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Why does an impoverished India
produce a globally mobile wealthy
class?
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Why does an impoverished India produce a globally
mobile wealthy class?
Anthony P. D’Costa
This commentary focuses on late industrialisation as a point of entry to explain why India,
notwithstanding its multiple institutional challenges with a large impoverished agrarian
population, is also able to generate a visible and globally mobile wealthy class. India’s
particular configuration of recent economic development policies, the changing role of the
state, and recent international integration has produced a sizeable minority of rich Indian
businesses and individuals. It has also failed to dismantle a vast and persistent low-wage
informal sector, thereby accentuating the rise of the rich.
1
1
I thank Andres Solimano for his helpful suggestions. Any errors and omissions are the responsibility of the
author alone.
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Introduction
One of the contemporary paradoxes of economic growth and development has been
accompanying inequality. However, in both practice and in theory such inequality need not
be inevitable since redistributive fiscal and tax policies along with widespread education and
social spending for those being excluded from growth could limit the degree of inequality. It
is therefore no surprise that Scandinavian societies are not only among the wealthiest
countries with some of the highest income taxes but also some of the most equal after
adjusting for taxes and subsidies. Clearly the institutional arrangements for both economic
production and redistribution honed over time and the relative robustness of the welfare
state ensured such favourable outcomes. However, reproducing redistributive institutions
generated in one national context for another context is politically difficult, especially when
the predominant capitalist sentiment is a ‘winner takes all’ approach rather than a
cooperative sentiment of sharing some of the winnings.
In this commentary, I briefly present an understanding of why an impoverished India
produces a globally-mobile wealthy class. This dualism is a reflection of a disarticulated
India, which I have labelled elsewhere “compressed capitalism”, where the very wealthy and
very poor, the highly educated and the illiterate, and financial and productive sophistication
coexist in a tense equilibrium (D’Costa 2014a, 2014b, 2016, 2019 (forthcoming)). India can
be considered impoverished at a number of levels. First, India’s per capita income has been
estimated to be $7,000 in PPP terms and a nominal income of $1,940 in 2017. This
represents an average of less than $600 PPP and $160 per month per capita respectively.
Second, though poverty levels have fallen, the estimates vary and are contestable.
Government figures suggest about 22% of India’s population live below the poverty line,
which is more than 200 million people living on less than $1.90 PPP per day. Third, the
Indian official poverty line has been based on very low levels of consumer expenditure,
which is INR 27 and INR 33 per day for rural and urban areas respectively. These amount
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to just $0.30 and $0.50 per person expenditure per day. Any marginal upward adjustments
in the expenditure definition of below the poverty line would actually raise India’s poverty
level to at least 30% (see Rangarajan Committee) and more if more realistic definitions for
India are adopted.
There are two parts to this exercise. The first presents an analytical framework by
which I contextualise the rise of the wealthy in the late 20th century and beyond and the
second part provides some empirical details on the Indian wealthy. It may be pointed out
that there have been roughly two phases in the rise of the wealthy in India: the first, in a
limited way, under import substitution industrialisation, which was largely state-led; followed
by a second more dynamic phase, in which the rise of the wealthy has been more
accelerated due to private capital accumulation in the broader contexts of domestic
deregulation and globalisation. Much of the discussion below rests on the second phase.
However, it is necessary to acknowledge that there is a link between the two phases since
many pre-reform businesses and individuals have remained significant in the post-reform
period, even as other new, globally oriented businesses have been spawned in the second
phase.
The commentary is divided as follows. In section two, I provide a quick background
of the contemporary rise of the wealthy and inequality. In the third section, I provide an
analytical framework (again briefly) of late industrialisation and its relationship to economic
development. In section four, I extend this understanding, albeit tentatively, to structural
change and inequality. I apply this analytical framework over a long period (circa 50 years)
in section five to illustrate the distinctive mechanisms of the sudden rise of the wealthy in
the second phase. This rise is not necessarily reflected in higher incidence of international
mobility since the population size is very large, now over 1.2 billion. Even emigration, which
is quite large for India, is relatively quite small compared to other smaller countries.
