Hello and welcome to NewsClick. I am Paranjoy Guha Thakurtha and with me is James Crabtree. James has recently authored a book. This is the book. It's come out. It's called The Billionaire Raj. And the subtitle is A Journey Through India's New Gilded Age. James Crabtree used to work with the Financial Times here in India for five years. He was based in Mumbai. Now he's an associate professor at the Lee Kuan Yew School of Public Policy in Singapore. He's a journalist whose writings have appeared in the wired foreign policy and the economist among other publications. Thank you so much James for giving me this time. The first question, the easiest question. What really motivated you to write this book? As the correspondent of Financial Times in India, you had some of India's richest men willing to open their doors to you. And what really spurred you to contrast their lifestyles with the lifestyles or with the way large numbers of Indians live? In your book there's a huge amount of anger and outrage at the growing inequalities of this country. So what really motivated you and prompted you to write this book? The two things. I turned up in India in 2011. I'd been here before, but I never lived here before. And so if you think about it, I'm a journalist. I grew up in Scotland. I went to university in London. To the extent that I knew businesses, they were fairly tame, listed American and British businesses. And I turned up in Mumbai and suddenly you had these entirely different creatures. The sort of which have never been seen in the West or they've not been seen for 100 years or more. Buccaneering tycoons who sit on top of enormous conglomerates who have huge amounts of power. Most at the time that I was arriving were making unprecedented amounts of money. And I was captivated by this side of India's business culture because it's quite unlike anything that we have in the West. Add that together with the fact that I learned quite quickly that India was going through a massive transformation. Typically the story that we tell about India's change is the one that begins in 1991 when the political reforms happened. And really the change that came over in the economic reforms in 1991 when the country was reopened after 40 years of socialism. What would we describe as the era of economic liberalization? Correct. And so that was the moment the liberalization began. But the real change in India happened in the middle of the 2000s and it is a change that is wrapped up in a far more global story. This was the period of enormous booming global growth, the height of China's expansion. And India also re-globalized at that time. Money flooded in from abroad. The tycoon class began to do things that they'd never done before in their history. That's partly to do with industrial investment in terms of what they were building for their businesses. But it was also to do with conspicuous consumption and what they were building for themselves. And inequalities widening in the process. So over this period I think the evidence is unarguable that Indian inequality has raced away. Now it's a perplexing figure because on the one hand India has a very good record or a much better record than it's given credit for of reducing absolute poverty. Now hundreds of millions of people have been reduced, have been taken out of poverty. But I think it's to my mind undeniable that the proceeds of the growth that have come particularly since the mid-2000s have gone overwhelmingly to the top. So everyone is doing better but the top is doing relatively better. Much, much better. And the business owners are doing best of all. Okay. James you know the American author Mark Twain, he was to the best of my knowledge described the late 19th century in America as the gilded age. He meant, he described a period where on the surface everything appeared to be glittering like gold. But beneath the surface there was filth and corruption. And the crass commercialization of the kind that combined with brazen corruption in public life. So you had economic growth but it was fuelled by the nexus between corrupt business persons and corrupt politicians and the so called robber barons. I mean their household names whether it be Rockefeller or Carnegie or Vanderbilt or Stanford or J.P. Morgan. This was the sort of group of people who prospered. Now why did you choose to title the subtitle of your book India's New Gilded Age? Why did you opt for the American analogy when you talked about India's new gilded age and not use the analogy of Russia or China? I think all three of those three big emerging economies, China, Russia and India have a similar sort of story that they all had a left wing economy that opened up very quickly for different reasons. And so a lot of the same things are visible. There was great corruption, there was a kind of land grab for resources. And actually compared to the China and Russia, India is probably the most benign of the three although the corruption that emerged in the mid-2000s was severe. But I think the analogy with America, so you have to start by saying these two cases are very different. The countries are very different and so it's a sort of metaphor. But you have a lot of things going on in India that aren't. And in terms of time there's more than a century. But there you have a lot of things that are similar. This is a period of early industrialization that a lot of countries have gone