Rana Dasgupta - Capital - The Eruption of Delhi

But in tandem with all this symbolism of dalit pride and wealth, she set about an aggressive redevelopment of her state, one whose dynamism depended not only on the size of her own war chest but also on her partnership with rich businessmen, especially a Brahmin engineer-turned-businessman. Her role in this partnership was to use state machinery to seize land from farmers and to provide the political support necessary for developing it. He, in return, supplied financial investment and business know-how, delivered well-executed prestige projects to the state and, presumably, shared his profits with her. Neither partner could have achieved this without the other. What they developed together, in fact, was a fast-track system for economic development which was sternly authoritarian — for state support came with the full arsenal of armed back-up — but which, unlike China’s equivalent system, was housed within a democracy. The democratic context certainly added many layers of conflict and uncertainty to the enterprise — Mayawati’s continued patronage was dependent on her winning elections, and on the day in 2012 that she was voted out, shares in the company tumbled. But this system, turbulent though it was, was India’s answer to China’s more explicitly autocratic one. In post-liberalisation India, it was not enough to have capital, for the flow of capital was blocked on every side by legal and bureaucratic constraints: only when big business entered into partnership with powerful and visionary political players could adequate outlets be opened for investment.

To cross the Uttar Pradesh border from Delhi was to be assailed not only by hagiographic images of its chief minister but also by the ubiquitous logo of her construction company partner. A publicly traded company whose shares were still majority-owned by one family, the company was an established giant before Mayawati came along, owning India’s largest private power station and its third-largest cement conglomerate. In 2000, it branched out into real estate, building a ring of golf courses and apartment complexes around Delhi. It had money and expertise, and was perfectly placed to partner with Mayawati when she came to power. It won from her first of all the contract to build an eight-lane highway from Noida to Agra, home of the Taj Mahal, Uttar Pradesh’s most famous tourist destination. The contract required the company to put up the money for the highway but allowed it to collect tolls from users for thirty-five years, after which toll income would revert to the state. To sweeten the deal, Mayawati also ‘gave’ the company the land on either side of the highway, a tract of some 6,000 acres forcibly acquired from farmers at a rate of Rs 580 [$2.60] per square metre, on which it determined to develop several ventures, including private townships and a private international airport, which would over the next twenty years generate a combined estimated income of $27 billion. This boon was in addition to the 2,500 acres that Mayawati bought from farmers for the company to build a private ‘sports city’, which included India’s Formula One racing track. It seems that the financial equation was enhanced in all these deals by the waiving of great tranches of the company’s tax bill.

Realising, belatedly, that the land they had surrendered to the state government for essential infrastructure had ended up in the hands of big business, the farmers began to protest, blocking roads, burning company offices and trying to disrupt the inaugural Formula One event. The protests were dealt with brutally — the police fired into one group of protesters, killing three — and ultimately led to nothing. The company’s expansion continued unabashed, with new ventures in mining, chemicals, hospitality, hydropower and foods.

As legal entities, organisations like this one were mercurial and opaque. Tens or hundreds of companies were owned by groups within other groups, some of them privately held, others publicly traded. The controlling interest of the founding families was usually distributed among many of their members. It was crucial to their success that they shield large amounts of capital from public scrutiny — not only because they did not like to pay taxes, though that was part of it, but also because their operations required them to generate significant quantities of black money for bribes, land purchases and the like. Many of them raised money for business expansion not from banks but by borrowing, unofficially, from each other, in accordance with a clubbish honour code that predated the corporate era. In the background of all this, holding things together, was usually some kind of financial genius; for it was not just anyone who knew how to move billions of dollars of black and white money efficiently through large and complex corporate systems, while at all times insulating the company from suspicion and investigation.

This system of collusion between politics and big business thrived because it allowed insiders to operate with great speed. But it did not leave room for many players. Part of its success, indeed, was due to the fact that it eliminated competition: international companies in particular found it almost impossible to duplicate the political know-how of entrenched local interests, who deliberately kept them out in just this way. No: the system was controlled by a few political and commercial figures, who concentrated enormous capital in their own hands and undertook among themselves a formidably dynamic transformation of the Indian landscape. They were not the apathetic, self-indulgent people that the press so often imagined the new ‘corrupt’ elite to be. Conspicuous consumption was part of their style, but this should not detract from the seriousness of their ambition. The reason they had manoeuvred themselves into this position in the first place was so that they could operate at dazzling scale and break-neck speed. They were enormous investors in the Indian economy and generated huge economic effects. Even those politicians who had swept corrupt gains into Swiss bank accounts during the 1970s and ’80s, when India’s slow-growing economy was no place to keep them, now brought them back to invest in its boom. Much of the foreign direct investment coming into India was not ‘foreign’ at all, but illicit Indian money funnelled out to companies in Mauritius or the Cayman Islands which then invested it back into India. In 2010, it was estimated that the present value of illicit funds taken out of India since Independence was close to half a trillion dollars. 49But in the decade after 2000 it was also conspicuous that tiny Mauritius accounted for over 41 per cent of India’s foreign direct investment; as a report issued by India’s finance minister in 2012 commented, “Mauritius and Singapore with their small economies cannot be the sources of such huge investments, and it is apparent that the investments are routed through these jurisdictions for avoidance of taxes and/or for concealing the identities from the revenue authorities of the ultimate investors, many of whom could actually be Indian residents.” 50Members of the corrupt elite, in this sense, became highly productive agents in the economy. Politicians and their business partners were like feudal venture capitalists, extracting a forcible tax on a particular turf and channelling it quickly into new business ventures.

This is why even people who observed these goings-on from the outside could be enthusiastic about what they saw: it seemed like this back-room path to development, where members of the political class extracted large amounts of capital which they then poured efficiently into fast-moving, dramatic business projects, by-passing all the friction of political approval and official financial procedure, might be the only way for India’s chaotic energies to be channelled into meaningful action. When I asked Raman Roy, the squeaky-clean father of Indian business process outsourcing we met at the beginning of this journey, what his prognosis was for the Indian economy, he found great hope in this grey zone of politics and business, whose uniqueness he appreciated with almost patriotic affection.