Nevertheless, the Indian wealthy have traditionally either parked their wealth in real estate,
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gold, and other non-money assets at home or abroad in tax-free havens and Swiss banks.
In addition, many others with their wealth generated in India have found new opportunities
abroad, especially in favourable receiving countries such as the UK, Singapore, and the US.
Then there are the tech-savvy entrepreneurs who have made most of their wealth after they
have relocated abroad as technical professionals or students, especially to the US. The final
section provides a sampling of wealthy individuals by background, sectors, and global reach.
The extent of the rise of the wealthy
Perhaps the most illustrative case of contemporary Indian opulence has been the
construction of ‘Antilia’, the residence of Mukesh Ambani, the chairman of Reliance
Industries in the heart of Mumbai. Estimated to cost one billion US dollars, it has a floor
space equivalent to two-thirds of the Palace of Versailles, and boasts a staff of several
hundred for its upkeep. The business history of the rise of the Ambanis is an interesting tale,
given that the senior Dhirubhai Ambani is a rags-to-riches story, but this is not the place for
that discussion. Rather, the point is how, in the midst of poverty and squalor and the lack of
proper housing – with Mumbai renowned for its massive urban slums such as Dharavi – a
27-story, 400,000 square feet single-family residence can be accounted for. More than the
sheer scale of the structure, the boldness of its existence at this time demands an
investigation of the underlying process of wealth creation and ownership in contemporary
India since there are many other individuals and businesses that are similarly wealthy (see
Figure 1). It also signals rising inequality in India.
As can be seen in Figure 1, the number of billionaires in India has been on the
upswing. From 59 billionaires in 2012, the number has shot up to 136, registering a 57%
increase over a six-year period. However, the jump in the number of billionaires was
between 2013 and 2014, with a net increase of 46 billionaires or a 42% jump in one year
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alone. There are forecasts that the number of US dollar billionaires in India will roughly treble
to 357 by 2027 (Global Wealth Migration Review reported by LiveMint, 23 May 2018).
Figure 1: Number of US dollar billionaires in India (2012-2017)
Source: statista.com (2018)
In a recent paper, Popov (2018), examining a number of relationships between billionaire
intensity and various economic and social indicators, finds counterintuitively that there is a
negative relationship between billionaire intensity and inequality. India has a low billionaire
intensity, given the size of its population and low per capita income, hence it fits this finding
at a general level. Since billionaires prefer to reside in places where inequality is low, this
implies also that the rich move to places where the economic and social conditions are
better. This is no doubt plausible but not all billionaires move. They have the ‘freedom’ to
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move but they could continue accumulating capital in their home country and park their
money in a third country (Solimano, 2018). For me, the question is how billionaires,
especially in low-income countries, get created in the first place, or in other words, what are
the mechanisms of wealth creation in these countries?
2
As we will see, in India the rise of
billionaires has been accompanied by a worsening GINI coefficient as well, hence, even if
tentative, there seems to be a relationship between the rise in the very wealthy and inequality
(Figure 2).
2
I do not dwell on whether pre-existing inequality reinforces inequality with wealth creation over time.
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Figure 2: India’s Gini coefficient (pre-tax national income, total population, adults)
Source: Based on data provided by Piketty and Chancel (2017) in Alvaredo, F., Chancel, L.,
Piketty, T., Saez, E., and Zucman, G. (2018). World Inequality Report (2018). World
Inequality Lab
In 2017, India’s GDP per capita income was about $1,940, while its PPP per capita income
was $7,000. The top 100 wealthy Indians had total assets of $417 billion in 2017 (Crabtree,
2018), with about 1% of Indians owning half of India’s wealth, which reflects the world
average as reported by the Credit Suisse Wealth Report. Many of the wealthiest Indians
lived abroad, having made their wealth in foreign countries, as opposed to moving abroad
with their wealth. There are a few wealthy Indians who have moved to more egalitarian
countries mainly to avoid business regulations at home and seek profitable ventures abroad.
