Of unholy nexuses, crony capitalism and corruption

Sunitha Choudhary

An artist and designer with a keen interest in the political developments in India and globally., Sunitha is based in Chennai. She can be contacted at
[email protected]

This article was originally published in Provoke Magazine

Which do you think is the most profitable business to be in, which is largely under the radar, plays above rules and answers to no one?

Take a guess. OK make it a wild guess.

Even then we wouldn’t guess because we don’t consider politics to be a business. We don’t consider it to be an NGO or social service organisation either as it is currently definition free. It is not a bank nor a corporation. Neither a promoter nor start up or a venture capitalist. But it is all the better if it is a family business.

So what is it?
It’s Politics.

There is no business like Politics.
RIP to the old adage “there’s no business like show business”. That is passe`and reminiscent of a bygone era when entertainment and job satisfaction combined to give us an unforgettable legacy of talent and joy.

Look around you and observe. The politician world over lives life like a VVIP, protected by top security agents, enjoying the highest of privileges and entitlements, all expenses and perks paid, no tax on official income and lifestyle on par with some of the wealthiest people on the planet. The only time he comes to you is during election time for he needs your vote. In order to get your vote, he campaigns, he gives speeches everywhere, he promotes and advertises himself so he is seen in all the right places and influential circles and showcases himself as the voice of the people. Only to become a law unto himself after he wins, because of the perks afforded to him by the very nature of the rule less business.

But there is a big but here.

*Who funds politicians? Not all politicians are born wealthy. Many in fact come from very mediocre backgrounds. So where do they get money from?

* Is it a single entity or a big corporation?

* Are there independent government agencies within nations monitoring such funding? As over a period of time, the amount a politician spends to groom and promote himself has become nothing short of obscene.

I can tell you for certain that in India, there is no agency to monitor how Political parties function. We have associate agencies like RTI, CVC and CAG to oversee various aspects of governance, but due to political interference and control, the proposed Lokpal which took over a decade in just discussion time, has not been instituted by traditional political parties whether it is the UPA or the NDA or its allied regional parties. The Election Commission which is supposed to monitor election expenses, is usually thwarted in enforcing rules autonomously. Recently when the EC cited that politicians fighting elections on corrupt capital should be disqualified, the move was squashed by govt. Hence many deviations are buried until they are out of sight out of mind. We have thus a huge grey area, which forms a significant part of our black economy thriving totally without checks and balances, and no questions asked.

To understand a little more, we have to go back a little. In a developing country like ours, industries and corporations have created huge amounts of capitalism which are good for the country, providing employment and enterprise, but bad when it comes to taxation. Every capitalist or corporation worth his salt looks at ways in which he can save taxes. This he does by either donating money to social service organisations or community projects or trust funds to contribute to other businesses. But more recently this excess has found a natural fit with political parties. This is a mutually beneficial association as corporates and politicians take care of each others interests, favor for favor and the benefits are tangible and immediate. It has become standard practise for these corporates to also take heavy loans from banks, often at the nod of a favored politician. And a part of these funds are diverted to political parties as election capital. When companies take loans from public sector banks, they inflate the value of the equipment they import and save the excess cash amount as a corpus in tax havens abroad. These stashed funds come back to India through hawala routes during election time, thereby forming part of the parallel economy expenditure and is completely unaccoubted for… until banks wake up and start calling in their loans. Then some further wheeling dealing is done to rob Peter to pay Paul in an endless cycle of fund rotation. But this unholy nexus has to come apart some time.

The following are grim numbers.

The current collective outstanding to PSU banks by the biggest corporates in India is a whopping 7.5 lakh crores.

During UPA tenure, about 1.2 lakh crores as tax dues by corporates was waived off. When NDA came to power in 2014, the following year they waived off another 1.54 crores as tax dues by corporates. But these are just temporary reliefs. In order to refund the banks, whose outstandings are still enormous, ingenious solutions are required. But politicians are in a fix as they have taken money from corporates who owe money to banks. Corporates need more business to generate funds in order to pay back loans. So they put pressure on politicians to help ease the financial pressure resulting in tax waivers as described above, but without really resolving the core problem.

