A professor at Columbia University in New York, Bhagwati is a gregarious if sometimes cantankerous free-marketeer, with a waspish sense of humor and a talent for argument. Although most famous for his academic work on trade policy, he began agitating for an end to the License Raj from the 1970s, providing the intellectual ballast for many of the market reforms that eventually followed decades later. Now in his eighties, he has long been dogged in the defense of economic liberalization, pointing out that India’s prosperity post-1991 led to sharp reductions in poverty, while poorer Indians also enjoy much higher consumption of basic goods like food and clothing.38
Bhagwati tended to downplay worries about inequality, or at least to argue that policies designed to ensure fast economic growth should precede any tilt towards redistribution.39 More controversially, he also became a vocal enthusiast for Narendra Modi, arguing that the politician’s economic successes in Gujarat—with his emphasis on large-scale infrastructure investment and export-focused manufacturing—should provide a template for the rest of the country to follow.40 His vision of India’s future has emphasized a path similar to that taken by China and most other successful east Asian nations, with their focus on industrialization and trade, an area where India’s economy has been notoriously weak.
Sen, perhaps India’s most celebrated public intellectual, gave the contrary view: that economic reopening had indeed created a more vibrant economy, but one that was less equal and fair. A kindly Bengali, also in his mid-eighties, he studied first at Cambridge, where he was a contemporary of both Bhagwati and Manmohan Singh. His subsequent career ranged widely across economics and philosophy, from social choice theory to research on famines and sex-selective abortions, all of which contributed to his winning the Nobel Prize in Economics in 1998.
Sen’s more recent work, written largely with Belgian economist Jean Drèze, has been sharply critical of India’s post-liberalization record, which for all of its growth has slipped behind neighbors like Bangladesh on measures of human development, from child nutrition to the advancement of women.41 The duo argued that this was mostly the fault of an underfunded and underdeveloped welfare state, which has in turn contributed to a growing imbalance between rich and poor. In his own way, Sen also looked to the successful “tiger” economies of east Asia, but mostly because of the way that they grew rich by investing heavily in basic health and education, which in turn helped to provide social support to poorer workers as they moved from farms to factories and onwards into the middle class. Modern India, by contrast, more often looked like an economy in Latin America, with a weak social safety net and yawning inequality.
This argument between Bhagwati and Sen has plowed on for the best part of a decade, making it hard to adjudicate a victor. Since Modi’s arrival as prime minister, Bhagwati’s side has been more influential and his arguments have been used by reform advocates within the BJP. Sen, by contrast, has been sharply critical of India’s prime minister, both for his economics and for his Hindu nationalist politics, and he has often found himself attacked by Modi’s supporters in return. Yet for all of their ferocity, the debates have hidden a peculiar intellectual consensus. On the right, Bhagwati has claimed that growth matters more than its distribution. On the left, Sen has focused on conditions at the bottom. For both, the gap between rich and poor has been secondary. “Some critics of the huge social inequalities in India find something callous and uncouth in the self-centered lives and inward-looking preoccupations of a relatively prosperous minority,” as Sen wrote in the New York Review of Books in 2011. “My primary concern, however, is that the illusions generated by those distorted perceptions of prosperity may prevent India from bringing social deprivations into political focus.”42
Long before it reopened its economy, India was riven by profound divisions between its different religions and castes. There were also stark differences between villages and cities, and between regions, with the more industrialized south and west growing prosperous more quickly than the relatively backward north and east. Anyone visiting for the first time would have concluded that India suffered wide inequalities. Yet the idea persisted that India was actually a relatively egalitarian nation. This was partly a hangover from its decades of socialism, when even its elite earned low incomes by global standards. Indian government data also often focused on consumption, a measure that gave the country a middling position in global rankings of inequality, rather than income or wealth.
