Yet the risks of rising illiberalism should not be downplayed either. The appeal of Hindu nationalism has grown in strength partly because of Modi himself, but also because of the thick sense of identity it provides in a country buffeted by the uncertainties of globalization. India’s rising prosperity offers no special defense against this rise of a slippage into majoritarianism. Modi’s Gujarat, one of the country’s richest and most industrialized states, also suffers from one of its most wretched records of caste and communal disharmony.
Even if Modi wanted to step away from the more extreme elements within his political coalition, he remains stuck in a deeper political bind. Congress politician Shashi Tharoor has described it as “the fundamental contradiction Mr. Modi faces, of advocating, as Prime Minister, liberal principles and objectives whose fulfilment would require him to jettison the very forces that have helped ensure his electoral victories.”52 By this, Tharoor means that there is at least a part of Modi that knows he ought to avoid sectarian distractions, given that these are likely to get in the way of his hopes of expanding and modernizing India’s economy. But with the next election looming, he also knows that the RSS and their millions of foot soldiers could well mean the difference between an unexpected defeat and a second Modi triumph. It is far from clear that Modi yearns to slap down the dogmatists and bigots within his own ranks, but he has found himself bound to them by political expedience nonetheless.
As he prepares for reelection, and a second term thereafter, the risk is that Modi will follow the path commonly charted by other conservative nationalists before him. In their own ways both Vladimir Putin in Russia and Recep Tayyip Erdoğan in Turkey took power by promising economic reform and hinting that they might move their countries in more liberal directions.53 But rare is the strongman leader who grows less autocratic the longer he stays in office. Liberals like Raghuram Rajan argue that development and social tolerance were reinforcing, which is indeed a persuasive argument in the long run. But viewed through the lens of short-term politics—the brief five-year cycle of an election, most obviously—there is no obvious reason this has to be the case. It is quite plausible to imagine that a leader like Modi with sharp populist instincts, who is both facing waning popularity and conscious of the need to push on with economic reforms, might decide to whip up nationalist sentiment to bolster his own support. Here the risk is not that Modi will weigh up a choice between nationalism and reform. It is that he will determine that these are twin and reinforcing projects that have to be pursued in tandem.
This same balance of risks underpins the bargain many felt they struck when voting for Modi himself. Some, like Rajan, went to work for him, despite personal reservations about his Hindu nationalist baggage. Others held their noses and voted for the BJP, calculating that Modi’s promises of development were worth the dangers of the potential social upheaval that he might bring. “I was aware of the risks,” as Gurcharan Das, a socially liberal author and ex-businessman, said of his own voting decision in 2014.54 “Modi was polarising, sectarian and authoritarian. But I felt the risk in not voting for him was greater.”
These, then, are the tragedies of Modi. The first: that such a bargain had to be struck in the first place. In 2014, many voters were forced to conclude that a personally honest and economically reform-minded leader was the best that India could hope for, even if his election came with the risks of political schism. This choice was made because the desired alternative—a leader who was popular, honest, economically imaginative, but also statesmanlike, untainted by violence, and willing to place issues of identity and faith outside the public square—was now in India almost impossible to imagine. The second: that Modi, a man of such great persuasive abilities, has consistently declined to speak up in defense of the kind of social tolerance that, in the long run at least, ought to have provided the surest footing for his own stated economic objectives. And then the third: that having struck this devil’s bargain, and chosen the hope of reform over the risk of polarization, those same voters have found their hopes of economic development at best half delivered—as Modi has proved to be a far less courageous and radical leader than they had hoped.
CONCLUSION
A PROGRESSIVE ERA?
