India’s turn towards oligarchy – Part 1

Ashraf Engineer

January 25, 2025

EPISODE TRANSCRIPT

Hello and welcome to All Indians Matter. I am Ashraf Engineer.

What happens when power – political and economic – is concentrated in the hands of the very few? What is the impact of such concentration on a country?

In recent times, the word ‘oligarchy’ has been uttered frequently. Joe Biden referred to it in his farewell speech as US President and we’ve heard often that India is turning into one. So, what exactly is an oligarchy and what does it mean in the Indian context?

Oligarchy, as I indicated, is a political system where power lies in the hands of just a few individuals or a single class. This group can have that power due to numerous factors such as wealth, connections, political influence… Such a system has a corrosive effect on democracy, where ideally power should be distributed broadly, where everyone has a say, where everyone has the opportunities to access power.

In India, it’s the owners of very large business conglomerates that are attaining oligarch status. But, before we get into that, let’s set some context.

For India’s rapid economic development, high growth rates are seen as essential. So, industrialisation and a reliance on the private sector to achieve this goal is thought to be the right way forward. There’s nothing wrong with that, but what’s needed is not just rapid but inclusive growth – where all sections of society benefit. That, unfortunately, is not happening. Political leaders find it more convenient to ally with the very wealthy and use that to attain and stay in power. Naturally, this means that power remains with those few and increases with time. These are the oligarchs and they present a threat to our democracy.

Underscoring the threat of oligarchic capitalism, economist and former Reserve Bank of India Governor Raghuram Rajan had observed that, after Russia, India has the most billionaires in the world per trillion dollars of GDP. This, too, indicates that income and capital are accumulating in the hands of a few. And this economic power translates into massive political power. These people are in a position to not just influence but build a whole new body politic.

So, who are these people? India’s top industrialists are well known and so much has been spoken and written about the proximity of billionaire Gautam Adani to Prime Minister Narendra Modi. Adani is India’s second richest person and his rise has mirrored that of Modi’s. This proximity has been raised in Parliament and in the international media. The Adani Group has even faced allegations of stock market manipulation and other discrepancies.

Depending on which side of the political divide you’re on, Adani is either a poster boy of India’s economic growth or emblematic of everything that’s wrong with it.

But it’s not just Adani. The increasing influence of others, like Reliance Industries led by Mukesh Ambani, has also been the subject of much scrutiny. It’s almost as if there is no limit to wealth-induced power.

What does the rise of oligarchs mean for India and India’s democratic order? All Indians Matter tries to explore the answers in a special two-part series.

SIGNATURE TUNE

What are the characteristics of an oligarchy?

First of all, as I’ve said earlier, the concentration of power among a small group of individuals or organisations. Second, the wealth results in influence over political decisions. With the concentration of this influence, that of the common citizen reduces. Lastly, it means that power passes on to generation after generation of the same group. This ensures dominance of the economy and politics for large periods of time.

Now, if all of this sounds the very opposite of a democracy, it’s worth understanding that oligarchies have flourished in modern times despite the existence of democratic institutions. So, on the face of it, Russia is a democracy but it’s a small group of business owners that exert decisive influence over the government. India, too, has a functioning democracy on the face of it but it has been termed an ‘electoral autocracy’, due in no small part to the transition of power from the people to the oligarchs in addition to shrinking freedoms and other such factors.

So, what is the social impact of corporate interests heavily influencing political decisions? What happens when just a few people can shape policies in their favour?

Among the immediate impacts is the widening of economic inequality. One of the most shocking things to emerge in recent times was that inequality is worse today than it was during the British Raj. While the average citizen reeled from the economic impact of COVID-19, our billionaires got richer. How does such a thing happen?

It’s not just wealth disparities; social inequalities widen too. Even those of education and opportunity widen for the less powerful. This, in turn, limits social mobility. If income and opportunity are elusive, individuals from lower social strata cannot advance and this further strengthens existing power structures.

