These are all reminders that, for all its progress in recent years, India’s economy remains very much an insider’s game. A recent study by two American business school professors confirmed that much of the formal economy continues to be run by a couple dozen family-controlled groups that seem to be in just about every major industry — manufacturing, retail, energy, infrastructure, shipping, construction and telecom.
Such family-controlled conglomerates are common in fast-growing countries — think of Japan’s kiretsu or South Korea’s chaibols. In developing markets, they can be effective for channeling capital and talent to their highest and best use and speeding the introduction of modern technology and management. But now that the Indian economy has opened and matured, the more enduring competitive advantage seems to be leveraging their political knowledge and connections in the many sectors where government licenses, approvals and industrial policies are still major factors. Akhil Gupta, who heads the Blackstone office in India, said that’s why multinational corporations continue to seek them out as partners before entering the Indian market.
The business of politics
Politics, too, is viewed as very much of a business, enriching elected officials and bureaucrats even as it provides the cash necessary to finance elections. The law, for example, limits campaign spending for a seat in the national parliament to roughly $50,000. The actual spending on a typical race is said to be many times that — and nobody doubts how the gap is filled.
The political business is also a family business, whether at the village, state or national level. Since independence, India’s national government has been dominated, with only one interruption, by a Congress Party that has been under the control of Jawaharal Nehru and his descendents, from daughter Indira Gandhi to her son Rajiv to his Italian-born widow, Sonia, with her son Rahul waiting in the wings.
Politicians talk a good game about cleaning up corruption — they just never get around to doing anything about it. Nor is it clear, says Shobana Bhartia, publisher of the Hindustan Times, that the great mass of Indian voters would reward them if they did.
Campaign pledge: A free color TV
Not unlike their politicians, Indian voters tend to view politics and government through the lens of “what’s in it for me.” For decades, politicians in many regions have won and held office by promising to provide subsidized rice and cooking fuel, but as the country has gotten richer, so has the cost of bribing the voters. After the last election in the state of Tamil Nadu, for example, the winning party made good on its promise to deliver to each household a free color TV, roughly 15 million so far. This bit of government largess also did wonders for the local cable television franchises, which just happen to be owned by the family of the party leader. In the next campaign, to be decided in a few weeks, the platform includes a food processor for the lady of every house.