India And ‘Crony Capitalism’

modi ambani adani

In 2012, Daren Acemoglu & James A. Robinson wrote a book, Why Nations Fail, in which they point out that when political power is captured by elites, all the wealth taken by few, and opportunities and prosperity apparently disappeared for the masses at one hand. And the public insititutions operate under highly influenced and show disparity in the treatment of economic elites and normal individuals of the society on the other hand. Then, such country is destined to failure. Though the book doesn’t enlist India for such destination but the story of post-liberalized India has been witnessing the growth of eliticism and cronyism that may stake the prosperous destiny of the country.

India has been severaly hit by a number of scams and there are evidences of corruption in the last few decades. Few years ago, it was a matter of great concern when one of the surveys conducted (2016) by the economists placed India on the 9th rank in the crony capitalism index. On the other hand, the report of Oxfam India spontaneously indicates for the accumulation of country’s wealth into the fewest hands. Moreover, former Governor of Reserve Bank of India Raghuram Rajan said that “I think capitalism is under serious threat because it’s stopped providing for the many, and when that happens, the many revolt against capitalism,”. His anxiety for the ‘serious threat’ to capitalism shows that capitalism has now changed its face and perverted as it only seems to favouring to the fewest instead of ‘many’. The fewest benefitted people in India has found a close relationship with the regime which is, arguably, regarded as ‘Crony Capitalism’ in India.

Crony capitalism is, though a pejorative term, often used to describe such condition of the capitalist economy in which business class and governmental official share close relationships for mutual benefits. Such kind of relationship can be observed into the partiality of governmental decision making related to the government permits, grants, disparity in taxation and so on. In other sense, crony capitalism refers when political and business men are found in a state of dependency and political system is hacked by the business class for their profits. Naresh Khatri observes ‘sycophancy’ and ‘loyalty’ as two important factors for crony capitalism in India. There is no doubt that ‘crony capitalism’ as a word may new for many but since the evidences related to the disclosure of the nexus between politicians and economic elites are comparatively more prevalent or visible than in any period of Indian history.

Treading the path of crony capitalism in India

As far as the relationship between economic affairs and politics in the context of capitalism is concerned, such epitome of relationships has also historical footprints. In the Indian context, the colonialization of India particularly the rule of the ‘East India Company’ on the Indian subcontinent might take as the earliest sign of crony capitalism in India. While, ‘the Bombay plan’ (1944-45) constitutes for a definite beginning of crony capitalism in India in which plan was officially sanctioned in favour of the then business community. The formation and implemention of ‘New Economic Policy’ in 1991 was one of the historic decisions in the history of Independent India. This step was intendedly considered as a landmark for the proper delineation between private and public sphere. In fact, the privatization has been dramitcally increased since after the implementation of LPG policy in which ‘Government of India’ decided to privatize various publicly owned productions areas with the expectation of efficient productions and services and avoiding ‘Red-tapism’. This reform ended the ‘Licence Raj’ or ‘Permit Raj’ in India and also considered that it would break nexus between the business men and politicians.

In Post-Liberalization, the ‘Commonwealth Games (CWG) scam’ in 2010 was one of the major scams that came into limelight in which around 70,000 crores of public money was filched. Then, the Indian Coal Scam, which is popularly known as ‘coal-gate’, got an unprecedented popularity and holds as a glaring example of cronyism in contemporary India. The result of this observed in the overthrown of the then government and new government came ito existence. Notably, with the change of government, the roots of crony capitalism are still alive and prevalent. Since the formation of Narendra Modi government, many allegations – including  corporate funding to the party, acute rise in the income of the party, and demonitization,  have been seen consecutively. These allegations got confirmed when India got 9th position in the list of countries whose influenced by crony capitalism that ultimately indicates the vitality of crony capitalism in India.

Besides all of this, another recent glancing issue in the journey of crony capitalism in India was noticed when ‘Rafale Deal’ under the Prime Minister Narendra Modi’s government questioned and came under serious allegation. The ‘Rafale deal’ is the matter of bilateral agreement between India and France over selling and purchasing of fighter planes. In this deal, the government was found under severe allegations for deliberately favouring Anil Ambani on the purchasing of fighter planes. The matter has vanished with the historic victory of Bhartiya Janta Party (BJP) and the winning government cited its unprecendented number of seats as the ‘consent’ of people that refutes for such allegations made by oppositions. Though the allegation of crony capitalism over the government has disappeared and remained as a mystery. But the question arises does it confirm the elimination of crony capitalism in India? The pages in the Newspapers, the coverage of new channels and the academic discussion and debates over the same issue are enough to answering the raised question.

Crony Capitalism as a political agenda

In the recent decades, crony capitalism has been remained powerful means into the electoral politics of India. During the 16thLok Sabha Election Campaign, The Bhartiya Janta party (BJP) made strong allegation of corruption for “Indian Coal Allocation” over the UPA government, which was headed by Indian National Congress (INC). Under the Indian Coal Scam, the government was reportedly found for misuse the authority and involved into the unfair allocation of coal instead of fair bidding. This clearly shows the favouritism and partiality from the side of government in decision making which endorse crony capitalism in India. In this response, The Congress Party had to face deplorable defeat in the 16thLok Sabha election and Bhartiya Janta Party got succeed in its long campaign for overthrowing the corrupted government and delineate itself for showing neutrality from crony capitalism by setting agenda of “Sabka sath Sabka Vikaas”.

Similarly,The oppositions of the Bhartiya Janta Party (BJP) in general and the then Congress President Rahul Gandhi in particular, relentlessly put allegation for the nexus of economic giants and the incumbent NDA government headed by Bhartiya Janta Party (BJP) for endeavouring crony capitalism. During the entire 17thLok Sabha election, Rahul Gandhi and other politicians used crony capitalism as a mean to target the the Narendra Modi’s Government. Though the result was not the same as it was in the 16thLok Sabha election and NDA was succeeded in securing its government for another five years of tenure. But the issue of crony capitalism is still remained on the lips of the politician of opposition parties for making criticism on the government. The spontaneous events related to the crony capitalism in India, even with the changes of the government, show failure of the political  system to expunge such connections between two dominating classes of the country.


One of the main reasons behind the implementation of structural reform in India was to eliminate the nexus between the business elites and the politicians and freed people to opening and running independent production of the goods and services in order to produce more opportunities and well being in society. But it has been argued that liberalization in India has further strengthened the relationships between these two group of people in a different manner. And even after the two decades of the ‘Liberalization’ of Indian Economy, the number of scams, corruption, and the instances of biases and the misuse of public authority have dramatically been increased. In this effect, the termite of crony capitalism damages the democratic values and undermines the democracy of India as people found themselves cheated when they come to know about the inappropriate allocation of public resources and wealth. The continuity of such undesirable features have the potentiality to make India for the next destination of crony capitalism.

Mohd Shahwaiz is Research Scholar at Department of Political Science, Aligarh Muslim University, Aligarh. He can be contacted at [email protected]


Support Countercurrents

Countercurrents is answerable only to our readers. Support honest journalism because we have no PLANET B.
Become a Patron at Patreon

Join Our Newsletter


Join our WhatsApp and Telegram Channels

Get CounterCurrents updates on our WhatsApp and Telegram Channels

Related Posts

Join Our Newsletter

Annual Subscription

Join Countercurrents Annual Fund Raising Campaign and help us

Latest News