Tuesday, June 26, 2012

Should India be proud of its billionaires?

When it comes to number of billionaires, India holds its own in the global arena. Indeed, in 2000, no Indian figured on the list of the world's top 100 billionaires. But by 2011, there were 7 billionaires in that elite club. Only the US, Russia and Germany had more of their billionaires in that top 100 billionaires' list than India.

What this highlights is the strength of India's economic rise. Or does it? Although those aspiring to be rich would like to think that it is healthy capitalism that has contributed to this meteoric rise, it may very well not be the case. Infact, the manner in which these people have made it to the top actually reveals a troublesome trend. At least that is what Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, believes.

For instance, one of India's strengths has been the rise of technology entrepreneurs who have played an instrumental role in putting India on the global map. But this trend is gradually paving way for provincial tycoons who have cut deals with state governments to corner the market in industries like mining and real estate. In other words, rather than capitalist principles, it is government patronage which is the ticket to the billionaires club, a trend which does not bode well for the larger interest of the Indian economy.

There is also the matter of wealth concentration to consider. India's 48 billionaires account for a collective networth of US$ 195 bn. This is a little more than a tenth of India's economy. China fares better on this front. Its number of billionaires is more at 95, but collectively they account for less than 3% of the country's economy. How much churn there is in the billionaires list is also a factor worth noting. In the last 7 years at least, nearly the same people have found a place on the list with hardly any headroom for new entrants. In China, the turnover of billionaires comparatively is on the higher side.

It goes without saying that the government aiming for 9% plus growth on a sustained basis going forward is all very fine. But the impact of this has to be felt across sections of society. Growth in the Indian economy has to translate into improved standard of living for all. Otherwise, growing inequality will only sow the seeds for future unrest. History is a testimony to this fact.

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