through. Other countries in East Asia, South Korea for instance, have been through the same period. You have very rapid urbanization, a negrarian economy becoming an industrial economy. You have huge wealth creation at the top as you begin to move to an industrial and to some degree an industrial and exporting economy. You have the growth of an urban middle class, you have a huge infrastructure boom because this is the period in which you build in America's case railways and canals and in India's case toll roads and ports. And you have the same phenomenon. In my book I talk about there being three fault lines that India has to cope with one of which is the super rich and the inequality that's come with it. Two is growing capitalism. And the third is a kind of boom and bust investment cycle which comes from a very raw form of capitalism. And all three of those things were present in America's Gilded Age. You had the robber barons as you said. You had really squalid urban politics, New York's Tammany Hall but you also had a very unstable and unpredictable form of capitalism. You had the financial crisis of 1873 which was, you know, at that time as definitional as the financial crisis that we had in 2007. And so while I don't think these things are the same, I think there's an analogy there. And it's almost, I mean it's an optimistic one in some sense because what it says about India is that if as happened in America you get policies right, it doesn't always have to be like this. You don't have to end up like Russia. Lots of countries, Britain, America, South Korea to some degree, Thailand, Malaysia have been through this period of buccaneering capitalism. And it's not set in stone that it has to be like that forever. Not everyone ends up like Russia as a sort of kleptocracy. You would argue that it's not just buccaneering capitalism. At times it's like predatory capitalism because you talked about natural resources being appropriated, the benefits of natural resources, the way they were allocated, the way they were priced, accruing to a privileged few rather than benefiting the majority. In India? Yes, India. No, I mean I think this is undeniably what happened from the mid-2000s again. So take a step back, what was happening in the world. This was just before the Beijing Olympics in China. It was the time of the Great Moderation, the high point of globalization. And so the world economy was doing well. Commodities were very valuable. And so there was suddenly a huge demand for things like iron ore licenses, coal mining licenses, second-generation phones were suddenly very valuable as well. And so as India's economy grew, its kind of regulatory system was completely unable to cope with this rush of money that came through the system. And that meant that instead of having small corruption of the sort that you might have, your father's generation might have had where you have to bribe a policeman. Big ticket corruption. Retail corruption went wholesale. And that's what happened. That's the third problem, you know, that in the end when people found out this was going on, then what had been a great boom then just ground to a halt all of a sudden because suddenly people realized there was this squalid problem of corruption. And these are three problems. The reason why I highlight this is that there is a public narrative in India about economic reforms. But it's a very narrow narrative. It tends to be about, you know, what are we doing about? The GST. But the point being about these three fault lines are much bigger issues. In the end the successful economies of East Asia, the ones who have made this, navigated the path from poverty to middle income status to being some of them rich economies, have grappled with these issues. You know, there's plenty of inequality in East Asia, but much less than in India. They began to get a kind of handle on corruption and they found an investment model which didn't fall over as soon as you began to push it. And these are problems that whoever is India's next minister after next year are going to have to grapple with this more seriously than has been the case now. James, what I found particularly interesting and fascinating about your book are the anecdotes. You know, I mean, you clearly had access to the rich and the super rich and your meetings, whether it be with Vijay Malia in London or with the Ambani's or with Gautam Adani. I found that particularly interesting. In fact, what I found particularly fascinating is the way you started your book about that unusual crash of that Aston Martin. Much of the Indian media just to completely black out this particular event, this very rather unusual development. And even today much of the media in India is somewhat cautious in talking about, you know, that conspicuous consumption that you talk about and that structure which you can't miss. So maybe you could tell us a little more about why you chose to start your book by talking about this car accident and the richest man in India who lives in this, I don't know, Gilded Palace, if you like. Well, so I mean Mukesh Ambani of Reliance Industries is the richest man in India, he's the richest man in Asia and to the extent that I have been partly responsible for promoting this idea of bollygarks as opposed to oligarchs, he is clearly India's bollygarch. And as you quote somewhere in your book, he wants to be the richest man in the world. Yeah, I