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Indians in the US are a visible minority due to their much higher household income compared
to the rest of the American population ($89,000 versus $50,000), with 44% of Indians in the
US possessing advanced degrees compared to 11% for the general population (Migration
Policy Institute, 2014).
Based on the recent World Inequality Report (2018), Chancel and Piketty (2017)
show that income growth has been accompanied by worsening income distribution (Table
1). India’s record on some measures is worse than China’s since the bottom 50% in China
has secured 312% income growth during 1980-2014 compared to India’s 89% only.
Disaggregated income growth by income class shows that the top 10% experienced a 6%
income growth compare to the 4% growth experienced by the entire population since 2000,
reversing the tendency towards equality of the 1955-75 era (Chancel and Piketty, 2017). On
the other hand, both India and China have unenvious record of significant income
polarisation, with the top 10% experiencing nearly 400% income growth in India compared
to China’s over 1,000% over the 35-year period.
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Table 1: Total Income Growth by Percentile in China, France, India and the US, 1980-
2014
An analytical framework to explain the recent rise of the Indian wealthy
Using the concept of ‘late industrialization’ (LI), I argue that ‘lateness’ offers both advantages
to economic development but also imposes disadvantages.
3
Lateness presumes an already
pre-existing structure of capital accumulation (or lack thereof), based on social and political
institutions, often historically determined. Perhaps the most striking difference between the
early and late industrialisers is the difference in the levels of economic development
interfacing with a hyper globalised contemporary world economy, which is different from the
core-periphery relationship under 19th and early 20th century imperialism. Lateness also
presumes shifts in economic policy from one of autarky to global integration, which is
inevitable due to the imperatives of an expansionary system of capital accumulation. It is in
3
Late industrialisers are defined as those societies/countries launching their industrialisation after becoming
sovereign, independent nations, freed from the structural and political grips of colonialism. It refers to those
countries not part of the western core nations. Japan is a late industrialiser but not the United States, even
though US industrialisation came after England and Germany. Relative to Japan, other countries such as
India, China, Brazil, and South Korea are even more late on the temporal axis of economic development. For
lack of space as well as the further need to refine the concept, for which is work in progress, I do not
elaborate late industrialisation further.
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this shifting context, both endogenous policy and exogenous forces of internationalisation
and technological change, that the rise of the Indian wealthy and worsening inequality must
be examined.
In Figure 3, I present the analytical framework in a stylised manner. The Y-axis
represents inequality and the X-axis time. There are three distinctive phases in the evolution
of the Indian political economy representing the changing relationship between the state and
business and between the national and international economy. In the first phase, the Indian
economy is dominated by colonialism, effectively circumscribed by global capitalism. In this
phase there are few wealthy Indians other than those belonging to the feudal regimes of
Nawabs propped up by Britain’s divide and rule policy and some landlords. During the
waning years of British imperialism, there were a few Indian merchants who availed
themselves of commercial opportunities offered by the two World Wars and sanctioned by
the British government in India. Some of these trading families became India’s big business
families, whose own economic interests converged with the nationalist goals of an
independent country with its autonomous economy. In phase two, circa 1950-1985,
independent India launched the classic late industrialisation strategy of heavy industry
through import substitution. The Indian economy was insulated from the dynamics of the
world capitalist economy during this phase. The state dominated its partnership with
business. Consistent with domestic market development, the state protected local business
from foreign competition but also regulated business to pre-empt the rise of monopoly
control.
During this state-led phase there were wealthy Indians, who profited from the artificial
scarcity that arose from excessive regulations over production, capacity expansion,
shortage of foreign exchange (since exports were not a priority), and privileged access to
the state that dispensed production licenses. Rent-seeking activities, including bribery to
circumvent various regulations, did contribute to the rise of the wealthy. However, by global
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standards the scale of wealth generation in India remained limited. It is at this stage a few
wealthy businesses emigrated to other countries, especially the UK, to avoid the regulatory
environment, the unpredictability of economic policy, and the high tax regime. Income
distribution, as evidenced by the GINI coefficient, remained relatively stable. This was
largely due to anaemic growth rates since the 1970s, which speeded up in the second of
half the 1980s, only to collapse in 1991 due to India’s massive balance of payments deficit.
