This tension between Mallya’s exuberance and his desire for acceptance played out most obviously in politics, an area well suited to his talent for schmoozing. “Alcohol was always kind of looked down upon. The bureaucracy looked down upon it. They thought that it was bootlegging,” he told me. “The whole business was hugely politically intertwined.” Liquor gave politicians much-needed tax revenues, as well as under-the-table cash to fund election campaigns. But many took against it nonetheless, currying favor with female voters in particular by pledging to introduce prohibition. Alcohol was regulated at the state level too, so brewers needed friends all around India. Industrialists in other sectors won easy favors, Mallya told me. “If they want to license or get things done, you’d just knock on the door of someone in Delhi,” Mallya said. “For me, it was like operating a business in what is now twenty-nine different countries.”
India’s booze trade was heavily regulated and known for corruption, as businesses strived to keep powerful politicians and civil servants happy. Yet such was Mallya’s facility with power that he took things a stage further. Just as he had once revived Kingfisher beer, in 2003 he took over a dormant political party and launched a quixotic effort to become chief minister of Karnataka, the southern state where he had based his headquarters, in the business hub of Bangalore. Ever the showman, on the stump he took to brandishing a sword that once belonged to Tipu Sultan, the eighteenth-century ruler of the southern Indian kingdom of Mysore, and something of a modern-day icon for his frequent battles against imperial British forces.
Karnataka’s voters were ultimately not impressed, so the tycoon contented himself with a berth in parliament instead, taking a place in the upper house, whose seats are sometimes handed out to celebrities and commercial bigwigs. Mallya rarely asked questions when the Rajya Sabha was in session. But he did host the odd glamorous soirée in his New Delhi home, while using his position to cozy up to power brokers. “I think it is clear that they thought it would be better to rub shoulders with politicians as one of them, to approach them in the lobbies as an equal,” one ex–government minister once told me, reflecting on India’s growing band of parliamentarian-tycoons, of whom Mallya was merely the most prominent. Even in a country where the dividing line between business and politics is often blurred, he raised eyebrows by taking a seat on the civil aviation committee, a position from which he was free to lobby against laws affecting his own airline, most obviously via a push to allow beer to be served on domestic flights.21
As his businesses expanded, so the man-child extravagances did too. First came the F1 team, then a cricket franchise in the glitzy new Indian Premier League, which Mallya named the Royal Challengers Bangalore after his own brand of Royal Challenge whiskey. But for those peering up from the bottom rungs of the social ladder, his excesses held out promises of the good life, in a country long denied it. After the long, joyless decades of socialism, India’s young population, and especially its men, warmed to the tycoon’s promise of an uninhibited, booze-soaked lifestyle. Few industries also embodied that same sense of aspiration more clearly than aviation, as Air India, the scruffy state-owned carrier, was eclipsed by hungrier private sector competitors offering the glamour of air travel to a rising middle class.
Even today, researchers disagree on exactly how large that middle class has become. Some generous estimates put the number in the low hundreds of millions. Others peg it lower, at perhaps just fifty million.22 Certainly the number meeting near-Western standards—car and home owners with college degrees, financial savings and frequent-flier numbers—is tiny. In the years after liberalization this group was tinier still: “99% of the Indian population have never flown in a plane,” as Wired put it a few years after Kingfisher’s launch.23 For those outside this narrow circle, Mallya’s airline finally brought trappings of the global consumer class within reach for the first time.
I boarded my first Kingfisher plane back in 2007, taking a two-hour flight back to Mumbai from the southern state of Kerala. By then, budget carriers were common in the West, turning air travel into a cheap but somewhat unpleasant experience. Mallya’s airline was different. The tickets were indeed remarkably inexpensive, but his planes were shiny and new, with wide seats, extra legroom and fancy entertainment systems. As we readied for takeoff Mallya’s face appeared on the screen in front of me. “Each member of the cabin crew has been handpicked by me, and I have instructed them to treat you as a guest in my own home,” he said. The aircraft were dubbed “fun liners,” and passengers were invited to email him with any complaints. The food was good. I recall being handed a free ice cream as we began our descent.
