You’ve Heard Jobless Growth, It’s Brandless Too

 Modi govt’s thrust on manufacturing is much-needed but it is pushing Indian manufacturing in the direction of outsourcing, same as our services industry

The Adani controversy brings to our attention some related aspects of India’s political economy. The most immediate one is the opposition’s allegation of cronyism. Which, when elaborated, becomes a larger theme encompassing the top four or five leaders of corporate India. You can add Ambani, Tata, Birla, and Vedanta to the list. All these qualify to be called conglomerates. They all have interests in diverse fields. This, to be sure, isn’t a definitive or comprehensive list.

The Tatas, for example, are often described as a salt-to-software group. They produce automobiles and military aircraft, run a massive and diverse airline business now, and also make steel. Mukesh Ambani’s Reliance Group spans a wide range of businesses too, from refining to telecom as the main course, to retail and even biosciences research, and some media thrown in the dessert trolley.

The Aditya Birla Group has interests in metals (aluminium in particular), telecom, cement, yarns and more. Vedanta is still mostly into metals but is now on the energy (oil and gas production) radar too. All these have three things in common One, they are all legacy or at least family-controlled enterprises. Reliance (Ambani) and Birla are empires founded by the previous generations. Vedanta and Adani have first-generation founders who control their businesses directly. The extent to which members of the family are in control of key businesses can vary, from Adani at one extreme to Tata at the other.

Two, all these have most of their businesses in areas where the government overhang is heavy and decisive. These are highly regulated areas and often — especially in the case of Adani — monopolies by definition. Think Mumbai airport and electricity distribution, or Mundra Port, or the mega plants with power purchase agreements. The same applies to refining and telecom, mining and oilfield concessions. A direct and extensive interaction with the state is critical to these.

Third, and the most important for this week’s discussion, is that none of them owns a truly global Indian brand. There will be protests from the Tatas, I understand, because they have the Taj Hotels and now Air India is back with them. I’d say with some humility that Taj is still not a hotel brand to awe the world — probably because they work in so many categories, from superluxury Palaces to the very working-class Ginger. And Air India was felled by the sarkari kiss of death decades ago, and it will take some doing now to bring it back to its old glory.

Much of the criticism Adani has faced in particular stems from his proximity to the Modi government, especially given how critical working with the state is for his main businesses. If running ports on India’s coast is a business fully regulated by the government, buying port assets overseas is impossible without a supportive government. Whether that’s a good thing or bad isn’t the question. In polarised debate it can often be seen as bordering on cronyism.

The Congress, for example, cites this as a case of the Modi government running foreign policy to “serve their friend Adani’s interest”. Others might see it as important that any g ove r n m e nt wo rk closely with powerful Indian conglomerates to compete overseas, especially with a rampant China with its Belt and Road Initiative and unlimited treasury. Similarly, think of the airports, highways, railways, tunnels, metros and much else that is being built in India now, as The Economist noted in its latest issue.

You’ll need companies that have deep pockets and large balance sheets to build so much infrastructure. Would you leave it to Bechtels of the world to come and do it for you, or would you rather have Indian conglomerates do it? Nobody can do it without working closely with the government, so that isn’t the issue. The debate, therefore, has to be about whether there is a level playing field for all comers. The Bechtels included. This state-corporate “cooperation” (nexus if you are conspiratorially minded) didn’t begin with the arrival of the Modi government.

Many of the big licences, contracts, and even environmental clearances for the Adani Group had come in the time of the UPA. Of course, they will insist they did it fairly after asking the right questions and giving all competitors an equal chance. But the fact is, there are so many areas in a growing economy with desperate hunger for infrastructure that private capital and the state will need to work closely together. We’ve discussed the Adani case in greater detail because it is the subject of most of today’s debate.

But all