Figure 3: An analytical framework: Inequality arising from the interfacing of late
industrialisation with globalisation
In the third phase, since around the mid-1980s, the Indian economy moved to a different
growth level. Tentative and incremental reforms in deregulating the economy in the mid-
1980s did lead to a spurt in consumer demand but also contributed to a worsening of the
trade deficit. Energy-intensive growth with high oil prices had a detrimental impact on India
as well. However, with IMF stabilisation loans to address the BOP deficit various reforms
were introduced that effectively increased India’s definitive shift, though not complete, to
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internationalisation and a removal of some of the most irrational regulations. Reforms led to
greater engagement of the Indian economy with the global one. Growth rates resumed and
the ‘new’ process of wealth generation began, including expansion of the auto, IT,
pharmaceutical, and financial sectors. It was during this phase, as the government
delicensed the economy, supposedly creating a level playing field, that it also created plenty
of space to game the system through power, influence, and privileged access (see Stacey
and Mundy, 2018, on Mukesh Ambani’s Reliance Jio telecom growth). With many lucrative
business opportunities, wealth generation went unimpeded as business confidence grew
and bank lending expanded, often falling in the zone of non-performing assets. It is in this
phase that India’s growth rates become second to none but inequality became far more
pronounced than in previous phases.
Structural change and inequality
Structurally speaking, the Indian economy displays a form of inequality that has not been
witnessed before. There is a declining share of agriculture, as predicted by the economic
development trajectory, but curiously a stagnating industrial sector, often dubbed ‘premature
deindustrialisation’, and a growing contribution of services to GDP characterise the
contemporary Indian economy. More pertinently, the growth of high value, tradable services
such as finance, insurance, real estate, and business services (including IT services) have
become the new sources of growth. In this changing structural context, a large share of
India’s workforce remains tied to low productivity (informal) agriculture, while a few
manufacturing sectors that have adjusted to global value chains such as auto and
pharmaceuticals have been performing well. In addition, India’s abundant supply of skilled
professionals has ensured its global position in various tradable services, especially
software and IT. Notwithstanding the rise of globally-oriented economic activities, the vast
majority of Indian workers are engaged in economic activities in the informal sector. Between
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2004-05 and 2011-12, a period of high economic growth, the share of informal sector
employment remained sticky, from 92.7% falling marginally to 91.9% (Ministry of Finance,
Government of India, 2015, p. 136). What is more disturbing is that there is a growing
informalisation of the formal sector. This is part of the reform process where flexible labour
is highly coveted but also serves to hold down wage costs from creeping up as economic
growth continues. For example, in formal organisations such as auto manufacturing there
are both regular, permanent workers working side by side with temporary, contract workers,
while lower tiered supplier firms rely solely on insecure and precarious unorganised workers
(Author’s field visit to a Japanese factory in 2017; Barnes, 2018; Kerswell and Pratap, 2015).
Similarly, the growth in the lucrative offshoring sector creates some well-paid, salaried
professionals but also the creation of informal service workers. Economic growth, instead of
eroding the informal sector, is reproducing it, if not expanding it. This is a paradox of late
20th century global capitalism operating in India.
It is not possible to undertake a full-scale investigation as to why the Indian economy
is generating a visible wealthy class while the rest of society is mired in the low-wage
informal sector. There are many hypotheses, mostly from the supply side, which predict that
should those supply-side bottlenecks be resolved, such grotesque forms of inequality are
likely to disappear, implying that the incentives to remain in or the constraints that impinge
on the informal sector will be weakened. But these hypotheses do not account for India’s
abundant labour supply, the general averseness to manufacturing for the world market
competitively, the presence of China’s massive manufacturing infrastructure, and the timing
of India’s engagement with the world economy when the deployment of precarious labour
along with labour-saving technologies, automation, and artificial intelligence has intensified.
The alternative hypothesis is that the very change in the global capitalist economy has
engendered non-egalitarian dynamics, which when combined with India’s specific form of
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deregulation and the jockeying of Indian business to capture new opportunities does allow
us to explain both the rise of the wealthy and worsening inequality.
