The Billionaire Raj

by James Crabtree

  Corruption damaged the fabric of the state in other ways, most obviously through job appointments. In a country with a bulging youth population, even lowly civil service jobs were fiercely fought over. In 2015, an advert for a delivery boy in Uttar Pradesh, with a monthly salary of Rs16,000 ($240), attracted over two million applicants.61 Senior positions were valued less for their prestige and more for their ability to extract kickbacks. British political economist Robert Wade wrote a celebrated paper in 1982 revealing the intricate system of payments that controlled the appointment of irrigation engineers in southern India.62 These employees, he discovered, could raise hefty sums in bribes, for instance by directing water to one town rather than another. But instead of each bribe being passed upwards to more senior bureaucrats and politicians, Wade uncovered a simpler and more ingenious system, in which each engineer would pay an unofficial fee to take their job in the first place, commensurate to the value of the cash that could be extracted from it. At that time an engineer would pay Rs100,000 ($1,570) for a basic “operation and maintenance” job. Having secured the post, the engineer could then earn nearly three times as much in bribes: “a most pleasing profit,” as Wade put it.

  Corruption of this type spread throughout India, creating a well-entrenched black market for public sector jobs. The system was riddled with perverse incentives. One study found that policemen in Mumbai would pay more to be transferred into jobs in high-crime areas, given these provided the best opportunities to take money from both criminals and victims alike.63 In the same way, excise officials paid for transfers to larger ports, and tax officials angled for jobs where they inspected larger and more profitable businesses. The more money that flowed through a position, the more that could be extracted from it. IAS officers faced an unpleasant choice of turning a blind eye to this corruption or sharing in its largesse. Honest candidates were unlikely to even apply for positions that required payments. Those who kicked up a fuss were quickly transferred to more mundane and less lucrative postings.

  India’s go-go years threw up many examples of the way limited state capacity acted to worsen corruption, although few were as clear as those that swept through the seaside state of Goa. Known for its palm-fringed beaches, the former Portuguese colony began attracting less welcome attention in the late 2000s, as reports of rampant illegal mining began to emerge. For decades, tourism and mining had been the twin mainstays of its economy. Goa’s beaches were glamorous, while its iron ore mines provided a stable kind of prosperity. The sector was dominated by local family businesses, who dug up the state’s red soil and sold its contents onwards to local steel producers. All that started to change as global commodity prices began to shoot up, however. “It was around 2005 that China came into the picture,” the state’s BJP chief minister, Manohar Parrikar, told me one afternoon, sitting in his plush residence overlooking Panjim, the state capital. An able administrator by reputation, Parrikar had swept to power on an anti-corruption platform in 2012. A year later, he recalled how China’s frantic building spree in the buildup to the 2008 Beijing Olympics had sharply pushed up global iron ore prices. In Goa, a mining boom began, as local producers madly increased production to meet Chinese demand. “The rush started,” as he put it. “People who had no experience in mining wanted to make money while the sun shines, including some with political contacts.”

  That boom was long since over by the time I visited in 2013, but its aftereffects were still clear to see. I drove inland one morning with Ambar Timblo, the head of one of the state’s largest mining groups.64 We passed first through small towns with Catholic churches painted in brilliant white, then smaller villages of neat single-story houses, many with large, colorfully painted dump trucks sitting in their driveways. As the boom took off and global ore prices spiked, Timblo explained, a kind of mania descended upon Goa. Normally it took years to open a mine, but suddenly new licenses were being handed out willy-nilly. An array of speculators and con men arrived to supply everything from mining equipment to black market financing. Millions of metric tons of ore were dug up illegally. Timblo seemed almost embarrassed as he recounted the delirium. “Mining leases were given to politicians and friends of politicians…Everywhere there was cowboyism, with new faces, traders, truck contractors, bad things going on.” Many villagers bought dump trucks on credit and set themselves up as transport-for-hire with local miners. When China’s economy began to slow and global commodities prices collapsed, their services were no longer needed, leaving hundreds of trucks idle by the roadside in villages across the state.

  An even crazier boom hit the state of Karnataka, Goa’s larger neighbor to the south, led by the powerful Reddy brothers, a trio of entrepreneurs who worked in cahoots with the local government. Gali Janardhana Reddy, the most prominent of the three, won his first mining license in 2004, just as global ore prices began to rise. Reddy went on to turn the mining town of Bellary into his personal fiefdom: a state-within-a-state filled with heavily guarded compounds and luxury foreign cars, more reminiscent of the hideout of a Colombian drug cartel than of a mid-size Indian town. Hundreds of mining companies sprang up, extracting enough ore to fill thousands of trucks each day, which then thundered off to nearby coastal ports ready to be shipped out to China. Political interference was minimal, especially once Reddy became a minister in the state government. An official investigation later blamed a “collapse of administration and governance” for the scandal, and cited gross misconduct by more than seven hundred public officials.65 Reddy himself denied wrongdoing, but was arrested in 2011 on charges of illegal mining, and spent more than three years in jail before being released on bail.

