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India's powerful businessmen flourish

Published by The Straits Times, Singapore on 2004-06-06

Soon after Mrs Sonia Gandhi's Congress Party won heavily in last month's general election, scores of Indian and foreign businessmen turned up at her sprawling home in this capital city to offer felicitations. But the person she saw ahead of anyone else was Mr Anil Ambani, a 44-year-old entrepreneur.

Of course, to characterize Mr Ambani as simply a businessman would be akin to calling Mr George W. Bush just a politician. Mr Ambani is vice chairman and managing director of the Reliance Group, whose annual revenues of US$17 billion account for 4 percent of India's gross domestic product. In 2003, the Reliance Group showed a pre-tax profit of US$2 billion. That makes Mr Ambani a very powerful entrepreneur indeed. In fact, there is wide agreement that he's quite possibly the single most influential man in contemporary India.

While the polo-playing, athletic Mr Ambani will be quick to deny his influence, politicians and bureaucrats of all persuasions are beholden to him and the Reliance Group. Mr Ambani, his older brother Mukesh, 46 years old - each of whose net worth is estimated at US$3 billion - and their late father and founder of the business dynasty, Mr Dhirubhai Ambani, assiduously cultivated India's power apparatus. Their contributions to political campaigns make the stuff of legends. And high-level bureaucrats, upon retirement from government service, have often found hospitable berths in Ambani enterprises, which include textiles, petrochemicals and telecommunications.

The Ambanis are at the apex of an elite group in India known by the cognoscenti as the "politico-industrial complex." It's not a membership organization, of course, but one where inclusion is determined by political influence, not merely wealth. While no Indian industrialist will acknowledge it, the contributions - some would say bribes - which these businessmen make to political parties, and to individual politicians and top bureaucrats, are extensive. According to several reports, they run into the equivalent of millions of dollars each year. But, of course, the money is well spent: in exchange, the industrialists pretty much get what they want in terms of governmental concessions and favourable policy terms for their businesses. While some would argue that such transactions also characterize government-private sector relations in even sophisticated democracies such as the United States, what makes the picture different in India is the utter lack of transparency.

The Birla family - makers of the clunky Ambassador cars used by most government officials - belongs to this small group, as does Mr Nusli Wadia, whose Bombay Dyeing Company manufactures textiles; Mr Adi Godrej, and his cousin Mr Jamshed Godrej, makers of office equipment and other industrial and consumer products; the Europe-based Hinduja brothers, who deal in all kinds of finance, including funding movies, and who've been linked to lucrative arms and industrial deals; the Tata family, India's earliest industrialists; and Mr Rahul Bajaj, who produces the scooters and tri-wheel motor rickshaws that are ubiquitous in India.

And if there's an informal rapporteur for this group, it's surely Mr Tarun Das, the eminence grise of the prestigious Confederation of Indian Industries (CII), which represents more than 5,000 businesses. Mr Das, a quiet, slight man of great personal charm, has access to practically everybody in the Indian government. Not given to publicity, he's been known to advise industrialists on issues such as export expansion and how to deal more effectively with New Delhi's huge bureaucracy. He's widely credited with raising the profile of Indian industrialists in international circles.

The outside consigliore is Prof Klaus Schwab, the German-born founder and executive chairman of the Geneva-based World Economic Forum, who is extremely close to this politico-industrial complex, particularly to Mr Bajaj. Each year, the Indians gather at an exclusive enclave that Professor Schwab organizes in Davos, Switzerland.

Those in the know say that in Davos, the group maps out priorities for the Indian economy. Each November, the World Economic Forum and the CII also organize a well-attended conference in New Delhi; it serves as a mixer for high-level government types and India's leading businessmen. The social highlight during this conference is a dinner given by New Delhi-based industrialist Mr Dhruv Sawhney and his wife Rati. Invitations to the dinner are prized by anyone who matters in the capital city. Over savoury curries and choice wine from Mr Sawhney's own cellars, considerable business is typically done.

"You don't mess around with these people," said Ms Sucheta Dalal, a leading economic analyst based in Mumbai. "They know how to get what they want. And they don't let anything, or anyone, come in their way."

Lest anyone have any doubts about the group's clout, consider this: some months ago, when Mr Atal Behari Vajpayee was Prime Minister, he journeyed from New Delhi to Lucknow to attend the weddings of Mr Shushanto Roy and Mr Shimanto Roy, the two sons of the founder of the Sahara Group, Mr Suboroto Roy. The Sahara Group owns a domestic airline and television interests. Its logo adorns the uniforms of India's national cricket team.

Not only was Prime Minister Vajpayee present at the Roy weddings, so were 10,500 other guests - top politicians and bureaucrats, film stars, media tycoons, and, of course, various industrialists paying tribute to one of their own. In addition to entertaining these guests over several days, Mr Roy also provided free meals to 140,000 poor people in Lucknow. And he paid for the wedding ceremonies of 101 poor couple, giving each US$4,400.

