The Drift towards Monopolization in Indian Telecommunication

• In Event: Inequality and Democracy

Abstract

What are the drivers of monopolization of India’s telecommunications sector? We argue, when ethnicity-based crony capitalism takes hold of the government, rent-seeking can be expanded to promote monopolization on an unprecedented scale. Ethnic bonds owing to trust between a business house and a populist leader can systematically produce unusual cooperation between the leader and the co-ethnic business house. Prime Minister Modi’s Bharatiya Janata Party government (2014-present) applied the Gujarat Model reminiscent of his tenure as Chief Minister of Gujarat (2001-2014) to India’s political economy. Ethnic Gujarati entrepreneurs supported Modi’s political rise in Gujarat. As Prime Minister too, Modi’s government promoted one Gujarati entrepreneur in the infrastructure sector where the country had succeeded -telecommunications. Ethnicity-based cronyism deployed the historical institutional path of drift to promote monopolization. Since rival businesses would oppose monopolization, the government merely interpreted rules differently to favor one company without any legal change. The paper deals with three issue areas: cheap licenses, predatory pricing, and reduced interconnect charges that enabled Jio to propel its meteoric rise. This paper holds that policy ideas can be adjusted to a historical path depending on the power of veto players and the ambiguity of rules to drive a new policy paradigm – monopolization.

Author

• Seyed Hossein Zarhani, Heidelberg University