The Billionaire Raj: A Journey Through India's New Gilded Age

by James Crabtree

If you take billionaire wealth as a proportion of national output, the super-rich do best of all in Russia, whose powerful oligarchs are renowned for their lavish lifestyles and corrupt business dealings.8 But India now often ranks close behind, with a new super-rich business class sometimes jokingly dubbed the “Bollygarchs,” for their ability to bring together much the same mixture of industrial might and intimacy with power.

The Bollygarchs borrowed huge sums from local banks and invested it all—with gleeful abandon—in one of the largest deployments of private capital since America built its railroad network more than a century and a half earlier.

Traveling around India, I became fascinated above all by the empire builders: those who grew powerful in politics and business during the mid-2000s boom and were then forced to grapple with their aftermath, especially as the tide began turning after Modi’s election victory in 2014. These were people who dealt with India as they found it, not as they would have liked it to be. They displayed ambitions on a scale that no longer seemed possible in the sanitized capitalism of the West. Even the vocabulary used to describe them was dredged up as if from a different era: baron, boss; magnate, mogul; titan, tycoon.

A petrol pump attendant turned industrial titan, Dhirubhai Ambani’s was corporate India’s most celebrated rags-to-riches story.

“Lots of chandeliers. The chandeliers have chandeliers.”

Antilia hinted at an existence that was part burlesque fantasy, part oligarch mansion, part Bond villain lair: a city within a city, and a barrier against the chaos below.

“Too many businesses were accumulating wealth because of their ability to manage the government rather than manage innovation,” he told me. “I felt angry. The economy was being manipulated for very few people. This was a collusive system.”

Political risk analyst Ian Bremmer defines emerging economies as those in which “politics matters at least as much as economic fundamentals for market outcomes.”

In the early years after its 1991 reforms India’s new billionaires operated mostly in areas like IT services, which had little in the way of rent-seeking. But as the economy took off and globalization jacked up demand for things like commodities and land, so the wealth of billionaires shot up most of all in rent-thick sectors, from mining and property to cement, infrastructure, and telecoms.

That said, the Bollygarchs tended to be easy to spot. They operated mostly in rent-thick industrial sectors, running tightly controlled family-owned businesses. Their affairs were almost always organized as sprawling conglomerates, rather than narrowly focused enterprises with the kind of distributed shareholding structures common in Western companies.

There was even a special local word for the tycoons themselves: “promoters,” a term that referred to the individual or family who owned most of the equity in the business and who in turn tightly controlled its operations. The business of rent-seeking in India led many tycoons to build up sophisticated influence machines.

There were more indirect techniques of influence too, as prominent tycoons expanded their business operations to open hospitals, schools, hotels, and newspapers. “The reason is simple,” as Sharma put it. “Most people understand it is wrong to take cash bribes, but few in India see much of a problem in accepting gifts in kind, even one as valuable as free medical treatment for a family member, free schooling for a child, free hotel banquet facilities for a niece’s wedding, or favorable coverage for one’s business or political ambitions in the local rag.”29

The duo argued that this was mostly the fault of an underfunded and underdeveloped welfare state, which has in turn contributed to a growing imbalance between rich and poor. In his own way, Sen also looked to the successful “tiger” economies of east Asia, but mostly because of the way that they grew rich by investing heavily in basic health and education, which in turn helped to provide social support to poorer workers as they moved from farms to factories and onwards into the middle class. Modern India, by contrast, more often looked like an economy in Latin America, with a weak social safety net and yawning inequality.

“His lovers and haters share an essentially identical impression of the man,” as essayist Vinod Jose once observed. “Both believe Modi possesses an almost absolute authority and a willingness to defy institutions and rules, as a strong and charismatic leader who ‘gets things done’ without concern for protocol or established hierarchies.”30

For a time, wealthy Indians faced punitive top rates of tax as high as 97.75 percent, teaching the prosperous to hide their assets and entrepreneurs to disguise profits.13

In the 1980s, economist Robert Klitgaard defined corruption as a process involving “monopoly plus discretion minus accountability.”30 Until Rai came along, India’s scandals followed this formula almost exactly.

This bringing together of cronyism and growth became a deliberate economic strategy, as author Joe Studwell explained in his 2013 book How Asia Works. In countries like South Korea and Malaysia, businesses were tacitly allowed to skim off the top, so long as they did so while investing in the kind of exporting industries and infrastructure developments their governments wanted. “Rents are the bait with which the successful developing state captures and controls its entrepreneurs,” as Studwell put it.51

Huntington’s argument suggested a rather different problem, namely that India had allowed graft to flourish without using it strategically to promote development.

Fifty-seven permits were needed to open an industrial plant, according to one estimate, or ninety for a hotel.54 United Spirits, the liquor group formerly owned by Vijay Mallya, once claimed it needed a staggering 200,000 licenses to operate.

In 2015, an advert for a delivery boy in Uttar Pradesh, with a monthly salary of Rs16,000 ($240), attracted over two million applicants.

Corruption of this type spread throughout India, creating a well-entrenched black market for public sector jobs.

The system was riddled with perverse incentives. One study found that policemen in Mumbai would pay more to be transferred into jobs in high-crime areas, given these provided the best opportunities to take money from both criminals and victims alike.63

In the same way, excise officials paid for transfers to larger ports, and tax officials angled for jobs where they inspected larger and more profitable businesses. The more money that flowed through a position, the more that could be extracted from it. IAS officers faced an unpleasant choice of turning a blind eye to this corruption or sharing in its largesse. Honest candidates were unlikely to even apply for positions that req...

Political scientist Ashutosh Varshney suggests three “master narratives” have come to define India over the last century.2 First came secular nationalism, the ideology of Nehru and Gandhi, and still the official state creed. Second was Hindu nationalism, a reaction to the first, led by the BJP and the RSS. Finally came “caste-based social justice,” in which political parties representing lower caste groups began to win political power. Yet to these three, if you were only a little cynical, you might add a fourth: cash.

In one study, the Polish-American political scientist Adam Przeworski found that countries below a certain level of GDP—$6,055 per head, to be precise—almost never manage to sustain democratic government.

His autobiography included a compendium of forty or so methods, from cash funneled through village headmen, to gifts of solar lamps, narcotics, cows, or manure.

It claimed to have seized $18 million in cash during the first few weeks of campaigning in UP alone, along with two million barrels of alcohol and 2,725 kilograms of drugs, all supposedly destined to win over wavering voters.16

Many of the problems that plagued the early days of India’s democracy, from logistical snarl-ups to violence at the polls, had been fixed, he argued. But the rising tide of illegal funding showed no signs of receding.

Subrata Roy, chairman of Sahara India, a conglomerate based in Lucknow, also began his career modestly, delivering snacks on a Lambretta scooter in Gorakhpur, an impoverished city in the east of the state. In the late 1970s he set up a small “parallel banking” business, offering generous rates of interest to poorer people without access to formal banking services, from farmers and taxi drivers to household servants.

Men like Chadha and Roy, trusted allies willing to donate sizable sums, provided a pleasing solution for cash-starved politicians. The circle of cronyism was self-reinforcing: the stronger the friendship, the richer the tycoons became, and the more they could donate in turn. “The cost of elections skyrockets,” Gilles Verniers explained.