The Rise of Crony Capitalism in India

By Shashikant Nishant Sharma

If democracy and economy is to flourish then there is a need to have a good mechanism to detect and prevent the rise of crony capitalism in India. This can be done only if multi pronged strategies are adopted for this. Our legal system should work in close collaboration with the academia to ensure that good practices are evolved and new policies are adopted to make our democracy and economy work independently yet in a holistic manner to enhance the quality of life of the millions of India who have faith in our constitution. 

Crony capitalism refers to a situation where businesses and individuals with close relationships to the government are given preferential treatment and advantages, often resulting in unfair competition and the misallocation of resources. India has faced several cases of crony capitalism over the years. The 2G spectrum scam, which came to light in 2010, involved the irregular allocation of 2G mobile spectrum licenses by the government. The scam resulted in a loss of billions of dollars to the exchequer. It was alleged that the licenses were sold at significantly undervalued prices to select companies with close ties to politicians and government officials. The coal scam, also known as “Coalgate,” involved the improper allocation of coal blocks by the government between 2004 and 2009. It was alleged that the coal blocks were allocated to private companies without following proper procedures, resulting in significant financial losses to the government. Many companies linked to politicians and influential individuals were accused of benefiting from the scam. The Commonwealth Games held in Delhi in 2010 were marred by allegations of corruption and mismanagement. It was alleged that contracts for various infrastructure projects related to the Games were awarded to companies close to influential politicians and government officials at inflated prices. The irregularities and misappropriation of funds led to public outrage and investigations. The Adarsh Housing Society scam, which surfaced in 2010, involved the illegal construction of a high-rise residential building in Mumbai. The building was initially intended to be a housing project for war veterans and widows, but it was alleged that influential individuals, including politicians and bureaucrats, obtained flats in the building through fraudulent means. The scam highlighted the nexus between politicians, bureaucrats, and real estate developers. Vijay Mallya, the former chairman of Kingfisher Airlines, faced allegations of crony capitalism and financial irregularities. It was alleged that he received preferential treatment from banks and politicians, including access to loans and financial assistance, despite the deteriorating financial health of his airline. Mallya left India in 2016 and is currently facing extradition from the United Kingdom.

These are just a few instances of alleged crony capitalism in India. It’s important to note that allegations are not proof of guilt, and legal proceedings and investigations are often ongoing in such cases. Curbing the rise of crony capitalism requires a comprehensive approach involving various stakeholders, including the government, regulatory bodies, and civil society. We need to enhance transparency in decision-making processes and public procurement. Government should implement measures such as e-auctions, online portals, and open bidding systems to ensure a level playing field for all businesses. There is a need to establish effective mechanisms to hold public officials and politicians accountable for any corrupt practices or undue favors. Time has come when a system of robust regulatory framework can be implemented and enforced strictly in conjunction with regulations and laws to prevent the abuse of power and manipulation of the system. While planning we must ensure that regulatory bodies have adequate resources and independence to perform their duties effectively. Regularly review and update regulations to address emerging challenges and loopholes. The competition commission of India should act in a progressive manner to foster a competitive market environment by breaking up monopolies and promoting fair competition. Encourage the entry of new players, both domestic and foreign, in various sectors. Empower competition commissions to monitor and take action against anti-competitive practices.  The dress of Anna Hazare can be realized only by implementing and enforcing strong anti-corruption laws. All government departments should try to establish specialized anti-corruption agencies with adequate resources and independence to investigate and prosecute corruption cases. Encourage whistleblowing and protect whistleblowers from retaliation. Promote a culture of integrity and ethics in both public and private sectors. As envisioned by the makers of the constitution of India, we should ensure judicial independence and expedite the resolution of commercial disputes. Establish specialized courts to handle cases related to corruption and economic offenses. Streamline legal procedures and reduce the backlog of cases to ensure timely justice. On the pattern of Atal Bihari Vajpayee Institute of Good Governance and Policy Analysis (AIGGPA) as set up by the government of Madhya Pradesh to strengthen institutions and promote good governance practices at all levels. Encourage transparency in political funding and electoral processes. Implement effective measures to prevent the misuse of public funds and resources. After the setting up of the AIGGPA, in Madhya Pradesh there has been enhancement in the efficiency and accountability of government institutions and bodies in the state of Madhya Pradesh.

We should encourage the active participation of civil society organizations, non-governmental organizations, and the media in monitoring and exposing instances of crony capitalism. All institutions must support investigative journalism and protect the freedom of the press. Foster a culture of public scrutiny and accountability in the youths so that they can be the next leaders and businessmen. Government must implement robust financial and corporate governance practices. Enhance disclosure requirements for companies, particularly those related to beneficial ownership and related-party transactions. We must encourage adoption of auditing and accounting standards to ensure accurate and reliable financial reporting. To ensure transparency and fair competition in PPP projects we must encourage close collaboration of the public and private sectors in delivery of services. We must develop clear guidelines and criteria for project selection and bidding processes. Implement effective monitoring and evaluation mechanisms to prevent favoritism and ensure accountability in PPP projects. Government should undertake structural economic reforms to reduce excessive government intervention and promote market competition. Simplify and streamline regulatory processes to facilitate ease of doing business. Government must encourage entrepreneurship, innovation, and investment in sectors that promote inclusive growth. It’s important to note that curbing crony capitalism is a complex and ongoing process that requires consistent efforts and the involvement of all stakeholders. It necessitates a commitment to integrity, transparency, and ethical governance from both the government and the private sector.

References

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