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Monday
May192014

Democratic change is awesome – unless, of course, you’re corrupt

PM Singh (right) congratulates Narendra Modi after Modi's election victoryRegime changes are always delicate moments in countries facing corruption problems. When the sea of power recedes the low tide often exposes relationships and decisions that many had hoped would never surface. What will the new regime do with the revealed detritus of prior “understandings?” Will there be “professional courtesy” or will the long knives come out?

The crushing electoral defeat of India’s long-ruling Congress Party announced Friday probably has many politicians – and business persons – contemplating what comes next. Anyone with a business in India, or expansion plans in India, should be wondering the same thing.

There will be a big change in personalities and styles from the somnolent Manmohan Singh and imperial Gandhi dynasty to the energetic and lively Narendra Modi and the ideological BJP. But the most important aspect of the vote may well be a crystal clear mandate from the electorate.  The Modi victory has produced the first parliamentary majority in thirty years, and dispenses with the need for the wobbly coalitions that have produce wildly uneven results. After a decade that felt like a country of more than a billion was walking in the twilight without a flashlight, a clear path for India is at minimum a step in the right direction. It could be even more.

The BJP’s sound drubbing of Congress is the natural headline, but the irrelevance of the once promising Aam Admi Party (“AAP”) is a significant and sad side show in this election. The AAP rode a gathering discontent to a stunning victory in elections to control local government in New Delhi, the AAP’s government fizzled in fewer than fifty days of bumbling. AAP leader Arvind Kejriwal, once the darling of those seeking to change India’s culture of corruption, lost his bid to join parliament and his party looked headed for total defeat. Watching the AAP implode was as painful as it was predictable.

One of the AAP’s major missteps during their abortive stay in power was to disregard actual governance and instead investigate major corruption allegations against major political personalities and business persons. However, well intentioned, it felt like a witch hunt, and it certainly didn’t improve garbage pickup or any other mundane aspects of running a mega city.

We can expect Modi to concentrate more on economic growth than re-opening old wounds. But anyone whose business in India depends on an important person related to the old power structure (some major U.S. hotel chains come to mind) should look over their files. Just in case.

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Russell Stamets is a Contributing Editor of the FCPA Blog. He was the first non-Indian general counsel of a publicly traded Indian company and was general counsel for a satellite broadcasting joint venture of a large Indian business house. Russ can be contacted here.