In a country with barely a decent motorway and whose city roads were riddled with potholes, Kingfisher seemed like a miracle of modernity. “Holy shit!” the American management thinker Tom Peters wrote at the time, having just taken his first flight, praising in particular the “butlers” who helped business-class passengers with their luggage.24 Kingfisher’s combination of the previously impossible—world-class service at rock-bottom prices—hinted that India itself might do the same, quickly leaving behind problems of poverty and inefficiency to become a world-leading economy. When Vijay Mallya took over from his father, that economy was manacled by rules, starved of capital and dominated by the state. By the time his airline launched, those rules were being undone, kicking off a period of booming growth and raising hopes for national renewal. In the same way as the country’s gleaming software parks, the seeming success of Mallya’s airline fed a deep hope within India—that the country might be able to leap in a single bound from the old world of sclerotic socialism to a bold new future of modern, competitive, and incorrupt Western-style capitalism. It was a moment, for both Mallya and India, in which everything appeared possible. At times it seemed as if the good times might be too good to be true. And, in the end, they were.
The Great Reopening
Back in London, Mallya recalled clearly when he first began rethinking his business: the run-up to the economic crash of 1991. Over a few dramatic months India plunged into its most perilous crisis since Independence. Facing a balance of payments crunch, and with barely a few weeks of foreign currency reserves in hand, then finance minister Manmohan Singh rushed through a series of emergency reforms, tearing up controls on business and removing barriers to foreign capital. Yet even a few years before the crash it was clear the game was up for socialist planned economies. China’s long boom was well under way. Even the nations of communist Eastern Europe were pushing market reforms. India looked ever more like a laggard and its tycoons were preparing for the moment when all those licenses, quotas, and permits would finally disappear.
“I’m talking about, what, the late eighties? Because before that foreign investment in India didn’t exist,” Mallya told me, sitting in his study. Back then his UB Group had at least thirty businesses. “We used to make automotive batteries, we used to make paint, we used to make polymers, so we were in petrochemicals. We used to make food. Snacks, pizzas, soft drinks. You name it,” he added with a smile, as if recalling fondly the commercial indiscipline of his youth. “I looked at each business and I said to myself, you know, how can we compete with the Nestlés and the Unilevers of this world? Either we have to come up with a huge bunch of resources or we’re going to die.”
The 1991 crisis had roots going back more than half a century and the battle against colonial rule. In 1947, just when Mallya’s father bought UB Group, a fierce debate raged among India’s national founders. On one side stood Gandhi, with his vision of a future agrarian utopia, dotted with prosperous villages and free of commercial exploitation. On the other was Nehru, who became prime minister of a newly independent India at the stroke of midnight on August 15, 1947. Inspired in equal measure by British Fabian socialism and the apparent successes of Soviet communism, Nehru and his supporters envisioned a bold new planned economy, dotted with towering steel mills and hydroelectric dams. �
�Their primary objectives were industrialization, the liquidation of illiteracy and superstition, and the mitigation of India’s material poverty,” The Economist wrote in 1948, shortly after Gandhi’s assassination. “They regarded Gandhi’s glorification of the simple life as reactionary.”25
Nehru’s vision ultimately won out, but for all their disagreements he and Gandhi remained united in their suspicion of private enterprise, which both viewed as an artifact of colonialism. “Right through history the old Indian ideal did not glorify political and military triumph and it looked down upon money,” Nehru explained in his autobiography. “Today the old culture is fighting against a new and all-powerful opposition: the bania civilization of the capitalist West,” he added, using a Hindi word for “traders” which implied dishonesty.26 Nehru’s ideas set India on a path that rejected free markets for nearly half a century.
