In recent days, two major scandals, involving the Indian Premier league and Ranbaxy, have hit India and threatened the reputation of not just the Indian private sector but also the country
When discussing corruption and misdemeanour, the Indian media often focuses on political actors and Governments. Corporate corruption is underplayed, and not just because few editors and media owners have the courage to put off potential advertisers and investors in their publications or news channels.
Many sensible media practitioners have sympathy for Indian business and for the narrow and constricting space it is allowed by the Indian state. Much of the corruption undertaken by Indian business corporations is sought to be explained away as necessary, given the oppressive conditions a toxic political and bureaucratic structure imposes. That apart, since familiar voices that rail against corporate corruption seem to locate its roots not in individual violations but in same grand idea of capitalism being a flawed construct, there is reluctance to become part of such an ideological mission.
The upshot is an insufficient attack on corporate corruption from the Indian right, the segment that supports the market system and a liberal society. This is disappointing and also self-defeating as it puts the onus of attack on those who have no affinity for markets or the private sector in the first place. For example, the hardest and most uninformed criticism on the Indian Premier league scandal has come from cricket writers who haven’t a clue as to how modern betting works, have no love and draw no pleasure from the Twenty20 game and are generally sour-faced anachronisms who give you the impression they long for matting wickets.
In recent days, two major scandals — involving IPl and Ranbaxy — have hit India and threatened the reputation of not just the Indian private sector but also India as a country. While individual politicians and politically-connected people may be associated with both, the two scandals are, broadly speaking, free of the Government and the state. They cannot really be blamed on the UPA Government or x or y State Government or political party. Even so they are enormously damaging, and in some respect more damaging than a swindle triggered from within the state or
the governing system.
Most stakeholders in the India story have pointed to the success and credibility of outstanding Indian business corporations as emblematic of the new respect that this country has earned. The IPl, as a breakthrough cricket product and a rare global leisure-entertainment business incubated and run by Indians, represented this sense of Indian enterprise. So did, in its own way, the home-grown pharmaceutical industry. Broadly these grew in spite of the Government and did not really need the Government.
True, cronyism was a feature. For instance, the IPl bigwigs gave a job to a senior politician’s daughter while her father was Civil Aviation Minister. In turn, he commandeered Air India planes for IPl use and hurt the public sector airline’s revenues and passengers. Nevertheless, the point was that even without that sickening diversion of Air India planes, IPl remained a good commercial proposition, opened up new demographic markets for cricket and provided it a compelling summer product it previously lacked. In a sense, the Indian nose for business had taken a Western invention and given it an entirely new spin and model.
Taking a big picture view, Indian pharmaceutical companies did something similar. Using techniques such as reverse engineering, they produced copycat and much cheaper versions of key drugs originally devised and formulated by Big Pharma in the West. This changed the rules of the industry. It began to provide much cheaper medicines — particularly for patient groups such as cancer sufferers and HIV+ people — and made India the “pharmacy of the developing world”. Today, 90 per cent of medicines sold are generics — copies of medicines originally patented by another company — and only 10 per cent are branded or patented. Indeed, the generics business itself has got so sophisticated and competitive that you have a choice between plain-vanilla generics and branded generics!
India contributed heavily to the spurt in generics. Yet, earlier this month, authorities in the United States fined Ranbaxy, a star of the Indian pharmaceutical industry, half a billion dollars for selling adulterated drugs made in India, and for compromising and simply faking quality tests required by regulatory bodies such as the US Food and Drug Administration. The episode in question went back to 2005-2006. later, Ranbaxy was sold to a Japanese pharmaceutical giant in a particularly high-profile deal that was seen as a vote of confidence in the Indian economy. In this period, there was a spate of investments in Indian pharmaceutical companies, and about every global corporation of reckoning acquired a generics manufacturing presence in India.
What this means is the response to the Ranbaxy mess will not necessarily be pharmaceutical MNCs mocking Indian companies. That old-style dialectic has long gone out of the window. Rather, it will result in all of the big Western companies that have made acquisitions in India looking at the quality systems at work in their Indian operations and wondering if the previous owners were entirely truthful. The Indian generics segment is now too big to fail — for global pharma and not just for India. No doubt, it has to be cleaned up where necessary and it needs to fight a potentially devastating credibility challenge.
India’s relationship with cricket and cricket commerce is analogous. Despite the spot-fixing muck and the smell of insider deals, the obvious conflicts of interest and the ridiculous situation where the management and players of a team that will play the final are under police investigation, the rest of world cricket has been remarkably quiet. From former Australian cricketers who find jobs as commentators and coaches to Caribbean players who are paid higher fees than they had ever imagined to the England and Wales Cricket Board that gets a slice of the India market through bilateral series and even a T20 contrivance like the Champions’ league, the IPl and all that it stands for is now too big to fail. It does not mean however that it is too big to be purged.
The answer to the excesses of the Singh brothers at Ranbaxy and of the Srinivasan clan in Chennai is not Government control. It is in the Indian private sector inviting more stringent — but independent — regulation upon itself. It needs to do so entirely in its self-interest.
malikashok@gmail.com