More recent research has proved beyond doubt the depths of India’s social divide. Churning through new data in 2016, Branko Milanovic, an economist at the World Bank, found India had higher income inequality levels than America, Brazil, and Russia, leaving it “more egalitarian than only South Africa,” a country famous for its jarring stratification.43 Other surveys found similar results.44 An IMF working paper from the same year showed that India had one of the highest and fastest-growing inequality rates in Asia.45 Its score on the Gini index—a measure of inequality where 0 means total equality and 100 total inequality—rose from 45 in 1990 to 51 in 2013. China’s increased even more quickly, from 33 to 53. But 51 is still unusually high: a level common in Latin America, but far above Asian economies like Japan and South Korea.
The threshold for entry into the wealthiest “one percent” differed wildly across countries, according to research from Credit Suisse in 2016. In North America it required $4.5 million in assets; in an average European country $1.4 million. In India the same figure was just $32,892. Yet within that group, the richest one percent owned fifty-eight percent of wealth, one of the world’s starkest gaps, up from thirty-nine percent at the start of the decade.46 Meanwhile the bottom half of the country owned a paltry four percent.
The reasons for this rising inequality are complicated and economists still disagree about which factors matter most. Some of it stems from positive factors linked to liberalization, as entrepreneurs built larger companies with links to global markets, making fortunes for themselves and paying higher wages to their workers. Rapid urbanization and the way in which new technologies rewarded the highly skilled played a role too, boosting incomes among the educated, urban upper-middle classes. “It looks as if a lot of this inequality is coming within urban areas, where already rich are getting even richer,” I was told by Johanna Schauer, one of the IMF paper’s coauthors. Then there were other trends, for instance a growing gap between richer parts of India, such as Kerala in the south, and poorer areas like the heartland state of Bihar.47 Tens of millions more people could have been lifted from poverty, according to the Asian Development Bank, had these various kinds of inequality not increased so sharply.48
Most striking of all was a 2017 paper published by Thomas Piketty, whose opus Capital in the Twenty-First Century first raised worries about an era of renewed inequality across the industrialized world. Along with coauthor Lucas Chancel, Piketty compiled data from tax records to show that the share of national income taken by India’s top one percent was at its highest level since records began to be collected under the British Raj in 1922. In the West, the relative wealth of the ultra-rich dipped in the mid-twentieth century before bouncing back over the last two decades. India showed the same trend, albeit mostly for different reasons. Most inequality studies had little to say about the super-rich, who are tiny in number and thus hard to capture in research surveys. But Piketty’s data also showed the share held by the very richest—the “0.001%,” as he called them—shooting up even more quickly.
Echoing Bhagwati, not everyone viewed this widening gap as a problem. One theory—known as the Kuznets curve, after economist Simon Kuznets—suggests that rising inequality is transitory, as most countries become more unequal in their early stages of development and then less so as they grow rich. As a result, mainstream economists have often argued that inequality acts as a spur to effort and that in any case it will decline in time. But more recent research, much of it again from the IMF, has begun t
o overturn this consensus, showing that unequal nations tend to grow more slowly, and are also more prone to financial instability.49 Countries with sharp economic divisions—for instance between business owners and their workers—also find it harder to create the kind of broad social agreements that can buttress support for structural economic reforms, a point made by Harvard economist Dani Rodrik and others. Countries that become unequal in their early stages of development, such as Brazil, also seem to face greater struggles reversing that trend later.
Back in 2015, I watched Piketty speak at a packed book festival one morning in Mumbai. The economist was given a rock-star reception, even as his thick French accent baffled many in the audience. The rich world had from time to time managed to curb the inexorable rise of inequality, Piketty argued, although this mostly happened only after the violence of world wars and revolutions. The tragedy of these events pushed national elites to accept that the rich should pay more tax and that the poor should receive greater social support. India now had inequality levels that were among the highest in the world, he argued, with no sign of remedial action. Piketty was highly critical of India’s political and business class, who he claimed had done little to invest in basic things like health care and education, or to ensure that the super-rich paid their fair share in taxes. “I hope the [Indian] elites understand this,” he said at one point during his talk. “Because otherwise capitalism is not sustainable.”