Mr Roy is a relatively newcomer to the politico-industrial complex. So are the Ruia Brothers, Shashi and Ravi, who run a huge complex of oil, energy and other interests, and are said to be close to Mumbai politicians such as Congress Party chieftain, Mr Murli Deora, a member of the same Marwari community as the Ruias. Mr Deora's 27-year-old son, Mr Milind Deora, was recently elected to the Lok Sabha from the South Bombay constituency, where many of India's top industrialists work and live. The senior Mr Deora, who once held the Lok Sabha seat, is now a member of the Rajya Sabha, the largely ceremonial 250-member upper house of parliament.

Also new to the power game are Mr Venugopal Dhoot and his brother, Mr Rajkumar Dhoot, who run Videocon Industries. Rajkumar, in fact, was recently elected to the Lok Sabha, the 545-member Lower House of Parliament. That he chose to become a legislator was somewhat unusual, however, since India's business power players generally prefer to flex their muscles away from the public limelight.

And they do flex those muscles at will. When the Reliance Group - which employs nearly 100,000 people - sought to make a late entry into India's booming telecommunications business a couple of years ago, all kinds of governmental regulations were hastily rearranged to accommodate the Ambanis. Their refinery at Jamnagar accounts for 25 percent of India's oil refining capacity. Their plant at Hazira is the country's biggest chemical complex.

It would be unkind to suggest that the politico-industrial complex acts only in its own self-interest. The Ambanis, for example, have made millions of Indians enormously rich because the value of shares in the Reliance Group has kept rising steadily over the years. One out of every four Indians who owns shares, possesses Reliance stock. The Ambanis, and other industrialists such as the Birlas, are also generous philanthropists, particularly contributing to educational causes. When the patriarch, Mr Dhirubhai Ambani - who started his career as a lowly petrol pump operator in Aden - died in 2002, there was national mourning.

The spectacular rise of the Ambanis displaced the Birla and Tata families from longstanding positions of pre-eminence in the industrial firmament. The Birlas, in fact, were among the main financial contributors to the Indian National Congress when figures like Mr Mohandas K. Gandhi and Mr Jawaharlal Nehru led India's struggle for independence from the British. In the early years after independence in 1947, they were rewarded with choice contracts, including a virtual monopoly in automobile production. Their enterprises include The Hindustan Times, the premier daily newspaper in New Delhi.

The founder of the Tata dynasty, Sir Jamshedji Nasarvanji Tata, established India's earliest cloth mills, and expanded his holdings to include the Tata Iron and Steel Company in Jamshedpur. The Tatas now produce automobiles and also run a successful consultancy service. But even though a Tata scion, Mr J. R. D. Tata was the original founder of the now-nationalized Air India, when the family recently tried to launch a new private airline in cooperation with Singapore, they were inexplicably denied permission by the Indian government. The unproven talk in India's business circles is that the Tatas failed to offer adequate emoluments to top bureaucrats.

Because the Nehru government instituted an asphyxiating system of licenses and permits, those businessmen who contributed to his ruling Congress Party profited the most. They also succeeded in keeping the Indian economy closed to foreign competition, at a time when such competition could have resulted in better choices for the country's growing millions. Bribes to government officials for the purposes of keeping the Indian economy insular were not unheard of.

The system of controls, known widely as India's License Raj, is being dismantled because of the pressures of globalization as India is forced to compete more vigourously in a world of faster capital flows and more demanding foreign investors. But the influence of the politico-industrial complex is, if anything, increasing.

Why? Because the cost of conducting elections and practicing politics is rising dramatically. The recent general election cost more than a billion dollars. It took more than US$2 million to run a satisfactory campaign in each of the 541 constituencies of parliament (four other seats are appointed). Only the plutocrats of the politico-industrial complex are in a position to supply the vast wherewithal needed to grease the wheels of democracy. They do so not out of any compelling belief in democracy but because it's good business. And with India's economy galloping at the rate of between 6 and 7 percent each year, business can only get better. At the end of the day, what matters is counting one's rupees.


India's three most powerful industrialists:

Mr Anil Ambani: Vice chairman and managing director of the Reliance Group. Is 44 years old. Holds master's degree in business administration from the Wharton School of Business of the University of Pennsylvania. Married to Ms Tina Munim, former film star, who's active in promoting art and also espouses philanthropic causes. Mr Ambani leads an athletic life, playing polo, jogging daily, and running in marathons. He also gives lively parties. Currently reported to be engaged in promoting development projects in Uttar Pradesh, India's most populated state with 170 million mostly poor people.

Mr Mukesh Ambani: Chairman of the Reliance Group. Is 46 years old. Holds master's degree in business administration from Stanford University. Leads a relatively reclusive life, preferring to read company reports rather than socializing. Like his younger brother Anil, is unfailingly courteous and affable, even to strangers.

Mr Rahul Bajaj: Chairman of Bajaj Auto Company. About 70 years old. Virtually dominates Indian streets with his scooters and tri-motor rickshaws. Studied in Europe and the United States. Active in the World Economic Forum in Switzerland. Highly accessible to the media, and is considered enormously popular in political circles.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist


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