certainly have heard people who know him who think that that is his ultimate ambition and I suppose if India is going to grow for the next 20 years then, you know, who knows. He's going to be there or thereabouts. It's possible. It's not impossible. He is close to your platonic ideal of a buccaneering tycoon. He runs a distributed conglomerate which stretches from petrochemicals to telecoms and has hotels and media and all the rest of it. He is perceived to be a very powerful figure and then you have the house. And so I'll come back to your specific question but the house really stood for me as an icon of India's gilded age. If you think about America's gilded age, the buildings that represented it were the mansions of Fifth Avenue and then the hilltop homes. You talked about Vanderbilt. The most prominent buildings of an age tell you something about the spirit of that era. And Antilia is unique. Even in China, in America, even in Brazil, these unprecedentedly unequal countries, there isn't a thing that somebody calls the billion-dollar home. It is peculiar to India that you had this. It is an icon of this moment. I lived in Mumbai for five years. It's a very, very unequal city. You come out of the airport. Your cover shows that. You have the shanties. You have the people where people are barely surviving and against the backdrop. The point about Antilia is that it was almost as if it was designed. You have a very unequal society but it's almost as if this building was designed to add a whole new layer on top of that, where, you know, another element of stratification. And so, from the start, I was fascinated by him and his business, sort of what he did. He's obviously, in some senses, he's a very capable entrepreneur. He builds world-class oil refineries. You could also argue that he's had a very, very favourable policy regime, including the way in which you has expanded and you could argue that the nexus between business and politics has been such and it didn't start with Mukesh Ambani. It dates back quite a long time. He was able to expand and grow the way he did because of a favourable policy environment. The reason why I began with the Aston Martin story, so most of the people who will know this story, but in 2012-13, an Aston Martin that was owned by a reliance industry subsidiary, crashed late night in Pedderode in Mumbai. It's never been entirely clear who was driving the car. The company claimed that it was a driver that they own. There was a suspicion it might have been somebody else.  And I found the car, the wreck of the car. I happened to be doing some reporting on the story and I found it abandoned under a plastic sheet. It became a habit of mine. I'd go back to see if the car was still there. And finally, before you left, you found it had gone. At one point it did disappear, but the point wasn't that what actually happened in that story remains a bit of a mystery, but what was perfectly clear was the perception of power amongst even the Mumbai elite. This is not people who are powerless. These are bankers and other corporate heads. They're senior journalists. These are people who are prosperous but they felt that the Ambani's had this mysterious power that they could make things disappear if they wanted to, that they could kind of bend things with their will. And so what that told me, what this story told me as I watched it, was it just told me the way that people think about the super rich in India, that they perceive, even if they reasonable people can disagree whether they do have these powers, but people think that they have them. And that's the point. Now, you have in great detail talked about your interaction with Vijay Malia. We studied in school together, by the way. And also with Navin Jindal with Gautam Adani, you describe in great detail how you met them, the rides you took on their aircraft and how Vijay Malia said. So I mean, let's first talk about Vijay Malia. Do you think that he is being targeted in a sense that many other rich persons from India like him have borrowed huge amounts of money from the banks, not paid them, but that he kind of became to use his own language a poster boy of what went wrong with this whole big business taking loans from banks, evergreening them. And he was kind of targeted. And he would like to believe that he's more of, more sinned against than a sinner, so to say. I think he's right about that. And I also think it's his own fault. So, Mr. Malia, for all of his, you know, attributes and faults, he can't avoid attracting attention to himself. And so most of the rest of the tycoons who found themselves in trouble, they borrowed too much money, some of it illicitly, they spent too much money, and then the music stopped and they didn't have a chair to sit on. And most of them were sensible. They had their heads down and they tried to sort of see what they could do to dig themselves out of it. But Malia kept attracting attention to himself. And therefore he has become the poster child for corporate bad behavior. There are many people who did worse things than him, but because he's so flamboyant, because particularly because he left the country, there are elements to this. He has always been a wonderful story and that's why I think he's one of the most compelling characters in the book. I was delighted to go and spend time with him. Let me say this is the point. What I think is that there is a risk that