Transcript The Battle for India’s Future: Democracy, Growth and Inequality Ellen Barry International Correspondent, The New York Times James Crabtree Associate Fellow, Asia-Pacific Programme, Chatham House, Associate Professor of Practice, Lee Kuan Yew School of Public Policy, Author, The Billionaire Raj: A Journey Through India’s New Gilded Age Shashank Joshi Senior Research Fellow, RUSI Saurabh Mukherjea CEO, Ambit Capital (2016-2018), Author, The Unusual Billionaires Chair: Dr Gareth Price Senior Research Fellow, Asia-Pacific Programme, Chatham House 3 July 2018 The views expressed in this document are the sole responsibility of the speaker(s) and participants, and do not necessarily reflect the view of Chatham House, its staff, associates or Council. Chatham House is independent and owes no allegiance to any government or to any political body. It does not take institutional positions on policy issues. This document is issued on the understanding that if any extract is used, the author(s)/speaker(s) and Chatham House should be credited, preferably with the date of the publication or details of the event. Where this document refers to or reports statements made by speakers at an event, every effort has been made to provide a fair representation of their views and opinions. The published text of speeches and presentations may differ from delivery. © The Royal Institute of International Affairs, 2018. 10 St James’s Square, London SW1Y 4LE T +44 (0)20 7957 5700 F +44 (0)20 7957 5710 www.chathamhouse.org Patron: Her Majesty The Queen Chairman: Stuart Popham QC Director: Dr Robin Niblett Charity Registration Number: 208223 2 The Battle for India’s Future: Democracy, Growth and Inequality Dr Gareth Price Okay, welcome to Chatham House everyone. I’m Gareth Price, Senior Research Fellow with the Asia Programme here. I’m delighted to welcome you all, on this beautiful sunny day, to a discussion about The Battle for India’s Future: Democracy, Growth and Inequality, essentially a stocktake of where India is four years into the current Government, meaning that there’s one year – less than a year, now, to go before the General Election. No particular comment on the timing of this meeting, except to say I think we will close at 7:00 rather than 7:15, in case people start drifting away for any other activities that might be happening. And at the same time, often, Q&A starts slowly and then, sort of, speed up towards the end, but today, if you’d have a question, frontloading is probably the answer. We’ve got a very good panel here to speak to this subject. Shashank Joshi, upcoming Defence Editor of the Economist, formerly of RUSI, and longstanding Commentator on South Asia. We have Saurabh Mukherjea, Former Chief Executive of Ambit Capital and a top Investment Strategy in India in 2014/15 and 16, according to Asia Money. We have Ellen Barry, formerly the South Asia Bureau Chief for the Wash – for the New York Times and currently, International Correspondent, based here in London. And we have our own James Crabtree, Non-Resident Associate Fellow at Chatham House, but more often, at the Lee Kuan Yew School and formerly, with the Financial Times in Delhi and Author of a new book on India: The Billionaire Raj. A couple of technicalities: you can comment on Twitter, using the #CHEvents. Please put your phones on silent and by the way of format, this is on the record. The speakers will speak to – for five to seven minutes each, leaving time for a couple of questions from me and then a Q&A for the remainder. So, without further ado, James. James Crabtree Thank you, Gareth. Yes, I say thank you very much all of you for coming. Given other events on in the city this evening, I think you all deserve a round of applause for not just heading to the pub immediately, but we will wrap up promptly at 7:00, so we can all flee and try and watch the match. I was a Mumbai Bureau Chief for the FT for five years between 2011 and 2016, and in a sense, when you talk about how the Government in India is going, there tends to be a quite formulaic conversation, which comes down to this notion that the word that you hear is ‘reforms’, has Mr Modi delivered enough in the way of reforms? And then there’s a, sort of, way that we talk about this, you know. There’s a list of things that we think he probably ought to do and has he done them? You know, that’s, sort of, how some Journalists, some Investment Strategists, judge the progress of Governments, not just in India. I suppose – so, the book that I’ve written, that’s coming out this week, it was my attempt to, sort of, take a step back from that and to try and take stock of some of what I saw as a foreigner in Mumbai. The front cover of the book has a picture of Antilia, the – for those of you who’ve been to Mumbai, the great landmark of the city, the billion dollar house owned by Mukesh Ambani, the richest man in India, that was built – finished building in 2010. And which, as I took my first car ride from the airport, in Northern Mumbai, down to the South, where I was going to live, you have to pass beneath this building, sort of, looming up on the left-hand side. And then, as I moved around the city, as a Foreign Correspondent, I’d go underneath this building, you know, once or twice a day, as I moved back up and down the Peninsula 3 The Battle for India’s Future: Democracy, Growth and Inequality of Mumbai, and it, sort of, stands in the middle of India’s financial capital, as a testament to a remarkable change that has come across India, in the last three decades, but particularly since the mid-2000s. In the book I call this ‘the Billionaire Raj’, and the three components that I talk about are partly the rise of a new, extraordinary wealthy, cadre of super rich individuals. There are now 119 billionaires in India, that’s more than any other country, apart from China and America. But the stage at which India has developed shows you how much money has accumulated at the very pinnacle of Indian society. At the moment India has an economy of about $2.3 trillion. China’s economy was about that size, roughly ten years ago, 2005/2006, at which time, China had ten billionaires. So, India has created, at the very pinnacle, eight times as many at the same time of its development. And, I mean, Ellen, to my left, used to be the New York Times Bureau Chief in Russia and therefore, can speak eloquently about oligarchs and the super rich. And it may well be that, you know, Russia is the absolute zenith of this, in terms of creating large amounts of wealth and inequality in the hands of the very few, but India is not that far behind, and so, you have that. That’s one thing that has happened in India, to which Modi was, to some degree, a response, and you also had, over the last ten years, the problems of crony capitalism that happened in the mid-2000s and the later 2000s, and in a sense, Modi was a, sort of, response to these things. He won his election, in a large part, because he was seen to be personally honest. He was not seen to be in hoc to the super rich. He was going to deliver jobs and prosperity, and so, rather than looking at, you know, whether he’s done labour market reform or whether he adequately introduced a new tax system, I suppose I judge him against the extent to which he has managed to change these more fundamental issues that India needs to grapple with, and I think the record there is rather mixed. The reason why it matters is India is trying to follow the successful developing economies of East Asia, in particular. Those who went from poverty to middle income status and a few of them have managed to become rich economies, and almost none of them have these characteristics, in the same way that India does now. They were more egalitarian. They did have problems of crony capitalism, but that crony capitalism was used strategically, to develop exporting industries that helped the country develop and they had an industrial model that worked. India’s challenge, it seems to me, is to, sort of, fix all these three things. It’s quite difficult to imagine that you can develop, as South Korea has done, for instance, with a society that is so unequal and growing more unequal in the way that India has done, that remains – and still has big governance problems, even though some of the worst of the corruption scandals have gone by the wayside, and where the industrial economy is, to some degree, dysfunctional. And we can talk in more detail about the – what they call the twin balance sheet problems, the fact that the backbone of the Indian industrial economy is, sort of, bankrupt and the public sector banking system is also, heavily under water. But I suppose until you fix all three of these things, it’s much more difficult to imagine India following a smooth, upward development path and, again, I think Modi’s record on these things is pretty mixed.