Whatever the beliefs of its founders, the violence of Partition proved the most challenging backdrop possible for India’s economic rebirth. Britain’s colonial rulers rushed to divide the subcontinent in two, creating a new border that brutally and arbitrarily split people and businesses. Their decision, announced in haste barely a month before Independence, kicked off a blood-soaked period of social dislocation and ethnic violence.27 Hindu and Muslim refugees streamed in their millions between India and Pakistan, with damaging economic consequences for both. India’s young government struggled to manage the cost of refugee camps, produce food, or curb rampant inflation. To regain control Nehru strengthened the already impressive array of state controls he inherited from the British, launching the first of many Soviet-style five-year plans in 1951. Under his rule a new and alien set of beliefs took hold: self-reliance in economics, nonalignment in geopolitics, and a sense of India not as a global power, but a leader of aggrieved third-world nations, struggling to escape the legacy of colonialism.
India’s economy was handed over entirely to the state from those earliest days, as sector after sector was taken into public ownership. In 1953 Nehru brought together all eight of India’s private airlines, creating two state-owned carriers in their place: Indian Airlines for domestic flights and Air India for those lucky enough to travel abroad. Industries that remained in private hands were soon enmeshed in the labyrinthine dictums of the License Raj. Strict rules controlled what companies made, the technologies they used and the workers they hired. Hundreds of categories of goods—from pickles and matches to padlocks and wooden furniture—were reserved for smaller and generally less productive companies, a Gandhian hangover that helped “Made in India” become a byword for poor workmanship. Spared the rigors of foreign competition, larger businesses were inefficient too. Rather than making better products, entrepreneurs learned to win favors from bureaucrats. The more successful expanded wherever rules allowed, hence why in his early days Mallya decided to take a beer and spirits business and move it into making petrochemicals and telecoms equipment.28
Few industries were more marked by the License Raj than alcohol. State governments controlled where Indians bought drink and what they paid for it. Import tariffs made foreign booze many times more expensive than local brands like Kingfisher. Regulators even controlled molasses, the sticky treacle that made up the base ingredient for Indian rums and whiskies, setting the prices at which it could be sold or the quantities in which it could be traded across state borders.29 Meanwhile, breweries and distilleries were hit with high taxes and hundreds of complex local rules—hence why it was vital for tycoons like Mallya to keep in the good graces of regional politicians.
The grip of the state only extended further when Indira Gandhi, Nehru’s daughter, became prime minister in 1966, nationalizing banks, insurers, and coal mines. The tighter the government’s grip became, the more ordinary Indians suffered goods shortages, and the further businesses retreated from international trade. The shift was profound. In 1947, Nehru inherited one of the world’s most globally integrated economies. Within two decades he and his daughter built one of the most rigidly closed.30 In retrospect these policies proved to be little more than a national catastrophe. India’s tryst with statism produced four decades of lackluster growth, watched over by an over-mighty state that to this day has only partially been dismantled. Nehru’s sincere concerns for the condition of the poor did little to improve their condition. Instead India idled as Asia’s other powers—Japan, South Korea, and finally China—first moved out of poverty and then gradually grew rich.
Today more than half of Indians are under twenty-five, meaning relatively few even remember the restrictions their compatriots once faced. Those who do mostly recall an era of petty frustrations, as was the case with chess grandmaster Viswanathan Anand, whom I met in 2013. Then forty-three, Anand was nerdy and talkative. We were meant to be discussing an upcoming match in which he would defend his world chess title for the third time, but our conversation drifted. Over a few hours in his home on a tree-lined street in the southern city of Chennai, he recounted stories of his upbringing in what was then known as Madras, and how India’s long era of autarky had shaped his youth.
Anand began playing chess in Indira Gandhi’s time, taught first by his mother, then coaches at a nearby chess club, housed in the city’s Russian Cultural Center. Named after Soviet grandmaster Mikhail Tal, the institution itself reflected the close Cold War–era ties that grew up between New Delhi and Moscow. “They [the Russians] allowed people to have a chess club there, as a way of promoting chess, and that’s kind of how I got my start,” Anand told me.31 Then, as his career blossomed—he became India’s first-ever grandmaster in 1988—he started to need to travel to Europe for tournaments. This meant trips to government offices for permission letters to leave the country, then long train rides to Mumbai or New Delhi, from where almost all international flights left.