Mechanisms of wealth-creating opportunities
As alluded to in the analytical framework, in phase two the state regulatory framework
entailing the license-permit-quota raj restricted output, thereby encouraging certain types of
rent-seeking activity through the economy of scarcity. One result of this has been
unaccounted wealth for a few private individuals and public officials, including politicians. In
the second phase, economic reforms at home and economic integration at the global level
have generated new commercial opportunities for Indian businesses, especially in what
Gandhi and Walton (2012) term “rent-thick activities”. These include mostly mature sectors
such as real estate, cement, mining, liquor, mining, and infrastructure, including ports. Of
course there have also been non-rent sectors such as IT, pharmaceuticals, bio-tech, and
automotive. Finance has the dubious distinction of being both rent and non-rent.
In addition to business success brought about by strategic investments and
commercial acumen, many Indian businesses in exploiting new economic opportunities
relied on fixers, lobbyists, and subcontractors to access the state. In this political economy,
where patronage politics between politicians and the electorate is rife, the relationship
between the state and business has also been subject to patronage. Thus there have been
questionable land acquisitions for infrastructure projects or special economic zones made
possible by intermediaries and their privileged access to the arms of the state. There is an
additional factor that contributes to our understanding of the rise of the wealthy and
consequent inequality in India. It is the change in the state-business relationship where
instead of the state being dominant, as in phase two, it is business that now commandeers
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the state.
4
The power of capital with growth is inevitable and in the absence of countervailing
policies to rein in big business, the latter is able to leverage its financial and political power
in its favour. This is facilitated by a quid pro quo arrangement where politicians seeking
public office expect contributions by business to their campaign funds, while businesses
expect special treatment from the state. While this is common to many democracies, the
magnitudes and volumes of transactions have exploded dramatically (for some details see
Crabtree, 2018). Thus the sudden and recent rise of India’s wealthy can be explained (if not
robustly tested) by ‘crony capitalism’. Some entrepreneurs have had the foresight to skip all
together the quid pro quo arrangement by becoming politicians themselves, thereby
enriching themselves and their businesses with favourable policies.
The rise of the wealthy in India can also therefore be attributed to a particular
historical juncture of India’s engagement with the world economy with its specific
endogenous political-economic dynamics. Commercial opportunities and business acumen,
along with privileged access to the state in certain areas, have allowed some businesses to
thrive. Their subsequent use (and abuse) of disproportionate power have led to further
expansion for some and debt-led collapse of others (Crabtree, 2018). Of course the
reciprocal relationship between business and government is not uncommon but when the
playing field is uneven, which is often the case, skewed structurally in favour of those already
wealthy and with ‘connections’ to the state, the dynamics of wealth creation become more
than a matter of business strategy and professional management. It is how to work with and
around the state, sometimes with foreign governments.
4
Incidentally this is not unique to India. Even in South Korea, with the proverbial developmental state, there
has been a reversal of the state-business relationship (see D’Costa, 2018).
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The global reach of wealthy Indians
The rise of the Indian wealthy class and worsening inequality at this particular juncture can
be explained by the commercial and business opportunities arising from a deregulated home
economy and a liberal international economic order. The international mobility of the wealthy
is also facilitated by favourable disposition towards the wealthy by receiving countries under
investment migration regimes. For example, wealthy foreigners, in exchange for their
wealth/capital, can be offered a quick route to permanent residency or citizenship. There are
several countries in the global economy that offer this opportunity to the wealthy. In addition
to the tax havens in the Caribbean and some smaller European countries, the US, Canada,
Australia, the UK, and Singapore (all Anglophone and economically relatively wealthy
countries) have investment migration policies to attract foreign investors. This also explains
why the rich may prefer to live in less unequal places.
