How Business and Politics Intersect in India's Porous State

An excerpt from 'India’s Porous State: Blurred Boundaries and the Evolving Business-State Relationship in India'.

Business and politics have a close symbiotic and real relationship in India. This relationship is on the cusp of turning point. The Indian state pursues both development and growth encouraging activities but also facilitates rent-seeking. This two-faced character of the state allows business actors to infiltrate multiple arenas and access points found across institutions of democracy, public institutions, and regulatory bodies. Over time, and especially after economic reforms of 1991, state actors have become more open and receptive to business inclusion.

A new book examines the evolving business-state relationship in India, which attempts to assess the power of business actors through a careful analysis of structural and instrumental power, across diverse issue areas such as land, labor, cities, media, and across states such as Gujarat, Tamil Nadu and Odisha. This excerpt is part of a chapter that analyses how this porous state works, creating a new business-state compact in India’s political economy and provides some details of how business actors have moved inside legislative institutions and the consequences for public interest.

As Abantika Ghosh reported in the Indian Express, in March–April 2015, a member of the parliamentary committee on health claimed that there were no health risks associated with tobacco use. The mainstream media laughed at this suggestion. However, his comments were consequential; he was Shyama Charan Gupta, a BJP MP, known as the “bidi baron,” with an annual turnover of Rs. 200–250 crore in the bidi business. The health ministry heeded the recommendation of the parliamentary health committee not to display a warning covering 85 percent of tobacco products. This example highlights the emerging instrumental role of business actors within a national institution: the parliament, where economic policymaking has become more salient. Business’s role in parliamentary committees has become especially prominent, even as committees overseeing economic and financial matters have proliferated. By now, a large number of committees in the parliament related to industry and business subjects, create and discuss regulatory policies, creating many possibilities for conflict of interests to emerge.

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The role of business within the Indian parliament is important in three distinct ways. First, it increases the representative power of business in a prominent institution. Such representative power increases the legitimacy of business by giving political legitimacy to business actors. Second, it enables business to make policy, apart from affecting how policies are implemented. Many laws are shaped by business presence in the two houses. Third, business’s roles in parliamentary committees give it a unique function of criticizing government policy and government departments and shaping policies in more specialized arenas related to business interests. This enhances the instrumental power of business to lobby the concerned officers, ministries, and MPs. As noted by Jairam Ramesh, a Congress Party MP and minister, a seat on the panel gives Vijay Mallya “access to information, and an unfair advantage to influence policy” (Sourced from, M. Rajshekhar, “How do So Many Industrialists get into Rajya Sabha,” Scroll in, March 21, 2016).

This latter role also creates the potential for conflict of interest of diverse kinds. Conflict of interest has become a serious issue within these committees as noted by the National Social Watch’s Citizen’s report on Governance and development, 2011. Many examples of such conflicts of interests have come to light as reported by many journalist reports. Business members are asking questions that affect their specific business interests. In 2009, for example, the Telugu Desam Party (TDP) member from AP raised a question related to highways. His business group was seeking to do business with the National Highways Authority of India (Rahman 2009). Such access and questions give policy information to business actors even as policy is taking shape. M. Rajshekhar reported the following statement by a former Congress MP from Karnataka: “You can direct policy. When a law is drafted, it is the standing committee which vets it. The government system is under its thumb. It can call any bureaucrat. Even as a MP, you have access to the bureaucracy” (Scroll in, March 21, 2016). Most of the legislative work takes place within parliamentary committees, where conflicts of interests are pervasive. The Committee on Public Undertakings addressed this issue to all its members in 2009 when it was found that three of its members—T. Subbarami Reddy, Lagadapati Rajagopal, and Nama Nageswara Rao—were “using their position to further their business interests” (Rajshekhar, Scroll.in, March 21, 2016). Vijay Mallya served on three committees—Consultative Committee on Civil Aviation, Standing Committee on Chemicals and Fertilizer, and Standing Committee on Commerce—while he was in the Rajya Sabha. He had business interests in all three sectors. Kupendra Reddy, a real estate businessman from Karnataka, served on the select committee to debate and discuss the Real Estate Regulation and Development Bill passed in 2013. In 2009 a newsmagazine story outlined that three committees—the Standing Committee on Health, the Standing Committee on Finance, and the Standing Committee on Industry and the Public Accounts Committee had massive business representation in each of their committees. Shafi Rahman noted in a India Today report on November 12, 2009:

The 31-member Standing Committee on Finance is virtually an industry who’s who—venture capitalist Rajeev Chandrasekhar (Independent) from Karnataka, chief-minister hopeful of Andhra Pradesh and business magnate Y. S. Jaganmohan Reddy (Congress), Maharashtra based industrialist Vijay Jawaharlal Darda (Congress), Sambasiva Rayapati and industrialist Magunta Srinivasulu Reddy (Congress) from Andhra Pradesh. The 26-member Standing Committee on Industry has Uttar Pradesh businessman Akhilesh Das (BSP) as its chairperson; perfume baron Badruddin Ajmal (AUDF) and Andhra Pradesh textile manufacturer Gireesh Kumar Sanghi (Congress) are its members. Over a third of the members of the committee on industry—nine out of 26—are from business and industry. The Public Accounts Committee boasts of members like industrialist Navin Jindal (Congress), Andhra Pradesh-based contractor Kavuri Sambasiva Rao (Congress) and Tamil Nadu educationist M. Thambi Durai (AIADMK).

In 2008, the Deo Committee set up to inquire into parliamentary misconduct said: “The committee members are of the view that a provision may be made to the effect that if a member has a personal, pecuniary or direct interest on any subject/matter, he should not be nominated in the first place to the Departmentally Related Standing Committee, which normally examines such subjects/matters” (Second Report of the Deo Committee, 2008). Some of the recommendations of the committee were accepted by the Rajya Sabha but have been ignored by the Lok Sabha.

Bharatiya Janata Party MP Rajeev Chandrasekhar. Credit: facebook/Rajeev Chandrasekhar, MP

These facts give us the context to examine the increase in business representation in parliament. Thangam Therarasu, a former education minister in Tamil Nadu, spoke of “a shift in how businessmen approach politics. Before liberalization, India had ministers who were close to industrialists—but thereafter industrialists began entering politics mostly though the Rajya Sabha” reported by Rajshekhar in a scroll. in story. While many businessmen entered the parliament through the Rajya Sabha in the early days after liberalization in 1991 (for example, Anil Ambani and Vijay Mallya), the Lok Sabha also has recently seen a marked increase in business representation. In 1991, 14.2 percent of Lok Sabha MPs belonged to “business” or “trader” professions. By 2014 the number had increased to 26.2 percent as evident in the table below. The Rajya Sabha has also seen a similar increase. Some prominent Rajya Sabha members include Rahul Bajaj, Vijay Mallya, Anil Ambani, Rajkumar Dhoot, and M. A. M. Ramaswamy (Janata Dal-S).

How does this picture look like across states? I collected data on the occupation of members of legislative assemblies (MLAs) in the legislative assemblies of all states from myneta.com. These data pertain to 2014 or 2013, as longitudinal data are not available as yet. Clearly, legislative assemblies have seen the penetration of business occupation categories in much larger proportions than the national parliament, although the northeastern states have negligible business presence [The following categories were categorized as having business occupations: Traders, Business owners, Oil Industry oils, Contractors, Developers, Builders, Proprietor, and Real Estate]. The table below documents an emerging pattern where many state assemblies (esp. Goa and Maharashtra) have higher representation of business actors than the national parliament, even as business presence is increasing in both houses of the national legislature.

What about political parties? While most of the business MPs come from the two major parties (BJP and the Congress Party), some regional parties have larger than expected share (given their number of seats). Business representation in smaller, regional, and secondary parties is even more pervasive. TDP, the Sikkim Democratic Front, and AIDMK have strong business representation. Why do these parties nominate businessmen? It is clear that parties sponsor business people who support the party and raise money for the party. Smaller regional parties are more dependent upon business funds for monetary support and sponsor the entry of businessmen in larger numbers. An investigative reporting cited a comment by a senior JD(S) member states: “Senior JD(S) leader MS Narayana Rao said the party supported these businesspeople because they had joined and supported it. If someone says we are selling [Rajya Sabha] seats for a price, that is not correct. . . . They helped the party. If MPs or MLAs contribute to the party, that is not trading. He conceded that the JD(S) was going through a financial crunch” as reported by M. Rajshekhar in a Scroll.in story.

Dr. Aseema Sinha is the Wagener Professor of South Asian Politics and George R. Roberts Fellow at Claremont McKenna College’s Government department. She is the author of The Regional Roots of Developmental Politics in India (2005) and Globalizing India: How Global Rules and Markets are Shaping India’s Rise to Power.

Excerpted from India’s Porous State: Blurred Boundaries and the Evolving Business-State Relationship in India, Christophe Jaffrelot, Atul Kohli, and Kanta Murali eds., Business and Politics in India, Modern South Asia Series, (New York: Oxford University Press, 2019).