India thinks it has a Vijay Malia problem, not that it has a far broader corporate debt problem. And that growing capitalism problem. Lying behind, Vijay Malia is not the worst offender. I think many of the allegations that have been made against him to the extent that I have been able to understand them are not convincing. Some of the things that he is accused of having done, maybe, but certainly this is not proven and I think that he has a kind of case that a lot of the stuff that people say that he's done he didn't do now. That's not to excuse him many of his problems and he's brought a lot of this on himself. But I can understand why he feels like that he's getting kind of singled out and it means that there are a whole bunch of other glamorous tycoons who did equal or worse who nobody ever hears about and that's a big problem because it means that the perception is if you just bring back Vijay Malia from London, we'll have solved this problem and that is nowhere near to the point to be closing the problem. Let's talk a little bit about your meeting with Gautam Adani. First, thank you. I'm flattered by your remarks about me and your meeting with me in your book. But here was Gautam Adani who almost nobody knew 20 years ago or 15 years ago and today he's not just one of India's richest men he's running a major conglomerate which is in all kinds of from electricity to coal mining to imports of coal to apples. Edible oils. Isn't he the largest apple producer in India? I think you told me that. Apple importer. And he's now going to make drones with the help of an Israeli company. He's got these string of pearls I call it ports which he controls.  How much of Mr. Gautam Adani's rise, incredible rise as a business person you can attribute to his entrepreneurial abilities and how much of it people say is due to his proximity to the Prime Minister of India Mr. Narendra Modi. So I'm glad you I know have an interest in Mr. Adani and I'm glad you asked because few people do. I start the book with a chapter on Mr. Ambani, a chapter on Mr. Malia and a chapter on Mr. Adani and he's the to my mind actually he's almost the most interesting of the three because it's his rise that was the most dramatic. He, Malia and Adani sorry Malia and Ambani inherited their money he did it all on his own and as you have done more than anyone to chart his rise was stunning in its scale. I mean unprecedented he went from almost nothing to being the 10th richest man in the country in a period of about seven years. Now, predominantly I put that rise down to an incredibly aggressive approach to bank financing. I mean he has the most jaw-dropping approach to the accumulation of debt and leverage. I found it quite hard to find the truth of those like Mr. Rahul Gandhi who claim that some important proportion of his rise was due to favorable treatment from the Government of Gujarat under then Chief Minister Narendra Modi. And thereafter by the central government. Now Mr. Adani would deny that Mr. Modi would deny that there are particular cases that have some legal background to do with his port at Mandra and the special economic zone in particular I in the end was not able I think to discover maybe we'll have to wait for your book to discover the truth of this it is difficult to build large projects of the sort that he has done in India without some sort of favorable wind from the state. Now, there's a lot of grey area before you get into is that kind of outright crony capitalism and in the end it was hard to tell. And so I tended to focus my story on the bit that you could look at which is his relationships with the banks and the way that he was willing to take on debt and the kind of behaviour and then you go into some detail and talk about how you know the house of debt Right, so whether Adani is rightfully I mean I think it's clear that he's a skilled businessman in almost all of these cases these are not with due respect to African business and I don't mean to be sort of pejorative about this but this is not a these are never situations in India almost never in which you have people who are sort of simply friends of the politicians who are basically idiots who get a concession these are very skilled businessmen and the question is are they augmenting their ability as businessmen with favours to sort of do things that other people can't but there's no question that go to Adani is an entrepreneur of some calibre I mean you can't do what he's done without actually being good at business the question you're asking is you know did he get a kind of helping hand from his friends in politics and that remains I think a kind of contested question and that's one of the frustrations about India that whether it was the question about the tycoons or something like the funding of political parties often even if you spend a lot of time burrowing around let's talk a little bit about you know economic systems in this country use I mean it's not just a series of anecdotes your book is not just a detailed accounts of these various business persons you meant Malia and Ambani Adani, Naveen Jindal among others. You also have sought to comment at some length on the economic systems and India's first prime minister wanted India to have a mixed economy the best of capitalism, the best of socialism, whatever these words mean many could argue that we took the worst of all worlds you know so instead of we had crony