At the time, Air India ran relatively few flights. Prices were fixed by the state, meaning that they were the same whether you bought tickets many months or the day before travel. But the airline also had few planes, and they were often full. Restrictions on foreign exchange meant taking money abroad was hard. “You needed to get a [government] sanction, and your allowance was something pitiful like $20 a day,” Anand told me. “If you didn’t have more money, then you had to live within those $20…Most Indians used to stay with their relatives and then eat in the cheapest joints.” Later he tried to buy a primitive chess computer only to find that import duties increased its cost threefold. Its arrival was then delayed for months as the grandmaster visited various bureaucrats to get the permission slips you needed to import any piece of foreign technological equipment. “It was just a different era,” he said. “Even if I explain this to Indians today, it sounds very North Korean. But in those days, that’s how it was.”
Similar restrictions were found across India’s shrunken consumer economy. Sky-high tariffs made almost all imports expensive. Many foreign items were simply banned. Shortages were common: the waiting list for a scooter stretched out for the best part of a decade. Clothes were basic and made by local tailors, while telephones were a luxury that required bribery and patience to acquire. One Indian friend told me that when his father died in the mid-1990s he left the family’s two landline phones in his will. Almost no homes had televisions, which in any case played just a single government-run channel. Almost no Indians owned a car either, while those who did were restricted to a handful of models, from the stately Hindustan Ambassador—a rehashed British Morris Oxford—to the boxy Maruti Suzuki 800 hatchback. Photographs of New Delhi or Mumbai in the 1980s show empty streets little changed from a century before. Owning an imported foreign car was unusual, especially a fancy one—such as Vijay Mallya and his teenage Porsche—given ruinously expensive import duties. Another friend who grew up in Mumbai in the 1980s told me that, as a child, he knew the names of almost every family in the city wealthy enough to own a Mercedes or a BMW, simply because there were so few of them.
India’s 1991 crisis arrived at a time not just of economic turmoil, but of social dislocation too. Violent protests erupted the year before against controversial plans to give more public sector jobs to those from the lower rungs of the caste system. Dozens of students set themselves alight. Communal tensions simmered as the BJP launched a series of national agitations. Their focus was the Babri Masjid, a mosque in the heartland state of Uttar Pradesh. Protestors claimed the site marked the birthplace of the Hindu deity Ram and eventually demolished it in 1992, causing further nationwide riots. Then, barely a month before the 1991 crisis began, Rajiv Gandhi, Nehru’s grandson, and the third member of his family to serve as prime minister, was assassinated. A youthful, reform-minded politician, Gandhi’s election in 1984 had raised hopes for economic revival, as he began loosening some of the restrictions of the License Raj. His first term ended in electoral failure, however, mired in a corruption scandal involving the Swedish arms company Bofors. Gandhi hoped that victory in 1991’s poll might restore his reputation. Instead his murder on the campaign trail in Chennai, by a suicide bomber linked to Sri Lanka’s Tamil Tigers, made him the second member of his family to fall at the hands of an assassin, following the death of his mother in 1984.
It was mostly external events that pushed India’s crisis to the fore. Soaring oil prices during the Gulf War hit an already yawning fiscal deficit, itself the legacy of undisciplined state spending over the previous decade. Inflation was rampant. A balance of payments crisis looked certain unless emergency funds could be found. Just as important, however, was an internal intellectual revolution, led by a band of policy advisers and economists, including future prime minister Manmohan Singh. For a decade or more this group had concluded that India needed to leave behind its statist heritage. For Singh, the crisis of 1991 provided the excuse he needed, as he devalued the rupee and launched a secretive plan to rescue the country from impending calamity.
The Billionaire Raj Page 7