There is, of course, corruption too. Oligarchies are dependent on quid pro quo and this undermines not just the rule of law but also trust in institutions. This is a further stifling of the democratic process.

Incidentally, ‘cronyism’ is not a new term in India. The Congress and Congress-led governments were often accused of it and it was one of the reasons the United Progressive Alliance, or UPA, was voted out. There was the allegation of largescale wrongdoing, such as the so-called telecom scam.

We have heard of cronyism even in the so-called tiger economies of the 1990s and in the US and Europe. Like in so many places, it has deep roots in India.

Ironically, it’s the very people who accused previous governments of cronyism that are now facing allegations of it themselves. In fact, it’s under Modi that India is seen to be moving a notch higher, from cronyism to oligarchy.

As Modi won term after term, Adani’s fortunes rose too. Adani’s companies have been handed government contracts as well as controversial loans and they have expanded aggressively abroad too. One example of beneficial behaviour was the Adani power plant at Godda in Jharkhand being designated a special economic zone in 2017, which benefited the group by roughly Rs 500 crore. In 2019, the Modi government awarded Adani the rights to operate six newly-privatised airports. At the time, the group had no experience in airport management.

No wonder Leader of the Opposition Rahul Gandhi said in Parliament that, during his Bharat Jodo Yatra, youth after youth asked how Adani had managed to rise so quickly and how they could do the same. Indeed, the group today has private railways and power lines, it has purchased coal mines in Indonesia and also controversially in Australia, transporting their output into India through its own port. This gives it an integrated supply chain – a rarity and a huge competitive advantage.

Adani’s companies began taking off soon after Modi was anointed chief minister of Gujarat in 2001. The Adani Group expanded like never before and became the unspoken showcase of the so-called Gujarat Model.

In 2018, Adani received a glut of contracts to set up and operate piped natural gas networks and fuel stations. For the 126 tenders floated, 23 entities submitted bids. The Adani Group won 25 bids either on its own or in a joint venture with the government-owned Indian Oil Corporation.

Much of the group’s expansion has come through acquisitions too. In 2018, it acquired Reliance Power’s electricity transmission business in Mumbai, GMR’s thermal power project in Chhattisgarh, Larsen & Toubro’s Kattupalli port in Tamil Nadu and a power transmission line in Rajasthan.

Such is the proximity that, when Modi became prime minister and in the first four years of his term he travelled to 52 countries, Adani was with him on several of these trips.

One of the characteristics of oligarchy is that, if power is to be concentrated in the hands of a few, it also means that India’s economic journey will be dependent on them. As I’ve said earlier, this is not a winning strategy. We are seeing that it has failed to give us broad-based development or sufficient employment generation. We are witnessing declining consumption and investment rates, and severe environmental degradation. The government pays much lip service to small and medium-size companies but it has failed them. These businesses are collectively the largest employers of India and are crucial to the economy.

No wonder that when the poor struggled to put food on their plates during the COVID-19 pandemic, Adani added more than $50 billion to his net worth.

As things stand, India is facing a serious economic risk – that of falling into the middle-income trap. That happens when a country’s median income is stuck in the middle-income bracket even as its economy continues to grow. What this means is that common citizens stay in the same place or regress, financially speaking, while the super-wealthy get exponentially richer.

This happens when oligarchy distorts the economy and policymaking in order to serve its own interests at the expense of the vast majority. Unless India changes course and radically overhauls economic governance, it risks going the way of Russia and the Latin American countries that have turned into deep oligarchies.

With that, we come to the end of Episode 1 of this special series. In the final part of the series next week, we will discuss the impact of oligarchy on democracy and what our response as citizens should be.

Thank you all for listening. Please visit allindiansmatter.in for more columns and audio podcasts. You can follow me on Twitter at @AshrafEngineer and @AllIndiansCount. Search for the All Indians Matter page on Facebook. On Instagram, the handle is @AllIndiansMatter. Email me at editor@allindiansmatter.in. Catch you again soon.