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Business and Politics in India
MODERN SOUTH ASIA
Ashutosh Varshney, Series Editor
Pradeep Chhibber, Associate Series Editor
Editorial Board
Kaushik Basu (Cornell University)
Steven Cohen (Brookings Institution)
Veena Das ( Johns Hopkins University)
Patrick Heller (Brown University)
Niraja Gopal Jayal ( Jawaharlal Nehru University)
Ravi Kanbur (Cornell University)
Atul Kohli (Princeton University)
Pratap Bhanu Mehta (Centre for Policy Research)
Farzana Shaikh (Chatham House)
1
1
Oxford University Press is a department of the University of Oxford. It furthers
the University’s objective of excellence in research, scholarship, and education
by publishing worldwide. Oxford is a registered trade mark of Oxford University
Press in the UK and certain other countries.
1 3 5 7 9 8 6 4 2
Paperback printed by WebCom, Inc., Canada
Hardback printed by Bridgeport National Bindery, Inc., United States of America
CONTENTS
Acknowledgments vii
List of Contributors ix
1. Introduction 1
C h r i s t o p h e J a f f r e l o t, At u l K o h l i , a n d K a n ta M u r a l i
v
vi Contents
Index 319
ACKNOWLEDGMENTS
This project was conceived over a lunch conversation between Atul Kohli and
Christophe Jaffrelot on the Princeton campus. Atul then applied for a grant to
the Princeton Institute for International and Regional Studies (PIIRS). This
facilitated the conference that led to this volume. Thanks are thus due to the di-
rector of PIIRS at that time, Mark Beissinger, for funding this project. Christophe
and Atul then invited Kanta Murali to join as the third editor. All three chose
the paper writers. In addition to the paper writers, five other scholars joined the
small conference at Princeton: Amrita Basu, Kanchan Chandra, Devesh Kapur,
Sanjay Ruparelia, and Vinay Sitapati. We would like to thank them for their
helpful comments on the early drafts of the papers that appear in this volume.
When Atul presented an outline of the project at the meetings of the American
Political Science Association in 2016, Ashutosh Varshney was kind enough to
invite us to submit the volume for consideration in the book series he edits for
Oxford University Press. We thank Ashutosh Varshney for this opportunity. Two
anonymous reviewers also need to be acknowledged for their useful suggestions
for revisions.
vii
CO N T R I B U TO R S
ix
x Cont r ibutors
Aseema Sinha is the Wagener Chair of South Asian Politics and George
R. Roberts Fellow in the Department of Government at Claremont McKenna
College.
Michael Walton is Senior Lecturer in Public Policy at Harvard Kennedy School.
Andrew Wyatt is Senior Lecturer in the School of Sociology, Politics and
International Studies at the University of Bristol.
Business and Politics in India
1
Introduction
Christophe Jaffrelot, Atul Kohli, and Kanta Murali
Over the last few decades politics in India has moved steadily in a probusiness
direction. The earlier state commitment to socialism and redistribution has
been replaced by the goal of growth promotion via support for private enter-
prise. Unlike in many other developing or communist countries, this important
shift in India has been incremental; it has come about within the frame of de-
mocracy and without any dramatic regime change. It has also led to a political
strengthening within India of indigenous—instead of foreign—capital. The
probusiness shift in India has important implications for both how the world’s
largest democracy is governed and for the life-chances of the citizens of that
democracy. In this volume we seek to analyze the growing power of business
groups in the Indian polity.
A study of the role of business in Indian politics is of both normative and
scholarly significance. As India’s economy modernizes rapidly, with the private
sector in the lead, some shift in political power toward business groups is to be
expected; to an extent, this change is par for the course. Moreover, business
groups in any capitalist economy are central economic actors and legitimate
participants in the political process. However, the legitimacy of a democracy
rests on a variety of citizens and groups having access to power; veto power held
by any narrow group threatens to transform a democracy into an oligarchy. The
struggle between the power of wealth and the power of numbers is a perennial
one in all capitalist democracies. What is important for democracy to flourish is
that this struggle is not won once for all by either side.