  These scandals underlined the new demands globalization placed on India’s creaking state. One of the country’s richer and better administered regions, Goa and its civil service were still rapidly overwhelmed. The phrase “illegal mining” became a catchall to cover anything from miners who dug up more ore than their licenses allowed, to those who started new mines with no licenses at all. Officially, production doubled during the boom. Unofficially, everyone seemed to know that far more had been dug up on the sly and exported without being registered. Environmental activists cataloged dozens of infractions, including mining in wildlife sanctuaries and forbidden forested areas. The relevant authorities—the local Forest Department, the Directorate of Mines & Geology—lacked even basic tools to enforce the law. Goa became an example of what economists call regulatory capture, as those meant to curb improper mining instead profited from its rise. Claude Alvares of the Goa Foundation, an environmental group, told me many officials ended up in the pay of the mining lobby and the politicians that ultimately controlled it. “Everyone was making money,” he said.

  In the end, it took outside intervention to bring the scams to a stop. Beginning in 2011, the Supreme Court brought in a series of blanket iron ore bans, first in Karnataka and then in Goa.66 In the same vein as their later decisions to cancel telecoms and coal-mining licenses, these were a kind of shock therapy from a judiciary that had grown impatient with corruption. “Mining stands for all that is wrong with unreformed India,” as author Gurcharan Das put it. “The nexus among politicians, officials, police, and big business, a powerful labor mafia, disenfranchisement of local residents, [and] damage to the environment.”67 Yet the sector’s problems provided a wider lesson too, namely that corruption was not just the result of greed, but also the far more complex problem of state incapacity.

  Behind this, there was the vexed question of politics. China and India both suffered severe corruption, but only India was a democracy. Behind almost every corruption scandal there lay the deeper problem of political party funding and the way in which political parties relied on under-the-table donations from businesses. As we finished our own conversation in Singapore, I pushed Vinod Rai for specifics. During the season of scams, what sort of collusion were we talking about? Were these deals as crude as handing over envelopes stuffed with c
ash, or was there a more sophisticated quid pro quo? Most importantly, how much was taken by the politicians, and how much was left over for their party? Rai sighed, and admitted that even he had never been able to figure out the going rate for a coal or telecoms license, or indeed the exact circumstances under which cash was handed over. “There was jockeying, there was lobbying, and obviously people were willing to pay a price to get these [coal] blocks under the table…For every 100 rupees, the [politician] might give 70 to his party and keep 30 for himself. Or he might have kept 70 and given the party 30, who can tell? But the sums involved were clearly very large.”

  CHAPTER 6

  MONEY POWER POLITICS

  Everybody Uses Black Money

  Settling back in his spacious office after a long day, Akhilesh Yadav allowed a moment of candor. It was election time in Uttar Pradesh, India’s most populous and politically significant state. Yadav had addressed seven mass rallies that day, zipping by helicopter from one to the other, before flying back to his residence in Lucknow, the capital. Tomorrow, there would be half a dozen more. It was February 2017 and I had come to meet him with a group of academics and journalists to discuss the state of the polls. He bustled in with the air of a man with better things to do, dressed in the same plain white kurta and black waistcoat he wore while campaigning. In his early forties with swept-back black hair, Yadav’s boyish face drew attention to the angle of a crooked nose, the victim of a youthful football accident. There was a poster montage on the far wall, featuring a picture of Yadav’s face made up of dozens of other tiny images of himself. Outside it was dark; a clock on his desk in the shape of a bicycle, his party’s logo, read 7:55 p.m.

  Uttar Pradesh—or “UP” for short—went to the polls every five years, in what was always the world’s largest local election. Home to some 220 million people, the state stretched from the borders of New Delhi in the west to the holy capital of Varanasi nearly 800 kilometers to the east, lying at the center of what was sometimes referred to as the “cow belt.”1 Crisscrossed by the sacred Ganges and dotted with innumerable spiritual sites, this was India’s heartland; a region that acted as the bosom of its identity both as an independent nation and under the British and Mughal Empires beforehand. Sheer weight of population ensured elections in UP were India’s most politically important, but 2017’s was especially fierce: Yadav’s Samajwadi (“Socialist”) Party had taken power five years earlier, but now it faced an emboldened BJP, which had swept the state in Narendra Modi’s “wave” election in 2014.

  Out on the campaign trail the various party leaders traded barbs about corruption, accusing one another of siphoning cash from state projects and trafficking in black money. But sitting in Lucknow, Yadav admitted that India’s problems of money in politics now affected all parties, including his own. “It’s not money that is black or white, it’s how we do business,” he said of attempts to curb corruption in New Delhi, and in particular Modi’s demonetization experiment, which he, not entirely surprisingly, judged to have been a failure. “In the villages, people buy houses and cars; they don’t know they have to pay taxes. They feel ‘This is our money,’ they have earned it,” he went on, explaining why so few people admitted their earnings. “But how can you take tax from the poor? They don’t have any money…How will corruption decrease, you tell me? Everybody is using black money in elections!”

