Pranab Mukherjee is likely to be India’s next President. It seemed
to be touch and go until the tide turned in his favour. It has been suggested
that the corporates swung it for him not because he is one of the most seasoned
Indian politicians but because they wanted him out of the Ministry of Finance.
He has acted tough on retrospective taxation and GAAR – the measures in his
recent budget to tackle black income generation. But it would not be surprising
if the real pressure was from foreign shores. Indian corporates are sensitive
to what their foreign counterparts think. So is our political leadership. Britain and Netherlands exerted strong
influence on the Vodaphone case. How much of our politics is being determined
by such pressures?
Pressure on polity
Several recent events testify that pressure is certainly being exerted on the polity: Hillary Clinton’s visit to India to influence the government’s policies on trade with Iran and on FDI in retail, the S&P downgrade of India, the Aircel Maxis deal. There are also less visible cases of foreign pressure as in defence purchases (the British were upset at our rejection of the Eurofighter), energy sector investments (oil, gas and nuclear), opening of markets and so on.
The Bofors scam has had a continuing impact on politics
since 1987. Sten Lindstrom, the former head of the Swedish police who led the
investigations into the Bofors-India howitzer deal, recently underlined that
there was conclusive evidence that Ottavio Quattarocchi, a close friend of the
Nehru-Gandhi family, was one of the recipients of kickbacks. His role in
swinging the Bofors deal at the last minute was known. It is not in doubt that
payoffs were made or that the Bofors guns are good. The only unsettled issue is
who got the money.
That Mr. Quattrochi had powerful friends was confirmed when
he was allowed to escape the country during the Congress rule. The case was
apparently deliberately spoilt by the investigative agencies, including the CBI
and, therefore, lost in the courts — in Malaysia,
Britain and Argentina. The
red corner notice against him “could not be executed” since our police agencies
could not “find” him even though journalists could interview him.
Evidence points to a high level cover up. M.S. Solanki, then
the External Affairs Minister, sacrificed his Cabinet berth rather than reveal
what he wrote in the paper he passed on to the Swiss counterpart at a meeting.
At that point of time, the Swiss bank accounts were being investigated by the
Indian agencies to trace the Bofors payoff trail. Could such a sacrifice of a
political career be for an ordinary leader?
Who took the money even if not Rajiv Gandhi and why did the
investigative agencies spoil the case? Investigations are essential to clear
the air about these questions. A former Minister in the Prime Minister’s Office
mentioned to this author in an interview on the black economy that when he went
with the Bofors file to the then Prime Minister, he was told to close the file
as it could cause a threat to his life. No wonder, none of the non-Congress
Prime Ministers changed the course of investigations to bring them on track and
none of the Congress Prime Ministers has wanted the truth to come out.
Kickbacks are common globally. Sweden is one of the least corrupt
countries in the world but its corporations have bribed to get contracts as the
Bofors case shows. U.S.-based multinational corporations have resorted to
bribes in spite of their being illegal under that country’s law. Recently,
Walmart admitted to having bribed its way through in Mexico. When the top management
learnt of it, rather than exposing corruption, the internal probe was closed.
The same Walmart has been trying to enter India. Ms Clinton’s agenda included
to open its doors to foreign retail. The only Chief Minister she visited was
Mamata Banerjee, the important UPA partner opposing FDI in retail. It is
reminiscent of Henry Kissinger and the Secretaries of Energy and Defence flying
to lobby for Enron in the mid-1990s. Enron admitted to spending $60 million in India, to
It is not just a few MNCs that indulge in corruption or use
their governments to apply pressure on policies. MNC banks are known to help
Indians take their capital out of India. UBS bank, the largest Swiss
bank, was fined $750 million by the U.S. for helping its citizens to
keep secret bank accounts. The same UBS bank was allowed entry into India in spite
of its known role; was it a reward for helping some powerful people?
Executives of Siemens, a supposedly honest MNC and an
important player in India,
were indicted in the U.S. in
December 2011 for bribery in Argentina.
Investigations revealed that the company also made illegal payments to the tune
of $1.4 billion from 2001 to 2007 in Bangladesh,
China, Russia, Venezuela and other countries.
These were often routed via consultants. The company paid fines and fees of
$1.6 billion to the U.S.
and German governments for the bribes it paid across the globe.
Siemens started bribing soon after the end of World War II
to get contracts under the Marshall Plan which were mostly going to the
Americans. Since its prosecution, Siemens claims to have appointed Compliance
Officers to check bribery. But, with the prevalence of a high degree of
illegality internationally, can one company be honest while others are not? How
would it win contracts when those in charge expect to be bribed? Since
non-transparent processes are set up, at every step, decisions need to be
influenced, as seen in the Bofors case or the 2G spectrum allocation.
The Vodaphone case is significant. MNCs (Indian and foreign)
have used tax havens and tax planning to avoid paying taxes in India. They
create a web of holdings to hide the identity of the real owners of a company
or who it is being transferred to. In 1985, in the Mcdowell case, the Supreme
Court bench observed, “Colourable devices cannot be part of tax planning and it
is wrong to encourage or entertain the belief that it is honourable to avoid
the payment of tax by resorting to dubious methods”. This judgment was
overturned in 2003 inUnion of India
vs Azadi Bachao Andolan on the use of the Mauritius
route to avoid paying tax in India.
Vodaphone took advantage of this judgment to successfully argue against having
to pay capital gains tax in India
on transfer of a company in a tax haven which owned the Indian assets. Mr.
Mukherjee was trying to recover lost ground.
Indian policies have been subject to foreign pressures since
the days of the Cold War in the 1950s. But until the mid-1980s, the decisions
were accepted as being in the “long-term national interest.” There were
accusations in the procurement of the Jaguar aircraft also but these did not
create the furore that the Bofors scam did. Since the late 1980s, as in the case
of Bofors or the new economic policies in 1991 or the Indo-U.S. nuclear deal,
sectional or individual interests have become dominant. These have played havoc
with national politics. Pressures and counter pressures are mounted through
political parties and their leaders and big business.
The lesson is that foreign pressures tend to damage
processes that national politics cannot undo. The public is left bewildered by
the goings on, as in the present case of selection of the presidential
(The writer is Chairperson, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University. Email: firstname.lastname@example.org)