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In Godfather, we trust
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TOI, 10/9/2000
Swaminomics by Swaminathan S
Anklesaria Aiyar In Godfather, we trust
Foreign visitors frequently ask me for my
assessment of
India's prospects. I tell them that economic
management
is improving, but governance is deteriorating, and
beyond
a point deteriorating governance can make good
economic management impossible. This has already
happened in Bihar: Economic liberalisation can do
nothing whatsoever for that benighted state.
Governance
is far better in the rest of India, yet we
increasingly take
the criminalisation of politics and business for
granted, as
part of the background noise rather than an alarm
bell.
When I say this, foreign visitors usually think I
am talking
about tax fraud or excise evasion. No, no, I tell
them, I
am talking about assault and murder. They look
incredulous: Surely you are exaggerating, they say.
No, I
reply, the Election Commission itself has estimated
that
40 MPs and 700 MLAs face criminal cases, many for
assault and murder. The visitors are horrified: How
on
earth can people vote for criminals, they ask.
Because, I
reply, when the law is so ineffective that nobody
is jailed
for anything, then criminals become more effective
than
honest people. Nitish Kumar said famously after the
last
Bihar election that you cannot defeat a criminal by
acting
like a gentleman. So all parties have got
criminalised.
They now compete less on the basis of morality than
effectiveness. And when governance is weak, the
mafia
can be very effective.
When the polity gets criminalised, business cannot
be far
behind. Embezzlement, fraud, tax evasion and white
collar crimes of every kind have long been common
in
business. A newer trend is to have connections with
the
mafia: This can translate into business clout. And,
far
from being treated as a pariah, a businessman with
mafia
connections can command respect and popularity.
You think I am joking? Well, just look at the two
big
public issues of shares in the market today. One
issue
comes from Hughes Tele.Com, a well-known MNC
which is expanding in the telecom business. The
second
issue comes from Tips Industries, which holds the
music
rights of several leading movies (Rangeela, Taal,
Biwi
No. 1) and is a major player in music CDs and
tapes.
The fine print of this company's public issue
contains an
interesting disclosure: One of its promoters,
Ramesh
Taurani, has been charged in connection with the
murder
of Gulshan Kumar, the former king of Indian music
piracy, in 1977.
Now, in any economy with decent governance, it
would
be impossible for an accused in a murder case to
come
out with a successful public issue. The regulatory
authorities would not stop him: Every person is
regarded
as innocent till proved guilty. But in most
countries, the
media would have blazing headlines on an alleged
murderer having the gall to ask the public to
invest in a
venture clouded by mafia links and suspicion of
murder.
The investing public would refuse to touch such a
public
issue, seeing it both immoral and risky. At the
very least
they would wait for an acquittal before entrusting
their
funds to such a company.
That is not the case in India. Far from being
diffident,
Tips Industries is asking investors to pay a
whopping Rs
325 for shares with a face value of Rs 10--that is,
a
premium of Rs 315 per share. By contrast the famous
MNC, Hughes, is asking for no more than Rs 12 per
share. The company with the accused murderer is
seen
as having far better prospects than a mere MNC.
The comparison is not entirely even-handed. Hughes
is
launching a new and very capital-intensive company
which may not make money for years. By contrast,
Tips
is a well-established and highly profitable
company. Yet
my foreign visitors are dumbfounded with
astonishment
(and a creeping sense of terror) when I tell them
that
Indian society has become so criminalised that
criminal
businessmen are becoming objects of envy rather
than
ostracism.
The late Kumar started as a music pirate,
mass-producing cheap copies of hit songs and
undercutting legitimate music companies which paid
royalties. Later he launched a legitimate brand,
T-Series,
but was always seen as having a foot in both
worlds, the
legitimate and illegitimate. Now, pirates naturally
have a
host of enemies. In 1997, hired gunmen pumped 15
bullets into Kumar. Not only did the pirate die, so
did his
piracy business.
The police investigated the crime and concluded
that it
had been committed by the Chhota Shakeel gang at
the
instance of music director Nadeem and Taurani.
Nadeem
fled to London, but Taurani stayed, and is
currently being
tried for abetting the murder. Not many people
expect
him to be convicted. Because of the interminable
delays
of our legal system, plus the corruption and
incompetence
that cripples prosecutory efforts, virtually no
resourceful
person is convicted of anything.
Far from being ostracised, Taurani is widely viewed
as an
effective businessman. Others in the music business
tried
to use legal processes to enforce intellectual
property
rights (IPRs) and stop piracy. They failed
miserably
because of the pathetic quality of governance in
India:
Neither the administration, police nor courts are
effective.
The person who really succeeded in reducing piracy
acted outside the law, by killing Kumar.
In our diseased climate, accusing Taurani of murder
translates into calling him an effective manager
finding
novel solutions to the problem of weak governance,
enforcing his IPRs through somewhat unusual means.
In
such circumstances, I suspect that the Tips
Industries
issue will be a success.
There is a lesson in this for Veerappan. He really
should
float a new issue at a premium of Rs 1,000 per
share. I
am sure it will be oversubscribed. He can then end
his life
of hardship in the jungle and retire to an
international tax
haven like the Cayman Islands. I am sure both SM
Krishna and Karunanidhi will underwrite the issue.
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