5
There are also many successful
Indian businesses that have found their niches abroad. For example, the Indian IT industry
is foreign-demand driven. India has about 55% of the $146 billion global software
outsourcing market due to a large and relatively inexpensive talent pool. The share of
exports to total output has remained steady at around two-thirds of total volume. The
cumulative annual growth rate for exports during the fiscal year 2009 to the fiscal year 2016
has been estimated at 61.68% (India Brand Equity Fund (IBEF), 2017). Countries such as
the US (the largest export market for India), the UK, Canada, Germany, Singapore, the
Netherlands, and Japan, which rely on Indian IT, are also home to many wealthy Indians,
especially the Anglophone countries. Demand for technical professionals is high in these
countries and many of them establish successful firms or rise up the corporate ladder to
senior positions because of their rich technical knowledge and industry experience. Some
individuals become wealthy entrepreneurs and venture capitalists. For example, some of
5
However, inequality in these migration investment-friendly countries is also rising.
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the corporate leaders in the tech industry in the US are of Indian origin, including the CEO
of Microsoft, the head of Google’s chrome browser and search business, the founder of
Hotmail, the developers of the USB standard, Intel’s Pentium chip, Adobe’s CEO, and other
venture capitalists (Gibbs, 2014).
Of the 264,000 millionaires in India, six thousand super rich changed their residency
to other countries (Special Broadcasting Service (SBS), 2017). There were roughly 10,000
HNW Indians who left the country (Global Wealth Migration Review, 2018, p. 23). The US,
the UK, Canada, and Singapore are also home to an earlier generation of successful Indian
businesses and a new crop of wealthy Indian entrepreneurs who have recently emigrated
to these and other countries, such as those in the Gulf region. In examining the top 150
wealthiest Indians and their business in the world, we find, for obvious reasons, that most of
them were based in India. However, there were at least 43 individuals and businesses that
had operations outside of India (Indian Link, 2017). Of these there were three businesses
that operated in India but also had operations in one or two of the following countries: the
UK, Switzerland, and Ireland. There were also three operations of Indian origin (but not in
India) in paired countries or regions such as the UK-Switzerland, the UK-Dubai, and the UK-
Nigeria. Beyond India and the six multi-country cases, the number of Indian businesses
operating solely and mutually exclusively in a single foreign country or region was as follows:
the US (9), the UK (6), Dubai (6), the UAE (3), Canada (3), and one each in Indonesia, Hong
Kong, Nepal, the Gulf, Tanzania, Thailand, Singapore, and Abu Dhabi.
In Figure 4, a recent Forbes ‘richest Indian-Americans’ list, all billionaires (Nair, 2018),
is summarised, providing some patterns for and profiles of Indian HNWIs in the US. One
commonality is that these entrepreneurs have an engineering background and have been
involved with technology, whether as a platform for a shopping network, or in private equity,
venture capitalism, or as investors in tech firms or staffing for technology firms. This profile
is quite different from the Indian wealthy found in the UK (see below).
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Figure 4: Patterns and profiles of Indian HNWIs in the US
In the UK, wealthy Indians are well represented. For example, the Asia Rich List 2018
recognised the 101 richest Asians in the UK. These individuals (and in some cases family)
belong to the ultra-high net worth group. Of the twenty-one richest Asians, all of them were
of Indian origin. The valuation of these individuals ranged from GBP 540 million for the
founder of Jet Airways, a private airline in India, to GBP 22 billion of the Hinduja family with
a multinational business empire covering trucks, banking, and gulf oil (Millington, 2018).
Most of these Asians are of Indian heritage (a few originated from Pakistan), from India or
from East Africa, either being born there or having emigrated from India earlier. However,
unlike their American counterparts, the UK-based wealthy Indian businesses span food
manufacturing, pharmaceuticals, hotels, construction, banking, finance and investment,
petrol pumps, retail/groceries, fashion, consumer goods, petrochemicals, textiles, mining
and agriculture, and steel. Some of these business founders fled from East Africa, especially
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during the brutal regime of Idi Amin in Uganda, others left India due to a highly regulated
business environment, while a few of the Indian origin businesses got their commercial
footing elsewhere, as in the case of an Indonesia-based Indian business in petrochemicals,
textiles, and steel (Mittal of ArcelorMittal Steel, headquartered in Luxembourg, and Lohia of
the Indorama Corporation of Indonesia).