I left India early one Saturday morning in spring 2016. My wife and I closed the door on our empty apartment and took the lift down with our infant son, born in a nearby hospital nearly two years before. As the sun rose higher we drove out through southern Mumbai, racing along the curve of Marine Drive and passing the empty sands of Chowpatty Beach. Soon we hit Pedder Road, where Antilia came into view up on the right-hand side. A few minutes later we crossed the spot where its owner’s Aston Martin had finally come to rest. I never did find out what became of the car. One afternoon in 2014, many months after the crash, I happened to drive past Gamdevi police station, expecting to see a familiar silhouette standing outside. But on that day both the car and its gray plastic cover were gone. Inside the station, an officer shrugged and said he didn’t know where the wreck had ended up. I didn’t believe him, but that was that.
Five years earlier I had flown into Mumbai’s old airport, a decrepit and congested concrete warren. On that last Saturday we left through the new Terminal 2, its exterior an elegant half-moon, painted in brilliant white. To many, the airport symbolized what was going right with India. Mumbai’s elite certainly viewed it with thinly disguised elation, as if their city had finally shed a shaming indictment, with its hour-long entry lines and third-world interiors. Rather than snaking through choked streets, passengers now arrived via the Sahar Elevated Access Road, a purpose-built two-kilometer stretch of raised six-lane highway, and perhaps the nicest road in all of India. Inside, the building was efficient and stylish, with soaring ceilings supported by pillars resembling the feathers of a peacock, the national bird. Yet the city’s infamous slums still pushed right up against the airport’s fence, while even the highway marked a curious kind of progress: a public facility that only the most prosperous would ever be able to use.
In early 2014, just before the new terminal opened, I called Katherine Boo, an American writer who had lived for a time in Annawadi, one of a clutch of shantytowns that ring the airport’s perimeter. Behind the Beautiful Forevers, her book from 2012, laid out a searing portrait of the traumas and injustices these residents faced. She was back in Mumbai for a spell on the day I rang, visiting some of those she had met during her research. The airport’s mysterious constructions had attracted plenty of local attention. “People in the slums are watching, amused, as the crews do the frantic work installing full-grown gardens, painting walls, and making improvements for the prime minister,” she told me, just a few days before India’s leader arrived formally to inaugurate the building.1
The gap between those inside that fence and those outside remained unbridgeably vast. Residents in places like Annawadi were unlikely to find jobs at the airport, let alone ever have enough money to enter as passengers. “City planners sweat to make their terminals grand by global standards,” Boo told me. “There’s always a vague, tertiary hope that some of the magic dust will settle upon the struggling locals, but they don’t see much of that.” Brijesh Singh, a slum-dweller who lived in a tiny one-bedroom house nearby, marveled at the new lines of lush, green palm trees along the elevated road, recently installed by laborers toiling high above his head. “Now it’s Singapore, up there on the expressway!” he said. “It would be interesting to see the inside [of the airport], but we will look from the outside.”
Having left and moved to Singapore myself, I began to think more about India and its future. On the one hand, its development aims are straightforward: first to cement its position as a firmly middle-income parliamentary democracy, then to enter the ranks of advanced economies at some stage after the midpoint of this century. Yet until it grapples with the three challenges outlined in this book—inequality and the new super-rich, crony capitalism, and the travails
of the industrial economy—the path to achieving those goals will remain uncertain.
In 2008, at the height of the go-go years, Raghuram Rajan posed a basic question about the super-rich: Is there a threat of an Indian oligarchy? At the time, his answer was “Yes.” Back then, billionaire wealth grew unchecked, from Vijay Mallya’s raucous parties to the nouveau riche grandeur of Antilia, leading many to fear a Russian-style carve-up. A decade later that threat has receded, at least to some degree. Few of India’s tycoons fell to earth as spectacularly as Mallya, but the aftershocks of the season of scams still left many powerful industrialists diminished. The old system, with its political favors and risk-free bank loans, came under intense scrutiny, not least from Narendra Modi himself. Even the word “oligarchy,” with its suggestion of a closed elite that held power in perpetuity, proved an imperfect description of India’s hurly-burly business scene. Mukesh Ambani’s perennial position on top of the billionaire rankings gives an impression of unfaltering supremacy. But it has been just as common to see old dynasties decline and new figures like Gautam Adani rise up to take their place. In all this, India actually looks very little like Russia.
