In the 1980s, domestic reforms started in what is now one of the most attractive markets for global investors. India was slowly easing restrictions and eliminating ineffective policies that had slowed social and economic progress decades after the country obtained its independence from the British Empire. The early 2000s witnessed India entering the fastest period of economic growth in its history, averaging more than 8 percent increase a year from 2004 to 2014. Three years later, the country’s gross domestic product reached $2.597 trillion, which surpassed France’s GDP of $2.582 trillion.
Despite its fast ascension on the world stage and rapid economic growth, India’s collective wealth has remained concentrated in the hands of just a few people. India is still considered a developing lower middle income country and the the country has, according to a new book, 178,000 millionaires and more than 100 billionaires whose total assets were worth $479 billion in 2017.
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James Crabtree, former Financial Times Mumbai bureau chief and associate professor at the Lee Kuan Yew School of Public Policy in Singapore, authored that book, “The Billionaire Raj,” which released this month. He spoke to U.S. News by telephone about the country’s challenges and future ambitions. The interview has been edited for length and clarity.
India is known for the huge discrepancy between the wealthy and the poor. Will we ever see equality in the country?
Until recently , India had hundreds of millions of people living in abject poverty. Although it doesn’t have that anymore to the same degree, you have the caste system, you have other kinds of inequality between different regions and religions. But we haven’t noticed how much more unequal it has become in the last decade, decade and a half. The gap between those most fortunate and those at the bottom has grown much wider and so India is now if not the most unequal country in the world, then comparably unequal to countries like Brazil and South Africa. So it really isn’t a question of when will India become much more equal. The question is how does it stop becoming less unequal.
How did the rich in India become so rich?
You have two things going on in India and there are some people that call this the division between the good and the bad billionaires. The good billionaires are those that run competitive businesses that become successful on a global scale and the Indian billionaires who made their money through software and IT are an example of that. They set up businesses that became successful in America or Europe and so they became themselves very rich because of that. And then there’s another group who are more likely to have become very wealthy because they have been able to manipulate the political system in some way. So they tend to be good business people, but they improved that performance by working (the political system). A lot of the wealth that has been created in India over the last two decades has been the result of collusion between the business elite and the political elite.
What solutions are there for economic inequality?
That requires a range of political reforms, some of which are focused at the top, making sure that rich people pay their taxes and so on. At the bottom , it means building a system of social support in terms of health care and education and pensions, which will help those at the bottom improve their lives. It’s a complicated long-term process, but the more important point is that India has been growing much more unequal and it needs to take some steps to reverse those trends.
What does having such rich people in the country do to its economy?
In a sense, there’s nothing wrong with having rich people and India in many ways could do with many more rich people than it has. As long as you’re making your money by setting up competitive businesses that make products that people want to buy and create value and get very rich doing that, then that should be fine as long as you pay your taxes (and are) sort of broadly, socially responsible in other ways.
The problem comes when people are making lots of money the wrong way, making it not running great businesses that are very successful, but by influencing politics and extracting what the economists call “rent” from the political system. If you have a lot of people who are making money that way , as is true in Russia and to some extent is true in India, then that’s not a very good thing for your economy because it’s not very efficient and it means that money that should be deployed elsewhere is being siphoned off by the very wealthy. So it depends how the rich are making that money as to what effect it has.
Can India ever become a superpower?
I think in the medium to long term, India will become part of a new world order in which there are a number of great powers. Alongside America and China, (India will be one of the) most important countries in the world in the second half of this century. At the moment it’s influential within its own region in South Asia, but it doesn’t have a military presence of a global scale.
So rather than a superpower, India at the moment talks about being a leading power, meaning that it’s one of the most important countries in Asia. In 50 years time , the size of India’s economy, the size of its population and its position in the world mean that it will be a great power of some kind. I think that’s almost inevitable.
What major things will come out of India for us all in the future?
India has enormous global potential. It’s an English-speaking country. It has a film industry to match Hollywood in terms of the number of films it makes. It has an amazingly powerful diaspora. In the United States, all around the world, the Indian diaspora is prosperous and influential and India is now a remarkably globalized economy. Its technology industry stretches from Bangalore to Silicon Valley and controls the IT systems of most of the world’s biggest companies. Its financial markets are very integrated into the world economy.
India is and will become an increasingly visible presence in the world from its films to its big businesses to its dominance in cricket, which is one of the world’s great sports. You will see that as the world becomes more Asian, it will also in its own way become more Indian.
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