Outside of the tech and business-friendly Anglophone countries of the US and the
UK, small countries such as Australia and Singapore have been important destinations for
wealthy Indians, many of them moving to these countries due to favourable host government
immigration policies and quality of life. In a recent Forbes Singapore Rich listing of 2017
(Karmali, 2017), five Indian-origin businesses were mentioned with combined assets of over
$7 billion. The individuals associated with these businesses came from India and settled in
Singapore, some becoming citizens as well. Businesses range from real estate, including
luxury hotels, to oil and gas, data analytics, electric vehicles, and financial services.
Some concluding observations
In this essay I have highlighted the evolutionary character of India’s late industrialisation
efforts and in that context provided an understanding of the rise of the Indian wealthy. I used
an analytical framework that linked late industrialisation (LI) with the sudden rise of the very
wealthy in a country that is largely characterised as impoverished. I argued that the shifts in
the Indian economic structure in the context of deregulation and globalisation created
hitherto unprecedented business opportunities for some, while labour markets remained
flexible due to a holding down of wages and the presence of a vast informal sector.
In conclusion, I raise a few questions as observations. First, theoretically is there an
intrinsic relationship between late industrialisation and the rise of the wealthy and between
late industrialisation and rent-seeking activity behind the rise of the wealthy. Late
industrialisation (or new business opportunities on an unprecedented scale) does offer
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space for businesses to succeed since the state relies on the private sector for its nationalist
agenda. Furthermore, the withdrawal of the state from the economy through deregulation
reinforces private sector growth on a bigger scale. In other words, the objective conditions
for capital accumulation are generally strengthened. But beyond this simple observation
there is nothing intrinsic about the rise of the wealthy since much would depend on how
successful late industrialisation has been. We have many experiences of late
industrialisation: from Latin America, Africa, South Asia, East and Southeast Asia, and
China. In each of these cases there have been many instances of rent-seeking activities (or
crony capitalism) associated with big business, party officials, politicians, and bureaucrats.
However, the economic performances of these countries and the degree of inequality have
also varied substantially thereby suggesting that there is no generalised relationship
between late industrialisation and the rise of the wealthy, although for some countries the
particular sequencing of economic policy shifts and the nature of the domestic political
economy could support the relationship that I have highlighted for the Indian case. One could
make the case that today the economic opportunities are immense at the global level and
those businesses who have a first-comer advantage, special knowledge, and unusual
access to information or policymaking institutions are likely to be successful. The quid pro
quo arrangement that has become integral to the practice of parliamentary democracy in
India is also an important contributor to the sudden rise of the wealthy.
Second, cronyism can be argued to be not analytically useful when discussing the
rise of fortunes of specific businesses that are tied to the state. After all, in 19th century
America where robber barons ruled the day, there was cronyism. There are also instances
of cronyism today in the US (lobbying, special interests). If one assumes that the state, even
if not all the time, is an instrument of the ruling classes, cronyism is likely to be present in
different times and places. Third, the key question is when does cronyism get pronounced?
Is it the absence of a well-designed regulatory framework that encourages the excesses of
Dialogue of Civilizations Research Institute
21
the wealthy or is it the bountiful commercial opportunities that drives the wealth creation
process with its attendant excesses? The late arrival of such opportunities in a moribund
economy with a weakly-enforced regulatory framework in India contributed to the rise of the
wealthy, while Indian businesses operating abroad exploited specific market niches to their
advantage. As in the case of 19th century America, an underdeveloped regulatory
framework allowed the reaping of economic opportunities that also contributed to the ‘gilded
age’ of grotesque forms of inequality, exemplified by today’s emblematic Antilia in India.
Finally, given the expansionary nature of global capitalism could we claim that the rise of
the wealthy is inevitable even in impoverished countries in India? Or is it because of its
impoverishment that the wealthy emerge on a disproportionate basis?
Anthony P. D’Costa
Chair and Professor of Contemporary Indian Studies; Director, Development Studies
Program, University of Melbourne
Dialogue of Civilizations Research Institute
22
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