Whatever else you think of him, Modi has also reset the balance of power between politics and business. When I met him in London, Vijay Mallya described the speed at which India’s new prime minister shut down the political access he and his fellow tycoons had long enjoyed. Yet even while crediting Modi with curbing corruption, Mallya expressed frustration with what he said was a new suspicion of entrepreneurs in New Delhi. “Modi’s narrative now very clearly is: ‘I was a tea seller. I’m now prime minister. I’m the champion of the poor. I’m going to screw the rich, screw the dishonest, and spread the impression that every rich man is dishonest too,’ ” he said. During demonetization, Modi’s rhetoric took an especially sharp turn. “With what we have done, the rich need pills to go to sleep,” the prime minister said in 2016, just after the note ban came in.2
In fact, India’s ultra-wealthy are thriving. The ranks of its billionaires have kept swelling, while the fortunes of the merely very rich continue to shoot up as well. In many ways this should be welcomed. India needs affluent entrepreneurs, a point recognized even by left-wing thinkers. “There is something a little deceptive about focusing on the very rich,” I was once told by Amartya Sen. “Having lots of rich people is not always a big problem so long as they get no special favors and pay fair taxes.” The problem is that these increases in wealth have turned India into one of the world’s least equal countries. Without action, this gap between rich and poor—between those inside the airport fence and those outside it—is only likely to widen. Perversely, the closer India comes to its ambitions of near-double-digit growth, the faster this will happen.
It is unfair to blame these trends on Modi, although he has done little to reverse them. Yet there will be grim consequences if they continue unabated. Those Latin American economies with the widest social divides have proved less economically stable and more likely to get stuck in the “middle-income trap,” in which poorer nations achieve moderate prosperity but fail to become rich.3 The more successful countries of east Asia, by contrast, grew prosperous while managing to stay broadly egalitarian, partly by building basic social safety nets. Of the two models, it seems clear which India should want to follow.
Inequality has complex causes, so making progress will not be easy. But there are still basic steps that would help. Sen is right to push basic education, health, and pension provision for those at the bottom of the social ladder, all areas in which Modi’s government has promised much but delivered surprisingly little. At the top, it means greater focus on raising taxes, especially from the wealthy. This does not mean attacking the rich, but it does mean ending the ridiculous situation in which only one percent of Indians pay any income tax at all, and barely 5,000 people do so on earnings above Rs10 million ($155,000).4 In America, “millionaires and billionaires” are often called on to pay their fair share. Until the same happens in India, it is hard to see how a fairer society can be built.
On corruption, India’s progress has at first glance been good. The old mega-scams have stopped, partly because valuable natural resources contracts are now auctioned off. Various recently introduced measures should help to curb fraud too, from the goods and services tax launched in 2017, to plans linking state welfare programs to bank accounts via Aadhaar, the biometric identification system.5 Most importantly, India’s democratic institutions are newly alert. At our meeting in Singapore, Vinod Rai, the crusading former auditor, was upbeat. “The media and citizens at large are far more vigilant about corruption,” he told me. “I don’t think we can go back.”
Yet there remains a danger of complacency. Kickbacks still dominate swaths of public life, from land purchase to municipal contracts. Criminal probes have dragged on, with almost no one sent to jail. State and city governments are just as venal as ever, while surveys say India remains the most bribe-ridden nation in Asia.6 Then there are deeper problems. “For any society to lift itself out of absolute poverty it needs to build three critical state institutions: taxation, law and security,” according to Oxford economist Paul Collier.7 All three in India—the revenue service, the lower levels of the judiciary, and the police—still suffer endemic graft. Perhaps most importantly, the country’s under-the-table political funding system remains largely untouched. This is understandable: Modi wants to win reelection in what is sure to be the costliest national poll in Indian history, and he needs to raise money to do so. But cronyism will never be properly fixed until the problem of “money power” is fixed too, starting with the full auditing of party finances and ending with some kind of transparent or publicly funded system.
