Investing next to India’s strongmen

It wasn’t obvious at first, but they had been robbed. An iPod was missing, along with an e-book reader. So they called the police who swiftly arrived in force and started searching the house for evidence of the intruder.

An important looking police officer – he looked like a detective – walked over to my Aunty.

In a heavy Indian accent, he asked, “Madam, could you tell us where you store your gold?

“We’re here on holiday… not for Diwali”, she replied perplexed.

My mother’s family now live in the UK, but once a year most of them visit our ancestral house in Goa. It’s located in Saligão – a small picturesque village in the North of the state.

It’s beautiful, set among rice paddy fields and coconut trees. The hills surrounding the village are covered in thick forest and are full of exotic wildlife. There’s a natural spring, which for centuries provided water for village. It’s where I bathed regularly as a child.

In the evening, the sound of the Hindu temple, set against the chiming of the church bells is absolutely intoxicating. There is no sound like it on Earth. I can’t help but envy my grandparents who grew up there in simpler times.

The detective’s question was quite reasonable given the setting we were in – India. But it was also a little stupid. There was an assortment of beach paraphernalia lying around the house – you know, sunblock and blow-up lilos. Goa is after all, famous for its tropical beaches. Plus, there was a cross on the wall and an alter dedicated to Jesus in the bedroom. It’s highly unlikely that a bunch of Catholic Goans would come over from the UK to store gold in their ancestral home. There are better places to do it, such as Switzerland.

However, I guess the detective was just making small talk. He knew who the thief was. In fact, the whole village did. We even knew the thief’s parents and years later we learnt that he was killed in motorbike accident, but that’s another story.

The detective continued asking routine and pointless questions and eventually the police left having found nothing.

“Where are my sunglasses?” my Uncle asked, “I put them right here on this side table, next to the detective”.

My Aunty looked at him in shock. “The cheek”, she exclaimed.

“Don’t worry, the jokes is on him”, my Uncle laughed, “They were prescription sunglasses”.

These stories are all too common in India and some of them are quite amusing. It’s difficult to explain why they happen.

There is a culture of improvisation where opportunities that present themselves are often taken regardless of whether they sit on the right or wrong side of what is considered ethical.

At a lower level its forgivable as poverty means that such practices are borne out of necessity rather than criminal intent. For example, once fish lady in the market didn’t want to give me my full change. It was annoying, but she had kids to feed so I could forgive her.

However, when these grey practices, shortcuts and financial slights-of-hand enter the professional business world that bothers me. It’s a great deterrent to wanting to invest in India. I’m personally fascinated by India’s fintech industry and the country’s increasing use of cashless payments. It’s a very powerful long-term trend that I would like to participate in.

Corruption creates structural distortions, supporting India’s large shadow economy, which is unregulated, untaxed and beyond the control of central government. That is why Prime Minister Narendra Modi’s recent staggeringly disruptive action to scrap India’s two highest denomination rupee banknotes was quite unexpected, but not too surprising.

Though perhaps haphazardly implemented, his intentions were to curtail the shadow economy and initiate, “the beginning of the end of the corrupt”.

It effectiveness was criticised by economists as a needless short-term dent in growth. However, it sent out a powerful message of support to a growing middle-class that’s tired and angry of the status quo applied by the wealthy elite.

My family never despised the thief who robbed my Aunty and Uncle. We knew his story. In fact, we pitied him while he was still alive. The police detective, who swiped my uncle’s prescription sunglasses in contrast, represented something different. He was supposed to be in a position of trust and respect.

Despite the comical nature of what this halfwit did, his actions were far less excusable or forgivable. In many ways this sums up the nature of the relationship between India’s electorate and it’s politicians.

There’s a new book by Milan Vaishnav titled When Crime Pay: Money and Muscle in Indian Politics. Within it contains some pretty shocking statistics.

In most countries, political candidates tainted by criminality are usually shunned. Vaishnav argues however, that although Indians are angry about corruption, certain criminally tainted candidates are still appealing because they are seen as strong and offer protection to their communities.

Until recently, I would have found such arguments unconvincing and very unpalatable. However, the rise in populist politics seen in many democratic countries and the strongman culture that is emerging from it has changed my perception. Despite the tremendous progress made against political corruption in India through social media and public protests, perhaps corruption will persist just a little bit longer.