The setback for the group has neither established firm evidence of a money trail with the party nor is it affecting the larger economy, yet. The battle is confined to the political narrative but to win that, the Opposition has to dent the BJP’s political economy approach
The allegations raised by a United States (US)-based short-seller Hindenburg Research have already inflicted a heavy toll on the financial might of the Adani Group. The only unknown, as far as this episode is concerned is whether the controversy will also hurt the ruling Bharatiya Janata Party (BJP), and especially the Teflon-coating that Prime Minister Narendra Modi provides to its political fortunes. There are three possible scenarios.
While the stock value and finances of the Adani Group have suffered a heavy loss, it is entirely premature to say whether the billionaire and his companies will go belly-up. (Reuters)
The first is the simplest and the most unlikely to happen. This will need the Opposition to establish a money trail between the Adani Group and the BJP or senior functionaries in the government. The Opposition knows very well that it cannot establish such a connection. A large part of this has to do with the systemic opacity in India’s political finance regime. This increased manifold after the current government enacted the law on electoral bonds. The electoral bond scheme provides complete secrecy about the identity of donors to a particular political party. To be sure, it is nobody’s case that political finance in India had a lot of transparency or integrity before the electoral bonds came into being. Rahul Gandhi’s question in the Lok Sabha asking the BJP to come clean on the political funding that it has received from the Adani Group was not just political polemics; it was also an admission of helplessness on part of the Opposition to access such information. The only way this information asymmetry can be undone is if the Supreme Court nullifies the electoral bond scheme and mandates the publication of details of funding received under the scheme.
The second route through which the Adani controversy can hurt the BJP is its impact on the economy as a whole. While the stock value and finances of the Adani Group have suffered a heavy loss, it is entirely premature to say whether the billionaire and his companies will go belly-up, thereby leaving a hole in the finances of public sector companies which have given loans or made investments into the group. In fact, the information available so far suggests that even if the Adani Group were to fail completely, the collateral damage to government-owned banks or the Life Insurance Corporation (LIC) would only leave a small rather than a gaping hole in their coffers. This is exactly the line the government and various regulators have been taking so far. The Indian economy is too big to be affected by the fortunes of just one corporate group and therefore the entire controversy is best left to concerned institutions and does not merit a political discussion, we are told.
Ironical as it may sound, the Indian economy’s biggest insurance from the Adani Group’s possible failure is because of the latter’s alleged malpractices. Thanks to its non-transparent corporate governance model, most mutual fund investors have stayed away from the group’s shares and this is an in-built buffer against a contagion effect in the equity markets that could have generated an adverse wealth effect for middle-class savers or markets as a whole.
The battle of the political narrative
The third way in which this entire controversy can hurt the BJP is in the realm of political narrative. Can the Opposition establish the narrative that the BJP government has only been working to provide gains to select business groups in return for money, and thereby it is acting against the interest of the common people?
To be sure, the attempt to establish this narrative is not something the Opposition will be doing for the first time. In fact, such attempts have not been complete failures in the past. The first Modi government’s decision to roll back the proposed amendments to the land-acquisition bill and the second Modi government’s decision to take back the three controversial farm laws are the two biggest victories of the Opposition (both parliamentary and extra-parliamentary) against the perceived pro-capital agenda of the current government.
However, the very fact that the government has made a retreat on these issues and it has been able to cut its political losses shows that today’s BJP has a pragmatic way of assessing its political vulnerabilities which pushes pro-capital economic policies.
How effective is this nimble-footed approach of the BJP? This question cannot be answered without trying to understand the BJP’s basic approach to the intersection of capitalism and democracy in India. If one were to sum it up in one sentence, it is best described as “Only the PM cares, but eventually, it is the market that has to deliver”. Let us explain this approach in a bit more detail.
The main economic debate in the pre-1991 period in India was on the validity of restrictions on the freedom of markets. There is now a bipartisan consensus in favour of more and more freedom for markets barring areas of strategic economic concerns such as financial stability and food security.
A bigger political debate around economic reforms only precipitated a decade after the 1991 economic reforms when the Atal Bihari Vajpayee-led National Democratic Alliance (NDA) government lost the 2004 general elections, which it fought on an “India Shining” slogan.
As a logical corollary to its anti-reform victory, the Congress-led United Progressive Alliance (UPA) tried to marry the agenda of a pro-poor shift in economic policy without upsetting the apple cart of reforms at large. This approach worked in the 2009 elections that were held in the backdrop of the best economic boom India has ever had.