  Political scientist Ashutosh Varshney suggests three “master narratives” have come to define India over the last century.2 First came secular nationalism, the ideology of Nehru and Gandhi, and still the official state creed. Second was Hindu nationalism, a reaction to the first, led by the BJP and the RSS. Finally came “caste-based social justice,” in which political parties representing lower caste groups began to win political power. Yet to these three, if you were only a little cynical, you might add a fourth: cash.

  Before liberalization, Indian democracy was a cheap, low-tech affair. But money began flooding into politics after 1991, particularly as its economy began to expand rapidly from the middle 2000s. Officially, political parties spent modestly, constrained by strict spending limits. But unofficially everyone knew the bill for India’s perpetual jamboree of elections now ran into billions of dollars: $5 billion for the 2014 poll alone, according to one academic estimate.3 This placed India not far behind the United States as the world’s most expensive democracy, except that in India’s case most of the money was unaccounted for. It was widely agreed that India’s problems of corruption and cronyism would be impossible to fix without first lancing the boil of the issue of illicit cash in politics. Yet this was also a topic very few politicians liked to discuss, making Yadav’s candor—“Everybody is using black money in elections!”—all the more intriguing.

  Founded in the early 1990s by his father, Mulayam Singh Yadav, the Samajwadi Party was a prominent example of the revival of caste in Indian politics. Broadly speaking, the millennium-old caste system divided Hindus into four groups, with the priestly Brahmins at the top and laboring Shudras at the bottom. There were then myriad other sub-castes, while below them all came the Dalits, once called “untouchables,” who stood outside the system altogether. In some ways caste became a less important feature of India’s social fabric after 1991, as the country urbanized and the fluidity of city life began to break down old rural hierarchies. It was a change long predicted by B. R. Ambedkar, the Dalit social reformer and architect of India’s constitution, whose caustic view of rural life—“What is the village but a sink of localism, a den of ignorance, narrow-mindedness and communalism?”—stood in clear contrast to Gandhi’s more romanticized idylls.4 Yet in the aftermath of economic reopening, caste also became a more important political force in many parts of India. This was especially so when the government established a new set of official caste categories during the early 1990s—forward castes; other backward castes; scheduled castes; tribes—and began to use them as a basis for the distribution of scarce public sector jobs. Although its name suggested a left-wing ideology, the Samajwadi Party was firmly caste-ist in its orientation, drawing support in particular from Yadavs, a caste group traditionally comprising mostly peasant farmers and making up about a tenth of UP’s population.5 With the party as their vehicle, the Yadavs soon became UP’s dominant caste force.

  Folksy and blunt, Mulayam Singh Yadav was by all accounts a masterful politician: the type who cultivated contacts in distant villages, and rarely forgot a birthday or wedding. He won the post of chief minister three times before his son took the job in 2012. Once known as the United Provinces, the state he ran had previously been the jewel of colonial India, blessed by lush farmland and dotted with cosmopolitan cities. But after Independence, India’s old regional balance gradually began to reverse. Once-undeveloped parts of the south and west grew quickly, while UP and other northern heartland states slid gradually backwards, hobbled by feudalism, administrative incompetence, and grinding poverty. Later, and especially under Yadav family rule, a new phrase hung over the place: “Goonda Raj,” taking the Hindi word for thug as shorthand for lawlessness and graft.

  UP also won a reputation for brutal patronage politics, in which support came through caste favoritism, backed by ruthless violence. Large swaths of the state, especially in its wilder eastern fringe, were said to be controlled by criminals, many of whom were coopted into political parties. As chief minister, Akhilesh Yadav had tried to shed this dark side of his state’s image. Educated in Australia, he came across as an Indian everyman in his early forties with few airs and graces. His young wife, Dimple, who had the looks of a Bollywood heroine, added a smidgen of glamour to their regime.

  Speaking in his office, the younger Yadav rattled off his achievements: investments in mills and factories, a free phone number for police and ambulance services, and a new toll road connecting Lucknow to New Delhi. Much like Narendra Modi, he favored grand infrastructure projects and technological gimmicks, including a scheme
that gave away one million laptops to children. Electricity had improved on his watch, he said, with no blackouts in major cities and power “for sixteen to eighteen hours in villages.” He identified with the state’s burgeoning youthful population, talking lyrically about those who came to his campaign events. “I observe the crowd, they come in blue jeans, they all have mobiles clicking photographs,” he said of a rally earlier that day in a town in a far corner of the state. “I can say we are living in very transparent times.”

  Yadav’s attempts to clean up his party’s image had proved only partially successful. UP still languished towards the bottom of state league tables for economic development, and towards the top for crime. Its newspapers remained filled with tales of murder, kidnapping and arson. In the months before I met him, Yadav had feuded publicly with his father, wresting control of the party apparatus, but in the process damaging his own clean image. More than one million young people spilled into the state’s labor market each year, only to find few jobs waiting for them in a state that enjoyed little of the industrial development seen in India’s most prosperous west and south. Social indicators remained woeful, especially for women, with sexual assault a particular problem. In 2014, Mulayam Singh Yadav was pilloried for appearing to excuse a widespread culture of rape, after being reported to have remarked somewhat blithely that “boys commit mistakes.”6