Two of India’s richest men have landed in an unlikely controversy over agricultural laws, becoming the target of protesters who claim the tycoons have benefited from their close ties to Prime Minister Narendra Modi.
For weeks, tens of thousands of farmers camped outside the nation’s capital, demanding the withdrawal of recently passed legislation, they say, without proof, intended to allow billionaires such as Mukesh Ambani and Gautam Adani to get into agriculture. The tycoons say they have no such interest. More than 1,500 Ambani wireless operator’s telephone towers were vandalized last month and some farmers have called for a boycott of their businesses.
The struggle between government and farmers has reignited debate over what Modi’s critics call a comfortable bond between the tycoons and the popular leader – accusations they all denied. The protests, one of Modi’s most difficult political challenges to date, follow a turbulent 2020 when the combined fortunes of Ambani and Adani swelled by nearly $ 41 billion, even as Millions of Indians have lost their jobs due to the pandemic that devastated the $ 2.9 trillion economy.
“Everyone likes to hate the rich in times of economic crisis,” said Sanjiv Bhasin, director of investment management firm IIFL Securities Ltd. in Mumbai. “People are expressing their anger at the social disparity. This is indeed a new commercial risk for these large conglomerates. But all the noise will stop when the economy begins to grow.
Highlighting the disparity, an Oxfam report released in January 2020 said India’s richest 1% had more than four times the wealth of 953 million people, who make up the poorest 70% of the population. from the country. The wealth of the country’s top nine billionaires equals the wealth of the poorest 50 percent of the population, according to the nonprofit that works against inequality.
A serious threat?
New agricultural legislation, passed in September, will allow private companies to buy their produce directly from farmers, abandoning the decades-old system of state-run buyers and wholesale markets that guaranteed a minimum support price. . India’s highest court last week barred law enforcement until the court rules on the matter.
Farmers, mostly in the northern Punjab state, fear that the removal of state support will leave them vulnerable to market-induced price fluctuations, despite government assurances that a minimum support price safety net will continue. About 800 million of the country’s more than 1.3 billion people depend directly or indirectly on agriculture, which gives the group political clout.
Modi, who won a second consecutive five-year term in 2019 with an even larger majority, has tweeted multiple times to allay concerns, saying the new laws would cut out middlemen, make farmers more prosperous and India self-sufficient. .
Still, Modi risks letting this political snowball headache into a serious threat. After calling his administration years back as a “costumed ki sarkar” – that is, a government that favors the business elite over the poor – opposition parties seize the opportunity to strike it down. .
In response to the accusations, Ambani’s $ 174 billion conglomerate, Reliance Industries Ltd., issued a statement earlier this month saying it had never engaged in contract farming or acquired any farmland. to this end, and did not plan to do so. It has also pledged to ensure that its suppliers will pay farmers the minimum prices prescribed by the government. The Adani group said in a statement last month that it does not buy food grains from farmers and does not influence prices.
Spokesmen for the groups Reliance and Adani did not respond to emails requesting comment on the protesters’ claims or the wealth disparity in India. Representatives of the Modi administration and the prime minister’s office in New Delhi did not respond to emails seeking comment.
Align business strategies
Adani and Ambani are both from Gujarat state in western India, as is Modi, who served as head of state for over a decade. The two tycoons have repeatedly aligned their business strategies with Modi’s nation-building initiatives.
About two decades ago, Adani solidified his ties with Modi by publicly supporting him when a crisis threatened to end the politician’s growing career. Modi was attacked by rivals and businessmen who accused him of failing to prevent bloody sectarian riots in his home state in 2002. Adani created a rival regional industrial lobby and helped launch a Biannual Investment Summit in Gujarat in 2003 which boosted pro credentials.
Like the famous South Korean chaebol, Indian conglomerates have been at the forefront of India’s economic growth, especially since a currency crisis forced the government in 1991 to revisit decades of planning Soviet style. The modest reforms launched three decades ago have begun to allow private investment in sectors mainly controlled by the government. With strained public finances, the capital-strapped economy has increasingly turned to these tycoons to invest and create jobs.
Ambani spent most of 2020 raising $ 27 billion in equity investments – a record for India – for its technology and retail operations from investors such as Google and Facebook Inc. He has defined an ambitious plan to make these units a strong rival for local e-commerce. to Amazon.com Inc. and Walmart Inc. The Adani Group, which started as a commodities trader in 1988, has rapidly grown to become the leading private sector port operator and power producer in India.
“India’s position is similar to the American Golden Age, with Ambani and Adani as the modern Rockefellers and Vanderbilts in the second half of the 19th century,” said James Crabtree, author of The Billionaire Raj: A Journey Through India’s New Gilded Age.
During the so-called Golden Age, the United States experienced rapid growth and industrialization, mostly led by a group of powerful business families. But it also led to worsening inequalities that sparked labor unrest and railroad strikes. The US government finally intervened.
To be fair, many East Asian countries followed this development path relying on their “favorite nation-building tycoons,” Crabtree said, but they were mostly autocratic regimes. . “The questions for India are: is this the right model, and can India even succeed?”
Farmers who protest worry about the scale of the ambitions of the two magnates. They are pushing for the laws to be withdrawn and demanding a guaranteed minimum support price for their products.
“Farmers believe that these two big companies have ties to India’s power center and have become symbols of crony capitalism,” said Darshan Pal, a senior leader of the Krantikari Kisan Union of the Punjab.
Meanwhile, Adani’s offer for an airport lease is met with opposition after the local government in the southern state of Kerala legally challenged it. A state minister said last year that Adani winning the nomination was “an act of cheeky cronyism.”
In an Indian court, the Adani Group dismissed the claims and said it won the offer through a competitive process. The Supreme Court is expected to hear Kerala’s appeal soon, after a lower court ruled in Adani’s favor.
In the aftermath of the protests, many Reliance retail stores have remained closed for months in the Punjab, causing millions of dollars in losses. Appealing to the Punjab government last month, Reliance demanded protection for its infrastructure and workers, according to a letter seen by Bloomberg News, the contents of which were confirmed by a company spokesperson. The conglomerate also went to court for redress.
“Until the income and opportunity gap is significantly narrowed by state policy, we can expect those at the top of the pyramid to invite the wrath of the growing base. of unjust and unequal India, ”said Nikita Sud, who teaches international development. at the University of Oxford.