socialism once upon a time now we have crony capitalism and in a sense we did some of the worst practices from across the globe instead of you know assimilating or adopting some of the best practices so to what extent I mean I may not ideologically be on the same side at you but you seem to be at different points of ambivalent about what should have been the path that India did I mean yeah we have a terrible record of healthcare in a healthcare education infrastructure and what I found particularly interesting is that your book has been praised by two people who don't exactly see eye to eye with each other two of India's best known economists Jagdish Bhagwati and Amartya Sen and you seem to agree with both so in a sense you seem to be performing a balancing act a bit of this and a bit of that I think that's a very fair criticism but let me try and answer it this way it typically in India there's this I think rather unhelpful debate where either you are a Jagdish Bhagwatiite and what you believe is a rising tide rising tide lift all boats and it doesn't matter if the super rich run away what we care about is growth first reforms and then other things will take care of themselves and then on the other hand you have Amartya Sen the Nobel Prize winning economist and his principal concern although obviously Amartya is they're both very sophisticated thinkers but his principal concern has been with the lot of the bottom and he worries that despite India's economic reforms on measures and the fact that lots of people have been lifted out of poverty on measures of human development India actually does much worse than Nepal or Bangladesh and notionally poorer countries now I don't think this is a very helpful debate I don't think I am you know in favor of the reforms that were introduced in 1991 broadly and I have been quite critical of the government of the preceding congress government and no ender Modi's government for not doing enough to do more reforms but in the end if you want to follow the path of East Asia which is basically the best path that we know to bring millions of people out of poverty and build middle income and rich countries they also introduced dramatic reforms but they did it in a more inclusive way so I don't think that there is a contradiction between wanting to be radical and reforming and you know move hundreds of millions of people off agriculture and into cities and build a modern industrial economy I think the efficient way that you do that is A by bringing the people at the bottom along with you which is what happened in East Asia but also by worrying about rampant inequality now we have to be reasonable about what we are talking about here you know Thailand and Malaysia are not Sweden let me just finish this these East Asian countries are not Sweden they are unequal countries they got plenty of billionaires but they are not as unequal as India was now and they were much better at building basic systems of social support so I the debate between Pakistan and Jagdish Bagwati I think A it misses the component of the importance of inequality as an issue and I also think that in a sense you can have the best of both worlds and that's what happened in East Asia which is that you have a more inclusive model of growth that you know you can use the proceeds of growth more fairly to help those at the bottom yeah sure so I would go along with you even though I'm not so sure how it can happen you know I would like to be optimistic about the future of this country and I also at times sensed you an ambivalence on your part when you talked about Prime Minister Narendra Modi at one point of time you say okay he's trying to weed out corruption but then you're also critical of him and you say no I mean not one the demonetization was you know not done I mean you've quoted from large numbers of people you met I'll just give you here I just got a paragraph the risks of rising illiberalism should not be downplayed either you say the appeal of Hindu nationalism has grown in strength partly because of Modi himself but also because of the thick sense of identity it provides in a country buffeted by the uncertainties of globalization India's rising prosperity offers no special defense against this rise of a slippage into majoritarianism Modi's Gujarat one of the country's richest and most industrialized states also suffers from one of its most rigid records of caste and communal harmony so the question is that has India really in this whole hero of Hindu nationalism it's been more than four years since Narendra Modi has been in power yet on the economic front he's not been able to deliver to many extent I mean you could argue that demonetization had a major impact on the economy in terms of job creation in terms of investments so if I ask you now how would I mean what is more important for you Modi the reformer so called economic reformer again you will argue in both ways or here is this majoritarian authoritarian populist demagogue I have a great deal of respect for Gujarat Das who's an intellectual and interesting thinker but on this I don't particularly agree with him he was one of the people who went public as saying that he was a liberal and he thought that the policies that Modi undertook were a sort of risk worth taking and I would be more circumspect than that I think that in a country like India you have to be very very wary of this majoritarian impulse you