India's billionaires and the wealth of the nation

 
Indian rupees There are 46 billionaires living in India

There were only two billionaires with a combined wealth of $3.2bn (£2.01bn) in India in the mid-1990s.

By 2012, there were 46 of them living in India with a net worth of $176.3bn (£111bn), according to the annual world's billionaires list compiled by Forbes magazine.

The ratio of total wealth of the billionaires to gross domestic product (GDP) - an indicator of how extreme wealth compares with India's growth - rose from around 1% in the mid-1990s to 22% at the peak of the stock market boom in 2008, before dropping to 10% of GDP this year.

So what does this tell us about the nature of the accumulation of wealth in India, one of the world's most unequal nations?

A new paper by Aditi Gandhi of Delhi's Centre for Policy Research and Michael Walton of Harvard University's Kennedy School of Government offers intriguing insights into the social demographics and source of wealth of India's billionaires.

Many economists, Ms Gandhi and Mr Walton point out, find a positive association between growth and self-made billionaire wealth, but a negative one with inherited wealth. "While no causality can be inferred, this is aligned with the view that self-made wealth is more likely to be associated with aggregate economic dynamism," they argue.

Analysing data put out by Forbes, the researchers found that though 21 Indian billionaires are "self-made", 40% of India's total billionaire wealth is owned by the "inherited and growing" category of businessmen.

The caste origins of India's billionaires are on predictable lines: 28 of the 46 billionaires come from traditional merchant classes (Banias, Parsis and Sindhis, for example), and a number of them belong to upper caste communities like Brahmins and Khatris.

A smaller number belong to the lower castes. There is one Muslim billionaire and no Dalit (formerly called untouchables) billionaires.

There is a more significant finding on the origins of billionaire wealth.

A total of 43% of the billionaires, accounting for 60% of billionaire wealth, had their primary - and original - sources of wealth from industries like property development, infrastructure, construction, mining, telecoms, cement and media.

These industries, Ms Gandhi and Mr Walton say, have strong links with the state.

Property development in India, most agree, is India's most shadowy business with a large number of transactions in illegal money on which no tax is paid.

Infrastructure and telecom licenses are typically given out through bids, which are often non-transparent and controversial. (A telecoms scandal rocked India last year). There are allegations of cartels working in the cement industry and sections of the media have been blamed for publishing and broadcasting news for money.

Ms Gandhi and Mr Walton note that all this does not mean that the billionaires acquired wealth through government connections and influence.

"However, it is notable that impressive wealth creation occurred in sectors with substantial potential for rent-extraction and rent-sharing between the private and government players," they say.

Many would say the research shows the two faces of Indian capitalism - like capitalism around the world - where business dynamism and oligarchies go hand in hand. All this can also lead to cronyism, often responsible for economic crises.

Business and the state continue to have tight links in India.

"In the last two to three decades this has bred both impressive business dynamism and even more impressive accumulation of extreme wealth in India. There is a real question as to whether an oligarchic business structure and a corruptible state will lead to the propagation of inequality and create distortions that hurt the growth process," write Ms Gandhi and Mr Walton.

It's a good question. The answer will determine how India tackles inequality.

 
Soutik Biswas Article written by Soutik Biswas Soutik Biswas Delhi correspondent

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  • rate this
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    Comment number 36.

    Following on my previous comment, if the caste breakdown of the reporters reveals that lower caste have less representation among BBC reporters and Mr. Biswas also belongs to so-called upper caste then I think a nice gesture from the author would be to leave his position and ask BBC to hire somebody from lower caste for his position. As Gandhi said : "Be the change you wish to see in the world".

  • rate this
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    Comment number 35.

    For full disclosure, the author must reveal which caste he belongs to and how many Indian reporters employed by BBC including BBC World Service belong to lower castes. He must also reveal how many India correspondents in the past have been of lower caste. Without revealing these stats any numbers that the author shows about lower caste not having enough representation is hypocrisy.

  • rate this
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    Comment number 34.

    The last para reads - "There is a real question as to whether an oligarchic business structure and a corruptible state will lead to the propagation of inequality and create distortions that hurt the growth process," write Ms Gandhi and Mr Walton".

    Ms Gandhi and Mr Walton - Does it apply to US ? - there has been a great stride in inequality there since 1978?

  • rate this
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    Comment number 33.

    #30: India is not Iraq or Iran, has no surplus oil, but great trade opportunity. What makes you think Obama Admin would want to kill the golden goose, upset a compliant Govt, interfere in the domestic policy of a sovereign democratic state (at least on paper), when it can dominate through FDI/FI and global trade with ease?

  • rate this
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    Comment number 32.

    #29: Indian elections are run along Roman war strategy: “bellum se ipsum alet”. Once someone can muster enough to win a seat (20 -80 mn INR per MP?), then the tenure recoups ‘seed capital’, provides next ‘war chest’ and enough for a comfy life for 3-5 generations – much more in subsequent wins. Hence political dynasties, and caste/religion perpetrated for 'divide & rule' advantage.

