Crony capitalism refers to a system where businesses thrive not through merit or competition but by leveraging close ties with politicians and bureaucrats. In India, crony capitalism has manifested itself under both the Congress and BJP governments, albeit in different ways and with varying degrees of visibility. This article examines the history of crony capitalism under these two major political parties, analyzing the policies, controversies, and impacts during their respective tenures in power.
The Congress party, particularly during its long reign in post-independence India, established a system where business-politician relationships were often central to industrial growth. This period, spanning from 1947 to 2014, saw the development of the so-called License Raj, which gave politicians the power to allocate licenses, permits, and resources to businesses.
State Control of the Economy:
After independence, the Congress government under Jawaharlal Nehru adopted a socialist economic model with an emphasis on state control over key industries. The government implemented heavy regulations, creating a system where businesses needed licenses to set up factories, expand operations, or import goods. This gave politicians significant power to control which industries could thrive, thereby fostering opportunities for crony capitalism.
Emergence of Family-Run Conglomerates:
Many large business houses grew in stature due to their closeness to Congress leaders. Families such as the Birlas, Tatas, and Ambanis had a significant presence in the business world, with the Birlas, in particular, being closely associated with Nehru's government. The Ambanis (Reliance) were able to rapidly expand under the leadership of Dhirubhai Ambani, using their relationships with Congress politicians.
Corruption in Licensing:
The business environment was rife with corruption, as securing industrial licenses often depended on political connections. The 1970s–1980s saw numerous allegations of favoritism and bribery, with businesses having to pay heavy "cuts" or bribes to secure favorable treatment from politicians.
Economic Liberalization:
In 1991, Congress, under Prime Minister P.V. Narasimha Rao, began the process of economic liberalization, reducing the role of the state in business. However, while this opened up the economy to global competition, it also continued to be shaped by the existing crony networks.
The 2G Spectrum Scam (2008):
One of the most notable scandals during the Congress-led UPA (United Progressive Alliance) regime was the 2G Spectrum Scam. The allocation of 2G spectrum licenses in 2008 was marred by corruption allegations, with politicians allegedly favoring certain businesses, leading to an estimated loss of ₹1.76 lakh crore to the exchequer. The scandal brought attention to how cronyism was deeply embedded in the allocation of national resources.
The Commonwealth Games Scam (2010):
Similarly, the Commonwealth Games Scam highlighted crony capitalism in the infrastructure sector. Contracts for the games were allegedly awarded to politically connected firms at inflated prices, leading to widespread corruption and inefficiency.
Coalgate Scandal (2012):
Another major controversy was the Coal Allocation Scam, also known as Coalgate, where the allocation of coal blocks was done in a manner that favored certain private companies. The Congress government was accused of allocating coal fields to companies without a transparent bidding process, allegedly to benefit business tycoons with political connections.
The Bharatiya Janata Party (BJP), led by Prime Minister Narendra Modi, came to power in 2014 with a promise to rid India of corruption and crony capitalism. However, despite the government’s push for transparency and reforms, crony capitalism has continued in various forms under the BJP.
Focus on Infrastructure and Development:
Under the leadership of Narendra Modi, the government adopted a pro-business stance, focusing on infrastructure, manufacturing, and economic growth. This has led to the rise of new business tycoons, particularly in sectors like infrastructure, power, and mining. Companies like Adani Group and Essar Group have gained significant prominence during this time.
Privatization and Public-Private Partnerships:
The BJP government has pushed for privatization of state-owned enterprises and public-private partnerships (PPPs) to spur growth. However, critics argue that these privatization processes have sometimes favored certain well-connected private players. For instance, Adani Group won several large projects, including the privatization of airports and the development of large ports. The growing presence of such conglomerates in key infrastructure sectors has sparked allegations of crony capitalism.
Environmental and Land Acquisition Issues:
Large projects like the construction of highways, power plants, and mining operations have been criticized for benefiting a few large players, while often bypassing environmental regulations and social justice concerns. The land acquisition process has also been questioned, with accusations of favoring corporations at the expense of farmers and local communities.
Adani's Growing Influence:
The Adani Group, headed by Gautam Adani, has become one of the most prominent business entities in India under the Modi government. With major investments in infrastructure, energy, and ports, Adani has seen rapid expansion, particularly in sectors that receive significant government support. This has led to allegations of cronyism, with some critics suggesting that Adani's success has been propelled by political ties.
Criticism and Investigations:
Opposition parties have frequently accused the BJP of fostering a crony capitalist system that benefits a handful of corporations, especially the Adani Group. In 2022, The Hindenburg Report accused the Adani Group of stock manipulation and financial irregularities, which added fuel to allegations of cronyism, though Adani denied all accusations.A few days back, Adani was indicted on charges of bribery and fraud in USA.
Crony capitalism in India has evolved over the years but remains a persistent issue under both the Congress and BJP governments. Under the Congress-led UPA governments, the License Raj and the centralization of power in the hands of politicians created a system where businesses could only thrive through political patronage. Scandals like 2G, Coalgate, and the Commonwealth Games highlighted the deeply entrenched nexus between business and politics.
Under the BJP government, while efforts were made to reform the economy and attract foreign investment, accusations of crony capitalism continue, particularly in sectors like infrastructure, energy, and defense. The rise of oligarchs like Gautam Adani and the controversy surrounding the Rafale deal have raised concerns about the transparency of government dealings with private players.
While both governments have aimed to promote business growth and economic development, the challenge of crony capitalism remains, highlighting the need for stronger institutional checks, transparency in public procurement, and reforms that ensure fair competition and resource allocation.
