Crony wealth in India drops sharply to 3.4% of GDP, says a report

This is one ranking which the Modi-government would be pleased to look at. According to the Economist study, India has been ranked at ninth position in crony-capitalism with crony sector wealth accounting for 3.4 percent of the gross domestic product (GDP) against 18 percent in 2008.  India’s improved performance has been mainly attributed to a slump in commodity prices in ranking, weak currency, end of property boom in Asia and the Modi-government’s tough stance on the graft besides the central bank prodding state-owned lenders to stop giving sweetheart deals to moguls. “Whether its Xi Jiping’s “crackdown against corruption” in China or PM Modi “trying to subject the economy to a blast of competition”, governments are initiating a clean-up everywhere,” said Times of India citing The Economist study. It also cites pressure from the middle class, reflected in the election of Arvind Kejriwal in Delhi. Referring to India, the Economist said, “A slump in commodity prices has obliterated the balance sheets of its Wild West mining tycoons. The government has got tough on graft, and the central bank has prodded state-owned lenders to stop giving sweetheart deals to moguls. The pin-ups of Indian capitalism are no longer the pampered scions of its business dynasties, but the hungry founders of Flipkart, an e-commerce firm.” In India, the non-crony sector wealth amounts to 8.3 percent of the GDP, as per the latest crony-capitalism index. In 2014 ranking also, India stood at the ninth place. Using data from a list of the world’s billionaires and their worth published by Forbes, each individual is labelled as crony or not based on the source of their wealth. Germany is cleanest, where just a sliver of the country’s billionaires derives their wealth from crony sectors. Russia fares worst in the index, wealth from the country’s crony sectors amounts to 18 percent of its GDP, it said. Russia tops the list followed by Malaysia, the Philippines and Singapore. “Thanks to tumbling energy and commodity prices politically connected tycoons have been feeling the squeeze in recent years,” the study said. Among the 22 economies in the index, crony wealth has fallen by $116 billion since 2014. “But as things stand, if commodity prices rebound, crony capitalists wealth is sure to rise again,” it added. The past 20 years have been a golden age for crony capitalists/tycoons active in industries where chumminess with government is part of the game. Their combined fortunes have dropped 16 percent since 2014, according to The Economist updated crony-capitalism index. “One reason is the commodity crash. Another is a backlash from the middle class,” it said. Worldwide, the worth of billionaires in crony industries soared by 385 percent between 2004 and 2014 to $2 trillion, it added. With inputs from PTI