Foreign visitors frequently ask me for myassessment of India’s prospects. I tell them that economicmanagement is improving, but governance is deteriorating, and beyond a point deteriorating governance can make good economic management impossible.
This has already happened in Bihar: Economic liberalisation can do nothing whatsoever for that benighted state.Governance is far better in the rest of India, yet we increasingly take the criminalisation of politics and business for granted, as part of the background noise rather than an alarmbell.
When I say this, foreign visitors usually think Iam talking about tax fraud or excise evasion. No, no, I tell them, I am talking about assault and murder. They look incredulous: Surely you are exaggerating, they say. No, I reply, the Election Commission itself has estimated that 40 MPs and 700 MLAs face criminal cases, many for assault and murder. The visitors are horrified: How on earth can people vote for criminals, they ask. Because, I reply, when the law is so ineffective that nobody is jailed for anything, then criminals become more effective than honest people.
Nitish Kumar said famously after the last Bihar election that you cannot defeat a criminal by acting like a gentleman. So all parties have got criminalised. They now compete less on the basis of morality than effectiveness. And when governance is weak, the mafia can be very effective.
When the polity gets criminalised, business cannot be far behind. Embezzlement, fraud, tax evasion and white collar crimes of every kind have long been common in business. A newer trend is to have connections with the mafia: This can translate into business clout. And, far from being treated as a pariah, a businessman with mafia connections can command respect and popularity.
You think I am joking? Well, just look at the two big public issues of shares in the market today. One issue comes from Hughes Tele.Com, a well-known MNC which is expanding in the telecom business. The second issue comes from Tips Industries, which holds the music rights of several leading movies (Rangeela, Taal,Biwi No. 1) and is a major player in music CDs and tapes. The fine print of this company’s public issue contains an interesting disclosure: One of its promoters, Ramesh Taurani, has been charged in connection with the murder of Gulshan Kumar, the former king of Indian music piracy, in 1977.
Now, in any economy with decent governance, it would be impossible for an accused in a murder case to come out with a successful public issue. The regulatory authorities would not stop him: Every person is regarded as innocent till proved guilty. But in most countries, the media would have blazing headlines on an alleged murderer having the gall to ask the public to invest in a venture clouded by mafia links and suspicion of murder. The investing public would refuse to touch such a public issue, seeing it both immoral and risky. At the very least they would wait for an acquittal before entrusting their funds to such a company.
That is not the case in India. Far from being diffident, Tips Industries is asking investors to pay a whopping Rs 325 for shares with a face value of Rs 10–that is, a premium of Rs 315 per share. By contrast the famous MNC, Hughes, is asking for no more than Rs 12 per share. The company with the accused murderer is seen as having far better prospects than a mere MNC.
The comparison is not entirely even-handed. Hughes is launching a new and very capital-intensive company which may not make money for years. By contrast, Tips is a well-established and highly profitable company. Yet my foreign visitors are dumb founded with astonishment (and a creeping sense of terror) when I tell them that Indian society has become so criminalised that criminal businessmen are becoming objects of envy rather than ostracism.
The late Kumar started as a music pirate, mass-producing cheap copies of hit songs and undercutting legitimate music companies which paid royalties. Later he launched a legitimate brand, T-Series, but was always seen as having a foot in both worlds, the legitimate and illegitimate. Now, pirates naturally have a host of enemies. In 1997, hired gunmen pumped 15 bullets into Kumar. Not only did the pirate die, so did his piracy business.
The police investigated the crime and concluded that it had been committed by the Chhota Shakeel gang at the instance of music director Nadeem and Taurani. Nadeem fled to London, but Taurani stayed, and is currently being tried for abetting the murder. Not many people expect him to be convicted. Because of the interminable delays of our legal system, plus the corruption and incompetence that cripples prosecutory efforts, virtually no resourceful person is convicted of anything.
Far from being ostracised, Taurani is widely viewed as an effective businessman. Others in the music business tried to use legal processes to enforce intellectual property rights (IPRs) and stop piracy. They failed miserably because of the pathetic quality of governance in India: Neither the administration, police nor courts are effective. The person who really succeeded in reducing piracy acted outside the law, by killing Kumar.
In our diseased climate, accusing Taurani of murder translates into calling him an effective manager finding novel solutions to the problem of weak governance, enforcing his IPRs through somewhat unusual means.In such circumstances, I suspect that the Tips Industries issue will be a success.
There is a lesson in this for Veerappan. He really should float a new issue at a premium of Rs 1,000 per share. I am sure it will be oversubscribed. He can then end his life of hardship in the jungle and retire to an international tax haven like the Cayman Islands. I am sure both SM Krishna and Karunanidhi will underwrite the issue.