  • rate this
    +1

    Comment number 31.

    A high proportion of comments on Mr Biswas' articles are negative and contradict a point/fact he has made. At first I got annoyed at the constant moaning and scrutiny on his every word.

    But looking back he has a habit of making false (or "borderline true") and irrelavant statements to sensationalise his article. And this one about no Muslim billionaires is no different.

    New India correspondent?

  • rate this
    -1

    Comment number 30.

    As per Congressman Trent Franks House Concurrent Resolution 139, I request Obama Administration to direct New Delhi regime to create an Independent nation for 300 million India's untouchables.
    http://wh.gov/Bo5w

  • rate this
    -1

    Comment number 29.

    Anti-corruption is a cheap/covert tool/trick used by forward caste people to promote their hegemony over BC/SC/ST/MC people in India.

    90% of corrupt money ($2 trillion) in India is with forward caste people. Their population is less than 150 million.

    https://en.wikipedia.org/wiki/List_of_scandals_in_India

  • rate this
    0

    Comment number 28.

    I am not getting what Mr.Biswas is trying to say here by using precious space. Strong objection over the word "Untouchables" seems you are defining to the west. No use from this article.

  • rate this
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    Comment number 27.

    Is it high time for top Western universities (eg Oxford, Cambridge, LSE, Harvard) to consider debarring the most notorious and corrupt past students from their registers, and changing the names of scholarship funds etc they have set-up to honour these criminals?

    Or, is it all about the West, as always, supporting the tyrants and dictators for trade, while pretending to have high morals?

  • rate this
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    Comment number 26.

    "However, it is notable that impressive wealth creation occurred in sectors with substantial potential for rent-extraction and rent-sharing between the private and government players,"

    "Rent" above is economists' euphemism for NATIONAL PLUNDER, CORRUPTION, BRIBERY! The highly educated politicians & bureaucrats of India have used their expertise to adopt world best practice in collecting "Rent".

  • rate this
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    Comment number 25.

    I have a hypothesis that 3rd world poverty is due to selfishness within the country. The world's first billion dollar home was built in Mumbai in 2009 - yet, only Bill Gates donated $150 million to immunize *Indian* children from diseases. Do an internet search for "Can Microhelping help eliminate 3rd world poverty"?

  • rate this
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    Comment number 24.

    there is more than enough wealth in countries like india and pakistan for the rich to aid the poor without need of outside help.

    there is no need for foreign aid. it only fuels corruption and allows those in power to be controlled by other richer nations.

    i

  • rate this
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    Comment number 23.

    @14 alexinexile . In the original article it did state , there are no Muslim billionaires or dalit billionaires. Now the article has been updated and I believe the time last modified is not updated to make it look like the article was never been updated.

  • rate this
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    Comment number 22.

    i didn't really understand why the caste system is coming into this topic. it is easier to say the rich are getting richer but caste system and becoming billionaires?

  • rate this
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    Comment number 21.

    The people of India do really need the aid. Just ask the homeless starving families who are gripped by poverty, who have not encountered any sudden riches that have brushed the wealthy Indians. Finance Minister (President) Mukherjee has never had a NGO handout for a ration of food or clothing, so I'm inclined to say that he was talking out of his dhoti, also known as pancha, panche or veshti.

  • rate this
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    Comment number 20.

    Almost all countries including India, China, South Africa are negatively impacted (increasing income & social inequality) by current model of globalization, except a handful of countries in Latin America and Indonesia. The difference btwn Indian & american rich has decreased, but the same within India or US has increased significantly.

  • rate this
    0

    Comment number 19.

    @ chiptheduck @silent-majority

    We don't want your aid.

    In 2011, Finance Minister (now President) Mukherjee told Indian Parliament that the Govt of India had _rejected_ British aid. Our solid econ growth sufficiently funds our massive social programs.

    The UK Govt responded - by insisting we take it. Why? To avoid causing them 'grave political embarrassment'.

    No offence: but keep your aid.

  • rate this
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    Comment number 18.

    When such wealth flourishes in the midst of wide spread poverty, one wonders what are the yardstick of morality. The lessons from market economy and capitalism are a sad reminder of a global malaise, which should be examined as it is a crying shame that in the midst of wealth, milk and honey we have thirsty, sick, starving and illiterates.

  • rate this
    0

    Comment number 17.

    How does a billionaire become a millionaire? Buy an Airline.How does a billionaire become untouchable? Buy a party.Why does an Indian politician want to be a politician? To get rich! The old money billionaires have trust funds and money managers.Some actually want and do genuine good. Shocking. Corruption has led to inertia. Parliament is moribund. Wake up before its too late.

 

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