The moral argument that might support growing concentration of wealth
and power would be that such an arrangement helps create greater wealth that
will eventually reach the poor. What this standpoint ignores, however, is an om-
nipresent political question: once the rich come to control the state, and state
power becomes more and more privatized, what political pressures will push the
state to undertake tasks that serve the broader good? With an enormous number
1
2 Chr istophe Ja ffr elot, Atul Kohli, Ka nta Mur a li
of poor in India, the Indian state faces giant public responsibilities. Beyond pov-
erty alleviation, these responsibilities include provision of education, health,
and infrastructure among others. The more the state caters to narrow, private
interests, the greater the danger that the public functions of the state will become
a distant second concern. Of course, the “socialist” Indian state of the past hardly
proved itself a successful agent of inclusive development; it would thus be unfair
to attribute the present failures of the Indian state to the growing power of busi-
ness. Nevertheless, it is the case that, with growing wealth and public revenues,
it becomes possible to imagine effective state intervention, aimed at promoting
the public good. It need not be added, but we will, that the Indian state at present
is hardly effective enough to initiate such public actions; for a journey in that
direction to even begin, what will be needed in the future are political leaders
who prioritize broader goals over narrow collaboration with the economic elite.
must take into account the preference of business groups, both to maintain the
health of the economy and to secure their own political futures. Since investors
can readily move their investments to more favorable locations, the threat of
capital flight is often enough to pressure leaders to pursue probusiness policies.
Though scholars may disagree as to which is more prevalent and important—
instrumental or structural power—most scholars are likely to agree that the
power of business operates via both pathways. We will discuss these general
considerations again in subsequent chapters of this volume.
Beyond advanced industrial democracies, scholars have also begun to ana-
lyze the role of business in the politics of developing countries (e.g., Handley
2008; Hundt 2009; Schneider 2004; Winters 2011). India is a prime developing
country for such studies because of its robust democracy and because of the shift
to probusiness economic policies since the 1980s. It is not surprising, then, that
scholars of politics and society in India have disagreed in their assessment of the
relative power of business groups within the Indian state, as well as on how this
power is exercised. While some scholars have suggested that Indian capitalists
exercised disproportionate power in the making of modern India (e.g., Chibber
2003), most have suggested that business groups in “socialist” India—say, prior
to the 1980s—competed for influence with other powerful groups, such as
landed classes and the state elite (e.g., Bardhan 1984; Raj 1973; Kochanek 1974;
Rudolph and Rudolph 1987). Since economic liberalization, however, there is
a growing sense among scholars that the power of business groups in India has
expanded, maybe even dramatically (e.g., Kohli 2012). This shift in balance of
power, in turn, points to new issues that are probed systematically in the studies
that are included in this volume.
In this volume we pursue several research questions aimed at focusing atten-
tion on the growing role of business in Indian politics. First, we seek to assess
the power of business groups: has the power of business achieved a nearly heg-
emonic status? As one might imagine, this question will be difficult to answer
categorically, especially because of the nebulous nature of power. Still, we seek
to understand if the power of business in India has expanded from veto power—
where business groups in the past could block changes that threatened their
interests—to agenda-setting power, that is, power to mold future patterns of
political and social change. Moreover, as noted above, hegemony implies some-
thing more than acquisition of raw power; it suggests a degree of legitimacy asso-
ciated with the exercise of that power. So we also seek to understand if business
groups in India are increasingly capable of transforming power into authority.
Second, whether business power is becoming hegemonic or not, how do
business groups mold Indian politics? Scholars of power have well understood
that the powerful do not always need to explicitly demand what they want. This
is what is meant by structural power. Producers, bankers, and owners of capital
4 Chr istophe Ja ffr elot, Atul Kohli, Ka nta Mur a li
occupy pivotal positions in the structure of any private economy. As the role
of private business in India’s overall economy has grown, how have politicians
responded to such changes in the structural power of business? In addition, busi-
ness groups consciously seek to influence the political process; we seek to under-
stand these efforts too. Conscious strategies in India vary from well-organized
efforts via chambers of commerce to personalistic efforts that many characterize
as crony capitalism.
And finally we seek to understand how the power of business groups in India
varies along several dimensions.3 At the national level we probe the capacity of
business groups to achieve favorable policies in such critical areas as acquisition
of land and control over labor. More diffusely, we explore the manner in which
business influences the functioning of Indian media and seeks to mold urban
spaces. And, of course, given India’s regional diversity, we seek to understand the
varying political role of business groups in select Indian states.