Much of the current corruption drop-off is also a function of fear, not least the trepidation inspired by Modi himself. The prime minister’s efforts have had tough economic consequences. This was certainly the case during demonetization, which did much to harm growth but little to curb graft. Corruption anxieties have depressed private sector investment rates too.8 Yet whatever its pluses and minuses, Modi’s leadership is also temporary. His successors may well be less censorious about corruption, hence why it is important to introduce wider measures to combat graft, rather than relying only on honest leadership. This matters because cronyism is sure to recur in new forms as India develops. At its most basic level, graft is a function of growth, meaning that it will reemerge when the economy expands strongly. This is especially true in areas like infrastructure, where estimates suggest India must invest around $4.5 trillion over the next two decades.9 Without careful management, spending on this scale will provide ample scope for grand corruption to return.
Corruption plagues developing countries not because their people are immoral, but because it is often useful. At its best, graft can oil the wheels of progress, as political leaders gift economic rents to favored businesses, which is what happened in the “developmental states” of east Asia. The proceeds of corruption can also bind together otherwise unstable social groups, as Samuel Huntington described in Political Order in Changing Societies.10 Here India has been a textbook example, as kickbacks have helped politicians to build infrastructure projects, while revenues extracted from corruption have united political coalitions in New Delhi. Elsewhere, the proceeds of patronage have given caste groups and other minorities a stake in the wider economy.
India therefore faces a choice. For a decade after 2004 it enjoyed rocketing growth but at the cost of sky-high corruption. More recently corruption has fallen, but growth has fallen along with it. Many now dream of rapid, graft-free expansion. But this is largely a fantasy: “The optimal level of corruption will not, in practice, be zero,” as Robert Klitgaard wrote in Controlling Corruption.11 By this he means that the cost of wiping out profiteering would require unacceptable collateral damage. “Fight corruption too little and destroy the country,” as one Chinese communist leader is supposed to hav
e said. “Fight it too much and destroy the party.”12 Instead, there is likely to be a continuing trade-off, in which India will struggle to deliver the two things Modi has promised above all: very rapid growth and very little graft.
A better approach is to push institutional anti-graft reforms, such as the earlier decision to auction off rights to natural resources, which can help keep corruption under control while allowing growth slowly to return. This in turn should form part of a broader set of changes that are described in India as a transition from a “deals-based” to a “rules-based” model of capitalism, meaning one whose rules allow little political and bureaucratic discretion over public resources.13 Yet even this will be far from straightforward. Francis Fukuyama describes this shift away from a “patrimonial” state, meaning one marked by corruption and clientelism, as the defining challenge for all developing nations. “[It is] much more difficult,” he writes, “than making the transition from an authoritarian political system to a democratic one.”14
This balance of growth and corruption then lies at the heart of the struggles of India’s industrial economy. The problems of indebted conglomerates and ailing banks were well known when Modi arrived in office. Yet progress towards fixing them has been slow, leaving India facing a lost decade of investment. Beyond Vijay Mallya, few errant tycoons have been pursued aggressively by the authorities. Instead, many now lead zombie companies that have struggled to repay their debts, including GVK, the Andhra Pradesh conglomerate which built Mumbai’s shiny new airport terminal. Modi’s administration introduced some important measures to help, including new bankruptcy laws and a series of bank recapitalizations. But more radical options have been ignored, notably privatization of struggling public sector lenders, leaving India with one of the most state-dominated banking systems of any large economy outside China. It is an irony of Modi’s tenure that a prime minister so obsessed with infrastructure projects has been unable to create the conditions in which more could be built. A better option would be some kind of grand bargain, in which tycoons, banks and politicians share the pain of putting right the festering problems created in the boom years.
The Billionaire Raj Page 37