residing in London. Mallya is facing probe back home for having failed to repay banks an astounding sum of Rs 9,990 crore. After manipulating the system that Mallya himself was once a part of, the former MP chooses to hit back at politicians.

What was interesting about Vijay Mallya was that he saw himself as a victim of circumstances. I think he feels that he was trying to build a good consumer business and the Indian system conspired against him.

James Crabtree, former correspondent, FT

Where are the Muckrakers?

America’s gilded age finally culminated at the end of 19th century with rise of muckrakers – the journalists and activists who questioned the institutions and leaders. Unfortunately, in the ‘Modified’ era, the rightward slant of certain media houses poses a challenge.

As shown in the Cobrapost sting operation, the problem is exacerbated due to the sheer willingness of a few media outfits to give space to news items specifically related to the Hindutva agenda. Familiar with the nationalistic agenda of certain news channels, Crabtree laments the lack of a credible player in India like the BBC and the New York Times.

In the US, when you have excessively partisan media coverage, that’s okay if you have other outlets that are providing dispassionate, factual reporting. Weakness of the Indian system is that it doesn’t have a well-regarded national broadcaster like BBC or the New York Times.

James Crabtree, former correspondent, FT

It’s quite ironical that BJP minister Jayant Sinha, a Harvard graduate, who co-authored the article on India’s gilded age was mired in a controversy recently for felicitating those accused of lynching. Perhaps politics got the better of the economist who was critical of policymaking at one point of time.

Crabtree has a word of caution given the current political climate: “If India wants to attract investment from abroad then a broad liberal agenda is really helpful.”

Citing examples of incidents like love jihad and cow vigilantism that have led to uneasiness among the minorities, Crabtree says that for a leader like Modi who “claims to be in the business of economic development, this is clearly a distraction”.