Ex-finance minister’s jailing hits investor confidence in India

As India’s economy continues to slow down, a case involving a former finance minister is starting to emerge as a symptom of everything that is wrong with the government’s priorities.

The World Bank has already termed India’s slowdown “severe,” while international rating agency Moody’s has already pushed the country’s credit rating down into the “negative category.”

For more than 100 days, India’s former finance minister P Chidambaram has been in jail, facing corruption charges. The government alleges that in 2007 he, along with his son Karti Chidambaram, helped a media company violate foreign direct investment rules to set up shop in India.

According to the government’s charge sheet, a formal document that frames the sum and substance of the investigations carried out against those charged, accuses the former minister and his son of accepting a bribe to clear the investment.

So far, the government’s investigating agencies have been able to only cite a payment of Rupees 9,96,000 (US$13,381) that was allegedly the bribe paid to the Chidambarams to facilitate the investment.

This, the charge sheet filed with the court claims, was paid by check and was part of a large demand for a $1 million bribe by the son, Karti Chidambaram. However, the charge sheet does not cite details of any other payment.

Gaping holes

Curiously, the alleged bribe payment was made to a company which neither of the Chidambarams have any links to. Advantage Strategic Consulting Private Limited, which received the payment, is purportedly a front for the Chidambarams, according to the investigating agency.

However, the charge sheet lacks any details that link either of them to the company. Worse, despite registering the case three years ago, the government has not been able to track any details of payment of the alleged bribe.

Despite these obvious gaps in the investigation, the courts have not been keen to grant bail to the former finance minister. The main opposition party, the Indian National Congress, terms it a political vendetta against Chidambaram.

“He is a much sought after designated senior advocate,” a senior Congress leader and a sitting member of Parliament told Asia Times. “He charges hundreds of thousands by the hour as legal fees. Why would he be interested in a bribe of Rupees 9,96,000?”

He added, “He may or may not be guilty. But the case was registered three years ago. After years of investigation, this is all that the government has been able to come up with.”

Chidambaram’s legal defense team also points out that the case has targeted him selectively.

“The decision to allow the media investment was taken by the Foreign Investment Promotion Board (FIPB). But none of the members of the board have been accused. Only the former finance minister and his son stand accused of accepting a bribe to clear it. That clearly shows mala fide,” a member of the legal team said.

The fact that the courts have not granted Chidambaram bail flummoxes everyone. His son Karti was also arrested in early 2018 in connection with the same case. He was let out on bail in less than 30 days.

“It is the same case, the same allegations and yet while his son was allowed bail, he is in jail for over 100 days. That is worrying,” a member of the former finance minister’s family said.

Chidambaram’s last bail hearing was at the Delhi High Court on November 15. The court denied him bail on the grounds that this was a “serious case” and he played an “active and key role” in the case.

Nervous investors

For investors, the case comes at a time when rulings by courts have led to major losses by companies. A recent Supreme Court order directed two major telecom companies to shell out US$4 billion in past taxes to the Indian government.

Worried about the fallout and continuous litigation in the Indian market, UK telecom major Vodafone’s CEO threatened to pull out of India.

“If you’re not a going concern, you’re moving into a liquidation scenario – can’t get any clearer than that,” Nick Read said. He was in India in September to meet top Indian government telecom officials to push for relief from the onslaught of tax demands that have turned their India investment into a major loss-making operation.

According to reports, Vodafone has devalued their India investment completely and is unlikely to inject more funds.

Ironically, the case against the Chidambarams is gathering steam at a time when India’s Prime Minister Narendra Modi is keen to increase investments from abroad.

In September he was in the United States urging investors to invest in India at the Bloomberg Global Business Forum. Among the many positives he cited was India’s independent judiciary as a key factor for investments.

India’s “judiciary being in English” makes it an attractive destination for foreign investors, and leads to “uniform interpretation” of laws and agreements, he said.

However, few are now buying that pitch. Foreign investment in India is the lowest in a decade, while foreign portfolio investments are exiting India, according to official data released in September this year. Even the current finance minister, Nirmala Sitharaman, finally admitted at a press briefing earlier this week that India was facing an economic slowdown.

Popular jokes on social media now urge the government to use Chidambaram’s time in judicial custody and use his expertise to fix the economy. That speaks volumes about how little faith investors have in India.