A Quiet Tycoon
Gautam Adani’s office was unexpectedly modest, housed in a squat glass and steel building set back from a noisy main road in the center of Ahmedabad. When I met him in 2013, Adani was not quite what I’d expected either. We met upstairs, in a reception room with light yellow drapes and golden sofas. He was unimposing: not terribly tall, with rounded features and a bulbous nose. His mustache quivered slightly as he spoke, and for a man with such a forceful reputation, he seemed almost withdrawn.
To break the ice, I asked about his background and what it had taught him about business. “I don’t have formal education, but I’m a good listener,” he said quietly. “I analyze in my own way, in very simple, no-jargon terms.” Later he talked about his dislike of public events. “Either you are extrovert or introvert, so I am an introvert. I only meet the people that I need to.”50
Adani’s reticence came through most clearly when I asked about two moments of drama in his life. The first happened in 1997, when he was kidnapped on the outskirts of Ahmedabad by a gang of underworld criminals. The case turned out to be a simple but traumatic case of extortion, as the young industrialist was held hostage for a day, until a ransom was said to have been paid.51 The second came in November 2008, when terrorist gunmen assaulted the Taj Mahal Palace hotel in Mumbai, where Adani happened to be having dinner. “I got out only when the commandos entered. My mobile was working so I was trying to contact friends,” was all he would say of a night spent sheltering in a business club on the hotel’s first floor, as militants roamed the halls, killing bystanders and setting the building alight. In general, Adani said, he preferred to avoid the limelight. Unlike his fellow Bollygarchs, he avoided flaunting his wealth, living a relatively reclusive life. Until his mother died in 2010, he told me, he had never gone on holiday without her.
Yet while Adani was no Vijay Mallya, he did splash out from time to time, as I discovered a year or so after moving to Mumbai. A delivery man turned up at my apartment one day, and handed over a pink, jewel-encrusted box, about the size of a small briefcase. It contained an invite to the wedding of Adani’s eldest son, Karan, and the daughter of Cyril and Vandana Shroff, a husband-and-wife team who headed one of India’s largest law firms. Inside there were various sweets and nuts, along with a series of curious charcoal etchings of the happy couple, drawn by the father of the bride. A stiff card provided details of an all-expenses-paid ceremony at a plush resort in Goa, one of a series of celebrations dotted around the country to mark what India’s business newspapers had already heralded as the high-society wedding of the year.
My wife and I declined the invitation. We had met neither the bride nor the groom, nor indeed anyone from their respective families. No one had explained that it was quite normal to accept an invitation to a fancy Indian wedding even if you did not know anyone involved. It was a decision we came quickly to regret, as reports of the ceremony filtered out the next year, including what one newspaper described as its “Who’s the Real Who of India Inc” guest list.52 The celebrations included a series of lavish parties in venues around the country. The Goa leg was said to have clogged up the state’s tiny airport for days, as private jets ferried in a glittering array of corporate big names, including both Ambani brothers, Vijay Mallya, and Narendra Modi himself.
Adani shrugged when I mentioned the invite, saying with a smile that all Indians loved big weddings. He talked about his business growth in similarly circumspect terms, describing an expansion that, in his own telling, seemed almost mundane. His first trading business was born of the frustrations of running a factory under the License Raj. “When I required 10 metric tons of raw material, I could hardly get 1 or 1.5 metric tons,” he explained. “So for four, five, six days I can’t run my business, and basically it was closed.” In the mid-1980s he began importing to fill those gaps. After 1991 he went into exports, and as liberalization opened more sectors to competition he ventured into infrastructure, beginning with ports. He credits that decision to a childhood visit to a government-run facility not far along the coast from Mundra. “I saw what actually at the time was a small ship, but to me it was like looking at a big, big ship,” he recalled, explaining how the sheer scale of the place had inspired a desire to build one of his own. Gujarat first permitted private sector port operators in the 1990s, allowing Adani to begin his plans for Mundra. He then moved into energy in 2009, growing to become India’s largest private sector producer in barely five years.
