Of Bad Boy Billionaires, Dirty Money and Indian Economy – Just Another Investor

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Over the last two weeks I watched ‘Bad Boy Billionaires’ and ‘Dirty Money’ on Netflix. Though the former is an Indian-specific series and the latter covers global corporates, the pitfalls conveyed in the polar ideologies – Capitalism and Socialism – in the two series caught my attention. The Bad Boy Billionaires’ stories, one can argue are an outcome of inefficient Public Sector Enterprises/banks being leveraged by few business houses (Mr. Mallya and Mr. Nirav Modi episode) whereas the Dirty Money is all about the pitfalls of capitalist societies (especially the episode on a leading US-based Bank and Mr Jared Kushner episodes)

For the uninitiated, Bad Boy Billionaires takes the viewers through the journey of Mr. Vijay Mallya, Mr. Nirav Modi and Mr. Subrata Roy, & their highs and lows. The series also highlights how they milked the financial system to create their respective empires. Incase of Mr. Vijay Mallya and Mr. Nirav Modi, both of them leveraged on the loopholes in the operations of Public Sector Banks to raise funds. Further, Mr. Mallya also used his strong political connections to aid loan approvals.  

Source: Netflix

On the other hand, Dirty Money is all about the irregularities in major global corporates (except the 1MDB scam story which covers the story of the then Malaysian Prime Minister – Mr Najib Razak) and how profits for a corporate precedes every other moral standing in a society. It perhaps makes you think if you want to live in such a society and what is the cost of the money that many corporates earn. The cost in terms of morals and ethics.

Comparing both these series, I wonder if there is any Ideology – Socialism or Capitalism or Mixed economy – which one can firmly argue works better for the Indian Economy.

Of Bad Boys Billionaires and PSU Conundrum…….

The problem statement explored by the Bad Boys Billionaires series and repeatedly discussed by many guests on the show as well is well versed one -PSU banks. India as we know has slowly transformed to a market-based economy post 1991 but the banking sector still continues to have substantial public ownership. There has been growing clamor for its privatization over last few fiscals. However, it is easier said than done due to various reasons. The public institutions in India (especially banks) were nationalized with a socialistic ideology in 1969 by the then Prime Minister of India – Smt. Indira Gandhi. The Prime Minister had felt that the banks are catering only to the rich and not to the poor section of the society. However, different books written about Indian history claim different reasons for the decision.  That is a discussion for another day.

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Socialist ideology also means more control with politicians & bureaucrats. Unfortunately, one may argue that what remains of Socialist Economy is the Strong Government control and the ideology of upliftment of poor thereby creating equality is largely forgotten. It will be unwise to say that PSBs don’t have their benefits. The large network of PSBs helps the Government to implement their initiatives. The implementation of Jan-Dhan Yojana on such a large scale was only possible because of the PSBs (especially State Bank of India).

During Fiscal 2015 to Fiscal 2020, the Government has pumped in around INR 3.5 Trillion into the PSBs due to NPA issues as per Union Budget Documents. Certainly a case of inefficient utilization of public money. A socialist may say that rather than looking at privatization as an alternative, India should strive to weed out the loopholes in PSUs. Well, we are all ears if anyone has a solution on how that can be implemented, as India has failed to do so since its Independence.

Mr Aditya Puri, the Managing Director and CEO of HDFC Bank (ex-MD and CEO if you read this article post 26th October 2020) narrated a story about the bank declining a loan to Mr Mallya despite repeated proposals. He said in this interview “If you are a bad risk, you are a bad risk. You can be my good friend, I can give you coffee and send you away’.  It certainly wouldn’t have been easy for a PSB MD to deny a loan proposal request from Mr. Mallya, who was also the Rajya Sabha MP during 2002-2016.  

Of Dirty Money and Capitalism’s Dark Side

If you watch Dirty Money, you realize that capitalist societies and its strong institutions try to extract the last ounce of penny from middle class, many times being hand-in glove with the politicians. A nexus between a strong private player and bureaucracy/politician is perhaps the worst of both the worlds. However, even in a faulty democratic market economy, this is not systemic problem with only few private institutions following such unethical practices. Further, the loss (extra cost) is restricted to the individuals/customers (as unfortunate as it is) to whom the company caters and is not inefficient utilization of public money at large. As showcased in two cases, the citizens eventually won the case through right representation by a Corporate Lawyer.

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Capitalist Societies also has its severe downfalls and I was rather surprised that an episode on US Healthcare Industry was not part of the ‘Dirty Money’ Series. A strong Independent Industry Regulator is equally important alongwith Institutions such as Competition Commissions to ensure a vibrant capitalism is in place. It takes years for this ecosystem to develop but has to be given a chance.

Which Problem is Easier to Solve – Dirty Money or Bad Boys Billionaires ?

The inefficiencies of private institutions are often leveraged upon by other market forces and therefore the competition ensures efficient utilization of resources. Even in case of distress, the problems of market economy can be solved through market forces evolved through capitalism. Unless the problem is too huge such as the Lehman Crisis or back-home the problem with a leading housing finance company and private bank, etc. where the Government had to involve itself directly or indirectly to retain market confidence. However, these are event specific and not structural issues which drain the public money on a steady basis over a period of time.

The problems of the PSU is generally dealt with by pumping in more public money because other solutions are simply not on the horizon unless the country’s finances are pushed to the corner like in 1991. PSUs are built with a very noble thought process but unfortunately they rarely serve the people for whom they are built- the poor. The private firms are always built with profit as one of their major objective and hence operate more efficiently.

Yes, capitalism does give disproportionate rewards to the rich, but it also rewards the people in the lower tier. The emerging middle class is rarely seen as a success of capitalism. The Indian Premier League may have certainly increased a Virat Kohli’s income by 6-8 times today than what he could have earned before 2008 (and the related hike in value & earnings from brand endorsements due to IPL). But the benefits/profits from IPL has resulted in an increase in the salary of Ranji players over the last 10-12 years. On paper the inequality may have increased further but a Ranji player would be more glad about his increase in pay cheque rather than being upset about increasing salary difference with top-tier cricketers

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India Has Reformed well, the Crisis should provide the final push

The banking sector has only been used as a metaphor for reforms in this post. To be fair, the Government has undertaken reforms over the few years, but the electorally sensitive ones such as fertilizer subsidy (~INR 60,000 Crore annually), bank privatization, land reforms, etc. which can create a political stir have been slow to come by for obvious reasons. Also, in reforms such as Insolvency and Bankruptcy Code, the Government has taken two steps forward and then one back by tweaking it. However, the current crisis due to Covid-19 provides a renewed opportunity to the Government to push hard for pending reforms.

India has come a long away in its efforts in building a vibrant market economy. From our Late First Prime Minister Pandit Jawaharlal Nehru saying to Mr. JRD Tata “Profit is a Dirty word, Jeh (Mr. JRD Tata)” while debating against growth of private sector in the country in 1960s, to our current Prime Minister saying “Wealth creation needs to be encouraged, not seen with suspicion”. However, for a democracy it always takes a crisis to reform as it provides window to the Government to do what is right than do what will be ‘perceived’ to be right.

To sum up, it is perhaps better to deal and solve the adhoc problems of ‘Dirty money’ than have ‘Bad Boy Billionaires’ through inefficient management of public money.



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Saurabh Prabhu
Stock Market. Cricket. F1 Enthusiast. Private Equity Professional . Ex- Crisil.
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