have to remember where we began I mean the congress government was a very solid mess and so things were so bad at the end of the UPA that I understand why people were sort of desperate to try anything else but I worry a lot about the majority but the BJP got 31.4% of the vote correct but you only win under the electoral system that you have it's unfair to criticize them that's the way the system works I worry a lot about the majoritarian impulse of the Hindu the example of Gujarat is a good one because I consider myself to be a liberal in the British sense of the word and you want to believe that in a sense kind of nice liberal politics and economic growth go together but the case of Gujarat shows that that's not the case it's not necessarily true that having liberal rights and respecting minorities will necessarily be the best kind of growth enhancing policy but I think there are good reasons to believe that that is the case and that particularly in a country that has 20% of its population are minorities that the values that are written in India's constitution are the best not simply from a moral point of view about the dignity and worth of all of the people who live in this country but from an economic point of view as well that if you want to attract foreign investment if you want social stability of the sort that will allow the economy to grow that it would be very risky to go down the kind of path of effectively turning India into a Hindu Pakistan which I think although I don't think the Sanghis won't like it because when Shashi Taroor made that same analogy he was very very badly attacked the problem is the secular tradition which is the one that I as an outsider a westerner, a liberal I look at the Indian constitution I see a lot to like in that document if it were to be properly implemented but the problem is that the quote you read that line was carefully written the thick sense of identity why is it that all across North India 20, 25 year old men turn to Narendra Modi they see something that they like they see a source of strength and identity they don't see that in the secular tradition the secular tradition looks weak, corrupt divided it's embodied at the moment by Rahul Gandhi who although he may have a second act is showing no signs of quite getting there this is the point in the end the secular tradition in India is in deep trouble and needs to be reinvented and here you're not talking as that bleeding heart foreigner who's outraged by the inequality the gap between the rich and the poor but you see yourself as a well-wisher of this country and you believe that this kind of Hindu nationalism majoritarianism is going to harm Indian society and harm India's economy and as we speak you know elections are not that far away and if I ask you to just sort of put on your thinking cap, gaze at the crystal ball I mean how do you see the next 8 months or 10 months to run up to the elections I think this is an interesting question for Indian liberals so this sort of rump of the secular elite who have been on the back foot for 10 years, 20 years now because they fear that Modi is going to turn himself into an Erdogan figure that somehow he's going to try and become a kind of quasi-dictator my reading is rather different actually that I think what's going to happen is Modi will return because he's overwhelmingly popular amongst the people the opposition is hopeless and although you may not like his record in government I think most people think he's done alright he seems to be a strong leader in public, kind of looks like a good politician the data suggests he has a 70% approval rating which is stunning but here let me finish the point, the point is that it's very difficult to imagine I suspect he'll come back with a reduced majority or perhaps if they do badly then he'll have to go into a coalition and that will mean that instead of getting Modi the demagogue you'll get Modi but sort of slightly weaker more chastened potentially chastened less able, well I don't know about less authoritarian the question, here's the risk the risk is that the majoritarian impulse is a choice now we know that when elections come around the BJP and it's particularly it's far right acolytes have a choice about do they throw some red meat out to the base and then we all start talking about love jihad or whatever it might be and the risk is that if Modi perceives that his authority on the economy is slipping do he and those around him decide to whip up other sources of support now that's the nasty scenario let's imagine that doesn't happen then in a sense what's going to probably happen is that you'll get a Modi that was quite like this Modi but just less good because he won't have a majority in parliament and he'll be able to get less done and so instead of a kind of an all powerful demagogue what you will have is a Modi who's less powerful and less able to get things done, that I think is the most likely outcome time alone can tell none of us can predict the future we'll wait and watch and see what happens thank you so much James for giving me your time and for holding forth about why you've written this book that you have and your concerns about the way India is moving and you've just heard and watched James Crabtree journalist professor who's written this book The Billionaire Raj a journey through India's new gilded age thank you for being with us and keep watching NewsClick