Many of India’s billionaires have made money from proximity to government.

The proliferation
of dollar billionaires in India in recent years has often been cited as evidence
of the country’s growing economic might, but Raghuram Rajan, previously chief
economist of the International Monetary Fund and now an economic advisor to the
Prime Minister said he had no problems with wealth creation, “but I do think
there is a problem if much of this wealth comes from proximity to government’’.

Pointing out that
India had the second largest number of billionaires per trillion dollars of GDP
in the world (after Russia) prior to the crisis, and now possibly the largest,
Rajan said “If you look at the areas where we have so many billionaires, many of
them are not software entrepreneurs, it’s things like land, real estate, natural
resources and areas that require licences.’’

While conceding
that some of these people have genuinely created entrepreneurial firms that have
done wonderful things, in telecom for instance, Rajan added, “There are other
areas which are less competitive and where proximity to government helps. That’s
a worrisome factor.’’

India, he said,
faced the danger of sliding into some sort of oligarchic capitalism like Mexico.
“I would argue that there is a danger that if we let the nexus between the
politician and the businessman get too strong, we could shut down competition.
That could slow us down tremendously and also maybe create questions eventually
for our democracy,’’ he warned.

Rajan, said there
has been a ‘privatisation by stealth’ of the state in India. Expanding on that
phrase, he said “I worry that in the areas where there isn’t adequate
governance, we are letting the private
sector determine things that should naturally be the prerogative of the state.’’

As with the
billionaires, so too with India’s membership of the G-20 — Rajan is not overly
impressed by this apparent sign of the country having arrived at the high table.
First, he maintained that international meetings rarely achieved anything
concrete.

Characterising the
NREGS as a stop-gap measure, Rajan said at least four elements were needed to
move the bulk of the population in the rural areas to the modern economy —
infrastructure to connect them to towns, education and healthcare to enable them
to participate in a modern economy, and financial inclusion. Without these, he
warned, India’s much-touted ‘population dividend’ could turn into a ‘population
curse’.

(Source : The Times of India, dated 31-7-2010)