Some observers found this kind of rapid expansion suspicious. Adani credited it instead to his willingness to take risks, as well as a relaxed attitude to debt. He took cash earned from trading, he explained, and funneled it into infrastructure projects. When those were finished he used them as collateral to load up more debt to build more projects, and so on. This approach left him with a debt pile worth about $14 billion at the time, one of the largest ever built by any Indian company. “I’m not worried about the debt part,” he said. “Once you are not investing further, then in five years, the debt will come down.”
Questions about Adani’s success focused in particular on Mundra, and the treatment it received during Modi’s time as chief minister of Gujarat. Over the years, Adani leased thousands of hectares of land from the state government, both for the port and for its neighboring SEZ. That land came on long leases at low prices, some of which Adani then re-leased at higher rates.53 Adani denied anything untoward and complained that he was being judged unfairly. “You can say very well that land has been given to Adani,” he once told a reporter. “So what? Has Adani taken away land and not developed anything?”54 Still, scrutiny of the two men’s friendship only increased as India’s worries about crony capitalism grew. Shares in Adani’s own companies rose especially rapidly in the year prior to Modi’s election as prime minister, with some more than doubling in value, seemingly on expectations of eventual benevolent treatment.55
Accusations of favoritism continued after Modi’s victory. About six months into his premiership, Adani joined the prime minister on a trip to a G20 summit in Brisbane. In Australia, the tycoon announced a $1 billion loan agreement with State Bank of India, the country’s largest lender, to help finance his coal mine complex near the Great Barrier Reef. That agreement eventually unraveled, but not before it had sparked suspicions that the SBI gave the loan under duress from the government—a charge the administration, the bank, and Adani all denied. It was not the first time Adani had faced charges of favoritism. India’s government auditor wrote a report in 2012
accusing Modi, as chief minister, of providing cheap fuel from a state-run gas company to Adani and various other businesses.56 Adani also endured a long court battle over accusations by local residents that he had originally been allowed to build his SEZ at Mundra without proper environmental clearances, charges which the tycoon denied. (His zone secured its various clearances in 2014.)57
A further set of allegations were then made by Paranjoy Guha Thakurta, during his time as editor of the Economic and Political Weekly. In 2017 Guha Thakurta published a number of articles claiming that Adani’s companies had received special treatment on Modi’s watch. One argued the government “tweaked” rules covering special economic zones, allowing Adani to enjoy a tax windfall.58 Another said the government failed to follow through on a tax department investigation into Adani’s trading of gold and diamonds.59 Adani’s company denied wrongdoing and sent a notice claiming defamation to the magazine over the first article, which the magazine subsequently removed from its website. Guha Thakurta stood by his stories, but resigned as editor following a row with the publication’s owners over its response to Adani’s complaints. Whatever the truth of his claims, his decision to step down prompted sharp criticism, both of the magazine, for not standing behind their editor, and of Adani, for his legal tactics, which did not result in further court action. Led by Amartya Sen, a group of more than a hundred academics wrote an open letter in protest at the magazine’s decision. “Legal notices have unfortunately become the standard means used to intimidate and suppress investigative journalism,” the letter said.60
Both Adani and Modi have consistently rebuffed suggestions of anything improper in their dealings. Still, many experts remained skeptical about their state’s corruption-free image. “Gujarat wasn’t as bad as other places, but there is this image that Gujarat was like a kind of Singapore, which is rubbish,” I was once told by Aditya Mukherjee, a left-leaning historian who studied the relationship between business and politics at New Delhi’s Jawaharlal Nehru University. “The state still had a model of business in which you could grow hugely with the help of government favors, and in return businesses would pour money into the political system.” Here Adani and Modi enjoyed at least a marriage of convenience: the mega-project-obsessed politician and the ambitious young industrialist, both gradually becoming indispensable to one another.
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