However, things unravelled very quickly for the Congress when a cocktail of external headwinds from slowing global growth, rise in international commodity prices and rising stress in bank and corporate balance sheets created a precarious situation of slow growth, double-digit inflation and high levels of external and fiscal deficits. Inflation spooked the common people and the overall macroeconomic stress created panic among big capital, which by now, had gotten used to receiving both debt and equity capital from foreign capital.
The BJP’s political campaign under Narendra Modi’s leadership tapped into both these sentiments and it became the first political party after the Congress in 1984 to win a majority of its own in the Lok Sabha. The continuation of this political success required continuous delivery to both capital and the poor. This government’s political economy masterstroke – this is what the experience suggests so far – is that it has managed to reach out to both these constituencies without antagonising one against the other.
Winning over both capital and poor
Here are three key elements of this strategy.
Aggressive countercyclical measures to boost the income of the poor have only been deployed during periods of extreme distress such as the pandemic. This has reassured private capital, big and small, that the government will not tilt the balance of power against capital as far the capitalism’s fundamental power equation is concerned. Labour is free under capitalism to not be exploited, but it must starve itself to death in order to do that. In essence, a programme like the MGNREGS tried to subvert this fundamental principle.
This government’s aversion to counter-cyclical measures does not mean that it has ignored the concerns of the poor. It has taken a different route to reach out to the poor, that of asset-building. The endowments include toilets, houses, LPG cylinders and now tap water. While they have made a positive impact on the quality of life, these are one-time advances and do not subvert capital’s power as far as the requirements of day-to-day living is concerned. While the idea of asset endowments is not new in India, its political weaponisation under the current government is clearly unprecedented.
Ironical as it sounds, the hegemony Modi and his party is seeking for its asset endowment schemes is only comparable to what the communists sought and enjoyed for redistributing land in West Bengal and Kerala. Of course, unlike the communists, the BJP has not made any class enemies in this quest.
This leaves the third, and rather important, question of the BJP’s political economy approach towards capital in the country. A regime can placate capital in two ways. It can either ensure that economic growth continues to improve or increase the surplus available to capital for any given growth rate. The current government’s record is underwhelming on the growth front. To be sure, one can argue about the exact role or lack of it of policy in this given the pandemic and other external disruptions to the economy. However, it has significantly tilted the scales in favour of big capital by decisions such as a cut in corporation tax rates in 2019 and launching programmes such as the Policy Linked Incentive (PLI) scheme, which, in their net impact, reduce the cost of doing business.
To be sure, the concessions to capital are not of a blanket variety. Big capital has gained much more than small capital thanks to the formalisation push. Even within big capital, some have enjoyed the government’s favours more than others have. It is here that the Adani Group stands out. Such preferential treatment, however, is more likely to cause heartburn among other capitalists rather than a large-scale rebellion against the regime.
Making a political issue out of such preferential treatment, as has been discussed above, will require either a money trail or systemic shock to the system and neither of them is imminent at the current moment.
The Opposition’s challenge
Does this make the BJP politically invincible? Not necessarily. The political loyalty the BJP currently enjoys among the have-nots, thanks to its asset endowment strategy, will not last forever. Asset endowments, by definition, are no substitute for a sustained rise in incomes. The CPI (M)’s fall in West Bengal was a result of precisely this contradiction. The BJP’s bet, of course, is that its 25-year-long economic strategy of putting state spending in infrastructure, sweetening the deal for big business and using asset endowments to contain class anger in the interim will eventually bear fruit.
Given the fact that the first two are outside the ambit of the Opposition, it must focus its energies on resurrecting class anger against the government. Doing this will require two things. Rejuvenating the art of political communication – Modi is still significantly ahead here – and taking a decisive call to burn bridges with not just one capitalist group but big capital as a whole.
Most political observers and regional political parties believe that the fundamental political contradiction between the BJP and its opponents is a Right versus Left divide on the social question. The larger acceptability for BJP’s majoritarian assertion among Hindus and the pivot within the BJP’s leadership in favour of the subaltern social groups has made the BJP largely immune to a secular or social justice line of attack.
A successful challenge to the BJP’s hegemony, if at all it comes, will have to come from the economic rather than the cultural left flank. A large part of the Opposition leadership is still to come to terms with this reality and this is exactly what is preventing them from even understanding the roots of the BJP’s current political hegemony.
Every Friday, HT’s data and political economy editor, Roshan Kishore, combines his commitment to data and passion for qualitative analysis in a column for HT Premium, Terms of Trade. With a focus on one big number and one big issue, he will go behind the headlines to ask a question and address political economy issues and social puzzles facing contemporary India
E-Paper
