India is paying the price for its obsession with billionaires

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Indians are furious over a $1.8 billion bank fraud case involving Nirav Modi, a billionaire and the man whom Vanity Fair called (in an astonishingly poor sense of timing) “the atelier of India’s most ambitious luxury jewelry brand.”

The diamond merchant, who boasts showrooms from Mumbai to Macau, and whose ornaments have bedazzled such stars as Kate Winslet and Bollywood actress Priyanka Chopra, is accused of conniving with employees of Punjab National Bank (PNB), the country’s second largest state-owned bank, to create fake letters of undertaking against which he and his uncle Mehul Choksi were able to raise millions of dollars in loans from banks outside India.

Now, the Nirav Modi scandal has become a critical test for the government of Prime Minister Narendra Modi ahead of election season.

A key reason for the Bharatiya Janata Party’s victory in 2014 was that its predecessor, the Indian National Congress, was buried under one corruption controversy after another. The prime minister’s election slogan of “Na Khaunga, Na Khane Dunga” translated to “I will neither take a bribe, nor let anyone else take one.” It hasn’t helped that Nirav Modi, the man at the center of India’s biggest banking swindle, conveniently left the country with his entire family during the first week of January. Three weeks later, he posed with the prime minister in a group photograph of corporate chieftains at the annual economics forum in Davos, Switzerland — just six days before the scam was first reported by the bank.

The government claimed the photograph was “impromptu,” and had no official endorsement. But, by then, satirists and punsters were having a field day with the coincidence that the jeweler and the prime minister share a surname. The explosion of memes and puns has only underlined the pressure that Narendra Modi’s government is facing to take swift and demonstrable punitive action.

Prime Minister Narendra Modi told the World Economic Forum Jan. 23 in Davos, Switzerland that protectionism is gaining ground as globalization loses its appeal. (Reuters)
The government has made some key arrests and has moved to revoke Nirav Modi’s passport. It has also attempted to shift the narrative by pointing a finger at the opposition, arguing that the financial fraud took seed in 2011, when the Indian National Congress was in power. But whether the Congress is complicit or not, the Bharatiya Janata Party, or BJP, will be measured by the high propriety and efficient governance the Modi government has claimed for itself. According to the information released so far, a majority of the fraudulent guarantees were underwritten by PNB during 2017.

This is the second time since Narendra Modi took office that a flamboyant billionaire has effectively mocked India’s legal system by running away before the law could get to him. Liquor mogul Vijay Mallya was accused of defaulting on $1.4 billion worth of loans before leaving the country in March 2016.

Beyond our anger over the flight of these fat cats, there is a deeper question for us to confront: As we are fixated by our pursuit of global recognition, are we partly responsible for celebrating structural inequities and cronyism? So annoyed were we at an Orientalist gaze that for decades could only describe Indians using picture postcards of poverty that, instead, we began to define our self-image by how many millionaires and billionaires made it to the annual Forbes list. And here we are, literally paying the price. Is this the domestic version of America’s ‘Gilded Age’? The satirical work of writers Mark Twain and Charles Dudley Warner mocked the showy business tycoons of the post-Civil War United States. Their stories of the American “robber barons” of the late 19th century resonate in present-day India.

Now that we know how Nirav Modi allegedly gamed the system, there is an unseemly vulgarity to his ostentatious dinner parties. He once had Michelin-starred chef Massimo Bottura flown to Mumbai just for an evening at the Four Seasons Hotel; at home, guests say his wife would make a big show of using a thermometer to check if the soup on the table was served at the right temperature — both fanciful luxuries that seem to mock the banks and the people they have swindled. Similarly, Mallya reportedly spent $2 million for his 60th-birthday bash — with singer Enrique Iglesias performing — while banks closed in on him for the $1.4 billion he owed them. It’s unforgivable.

This is not capitalism, but a twisted variant. It is a morally unacceptable form of crudeness that mocks the legal system, manipulates political connections and reinforces the gap between the privileged and the ordinary.

In a country where nearly 270,000 farmers have been driven to suicide since 2000, and nearly 80 percent because of an inability to repay small loans (the average value of most of these outstanding loans is about $3,000), it is criminal that millionaires and billionaires live it up as their unpaid loans suck dry the banking sector, and then simply take the next flight to London or Antwerp or Dubai, never to return. An Indiaspend report estimated that, in 2016 and 2017, more than 5,200 “willful defaulters” owed public-sector banks about $8.65 billion, much more than the government allocation for agriculture and farmer welfare. Yet, because these men make up India’s power elite and are embedded deep within the political system, their violations are handled with kid gloves — until it blows up in our faces.

The Indian National Congress was voted out in large measure because of disgust with the cronyism that facilitated collusion between government and big business. Narendra Modi promised to change that, but he needs to shed the statism that is associated with Big Government, and make good on his promise of “minimum government, maximum governance.” Ending the nationalization of banks — a relic from Indira Gandhi’s contentious decision in 1969 — could be a start.

Otherwise, scandals such as that involving Nirav Modi will happen again — and may unwittingly rob the other Modi of some of his own political glitter.