In this brief introduction to the volume we provide some historical back-
ground that helps situate the role of business in the Indian political economy,
first in the pre-1980 period—the so-called socialist phase of the Indian political
economy—and then over the last few decades as the role of the private sector
has expanded steadily. While the basic factual information is likely to be well
known to specialists, the interpretation we provide is just as likely to be distinct;
moreover, nonspecialists may want a quick overview before moving to more
specialized essays. We then finally lay out the plan of the volume, including brief
summaries of the essays that follow.
Historical Background
The socialist Indian state of the past, say, from 1950 to 1980, was never deeply
antibusiness. For that matter, this state was also never totally beholden to busi-
ness interests. The reality of state-business relations in India during the socialist
phase lay somewhere between these extreme but popular misconceptions.
While the state was very much in the lead, India was also very much a private
enterprise economy. The political and economic elite forged a working relation-
ship during much of this period, cozy at times but uneasy at other times. State-
business relations during this early phase are thus best thought of as varying
along several dimensions: over time, along issue areas, and across regional states
of India.
Following independence, the Congress Party inherited a moderately well-
functioning colonial state and then modified it in line with its own interests and
ideology. If the economic focus of the early British colonial state in India was the
collection of land revenues, the late colonial state, say, post-1857, was concerned
Int roduc tion 5
mainly with keeping the Indian economy open for British manufactured goods.
This was a law-and-order state that played a minimal role in fostering economic
development. In spite of economic neglect, a number of private industries
emerged in India during the late nineteenth and the first half of the twentieth
centuries: for example, a jute industry—largely British owned—flourished in
eastern India; Parsis, Marwaris, and others pioneered textile industry in western
India; Tata initiated steel production prior to World War I; and during the in-
terwar years sugar, paper, glass, and even shipbuilding were initiated by Indian
industrialists (for details, see Bagchi 1972; Ray 1979; Tomlinson 1993). While
the share of large private industry in India at the time of independence was only
7–8 percent of the national product, a small but significant number of large
Indian business houses had already made their appearance; these included Birla,
Tata, Dalmia, Walchand, Shri Ram, Thapar, and Singhanias.
Indian business groups were already politically active in the first half of the
twentieth century (Low 1988). While early Indian industrialists sought to work
with the colonial state, following World War I the relations between these busi-
ness groups and Congress leaders grew warmer. For example, Indian industry
did rather well during World War I but then suffered as British imports resumed.
Indian industrialists, especially in textile and steel, then lobbied the colonial
state furiously for some protections, but largely in vain.4 Gandhi and others
in the Congress Party then took up the cause of government support for pri-
vate Indian industry.5 Indian business groups in turn started providing financial
support to the Congress, with Gandhi as a key intermediary. The Left within
the Congress was of course suspicious of such links. Nevertheless, the uneasy
dance between the Congress and Indian business groups had begun well before
World War II (e.g., Markovits 1985). Indian business then became organized
as a national chamber of commerce. Anticipating independence—and suspi-
cious of the Left within the Congress, especially Nehru—Indian industrialists
produced the so-called Bombay Plan in 1943 to influence economic policy of a
Congress-led government of sovereign India. Key elements of this plan—such
as planning, a mixed economy, protectionism, and public investment in heavy
industry—eventually converged with Nehru’s preference for a state-led, “so-
cialist” economy (Rothermund 1986).6 By mid-century, then, Indian capitalists
and nationalists had created a working relationship of sorts that fluctuated be-
tween mutual suspicion and mutual cooperation.
State-business relations in Nehru’s India need to be understood within the
political context of the period (e.g., Naseemullah 2017). After the death of
Gandhi and Patel, Nehru emerged as India’s unquestioned leader, and his brand
of left-leaning nationalism became India’s dominant ideology. Simplifying dras-
tically, we can say that Nehru’s priority was to build a strong, modern India, with
the Indian state in the lead (Gopal 1984). The approach to the economy—and
6 Chr istophe Ja ffr elot, Atul Kohli, Ka nta Mur a li