But what is the biggest fallout of these huge moneys circulating only amongst the top colluders? The phenomenon called crony capitalism is the result. Now if capitalism generates wealth creation, crony capitalism does the opposite. Wealth gets concentrated amongst key nexus players instead of spreading down the economic pyramid from the organised to the unorganised sector. The divide between the rich and the poor thus gets more acute, as the trickle down effect of money is too small to benefit more number of citizens, who then have to fight that much harder to climb up the poverty to wealth chain. This is actually institutionalised corruption and nothing is being done to contain it.

Sometimes 3 or 4 corporations get together and form shell companies, with false addresses and benami holders who have little know how about the real identities behind these faceless organisations. The primary intent of these shell companies is to divert their excess funds into parallel unrelated activities or black economy businesses often linked with construction or property/land, in order to spread their business risk.

With some pressure from the election commission, the UPA and the NDA have reluctantly revealed the quantum of funds they received but not the sources. UPA states they received about 500 crores last year while NDA says they received close to 950 crores. But even the most basic over view of election expenses will reveal that the amount declared is a mere drop in the largely opaque ocean of electoral funding.

About 30 years ago, the Congress in its wisdom brought out a bill declaring that election funding is completely tax free. It is a fact that 30 years ago, this made sense as political funding was miniscule compared to the mammoth amounts spent today. This bill desperately needs revisiting but no political party is willing to take this up. Despite making suitable noises before the 2014 elections, the NDA also changed its stand after coming to power in 2014 and proceeded to make election funding even more secretive than before.

Three major changes indicate that political transparency has taken as bigger hit.

1. Political parties continue to enjoy tax free donations as long as each entry is below 20,000 Rs.
2. Political parties do not need to answer to RTI enquiries.
3. Political parties can get foreign funding from international agencies even though they have clamped down on NGOS receiving the same citing conflict of national security. This last is pure and simple humbug.

Crucial fact that endorses the above is that in India alone there are 1866 political parties which have been registered. Out of this, more than half have never fought a single election but are eligible to receive unaccounted money from anyone.

*Who uses the money then?
* what are the expenses for?
* Are they front organisations for other political parties?
* by whom will they be investigated?

The suspicion arises that these organisations are facilities for money laundering and slush funds.

So what is the cure for this deep institutional malaise?
Awareness and understanding of political corruption is something that can unite the entire country peacefully in a way that hasn’t happened since the independence, provided more citizens understand the above facts.

What are the possible solutions that can help this massive grey area?
Listed below are some main ones.

1. Only individuals can make donations to political parties.

2. The function of companies is to make profit and donating to political parties for a financial return should be declared tantamount to a bribe.

3. All donations by individuals to political parties should be declared on their website with name of donor and identification details to ensure authenticity, to aid auditing later.

4. All expenditures by political parties should be recorded and uploaded onto a web site.

5. Audits should be done by CAG appointed auditors and the auditors rotated every three years to ensure fair representation of same.

6. The public should be able to file RTI requests to crosscheck certain expenditures cost. To prevent people from filing frivolous requests, a fine can be proposed if fake enquiries are ascertained.

7. Any unaccounted or illegal or undeclared transaction more than 5% of total declared funding should be punishable.

8. A yearly public statement by CAG on the accounts of the major parties open to scrutiny and discussion by general public will make political parties and accountable to the people, just as people are accountable to govt laws.

Only if political parties are willing to institute these changes, can true democracy be upheld where the law of the land is equal for all. And transparency becomes the hallmark of the universal instead of the hollow rhetoric of the privileged.

So before we talk of removing corruption and black money from our day to day lives, Political parties need to show us their intent to reform at inception.

The biggest generator and user of black money and corrupt practise, needs to walk, and show the intent. Even if one political party dares to start the trend, others will have no choice but to follow.

Unless and until the way politics functions changes, the country will not change.

This is a conversation we need to have before we can walk the anti-corruption talk.

 

 

 

  • Sarfaraz Hadi

    Sunita Chaudhary’s write up articulately lays bare some of the facts about inter-twining of politics and economics. Repeated deliberations like this are needed, some times in simpler ways, to spread the understanding wide across the people.
    At the same time, we must admit that politicians don’t descend from the skies; they come out from our society. Basically, they are corrupt because our society is widely corrupt, if not entirely. Corruption is a social problem; it may not be cured solely by political remedies. We have to think of social remedies as well.

  • K SHESHU BABU

    Very important points raised. The Nexus between corruption and capitalism spreads with the system of political authoritarians controlling the economic sector. The whole establishment should undergo a thorough change for elimination