On March 26, 2024, headlines across Indian business papers announced that Mumbai had surpassed Beijing in its count of billionaires, now ranking as the third, following New York and London.

According to the Hurun Research Institute’s latest global rich list, India has 271 billionaires, the third country, trailing only China and the US. This surge marks a notable increase of 84 billionaires in India within a year, 50% of the overall global additions of 167 billionaires.

The meteoric rise of billionaires in India was eloquently captured by James Crabtree, former Mumbai bureau chief of the Financial Times and current professor at the National University of Singapore. In his acclaimed 2018 book ‘The Billionaire Raj,’ Crabtree underscored a profound transformation. India, from merely two billionaires in the mid-1990s, had over 100 in 2017, marking what the author describes as the swiftest growth of the super-rich anywhere in the world. Crabtree coined the term ‘bollygarchs,’ blending ‘Bollywood,’ the epicenter of the Indian cinema industry, with ‘oligarchy,’ signifying the few who dominate the market, associated with Russia. Interestingly, this term and the book’s cover, which prominently features Mumbai’s skyline with the towering residence of India’s wealthiest individual, seem to be forecasting Mumbai’s recent overtaking of other major cities.

In ‘The Billionaire Raj,’ Crabtree underscores that India, once a lower-middle-income country, has witnessed rapid economic expansion for decades. However, this growth has also been accompanied by a marked rise in inequality. This is a phase when the top rich have a better hold on the economy/nation thus the very essence of his book and its title The Billionaire Raj.

The World Inequality Lab’s report titled ‘The Rise of Billionaire Raj,’ published in March 2024, reiterates the concerning trend of inequality in India. From 1922 to 2023, the report meticulously examines this phenomenon, showcasing the stark transformation over the past 101 years. Three of the thirty charts from the report are displayed here to illustrate the trend of inequality of income during the period covered by the report.

The above chart illustrates the drastic shift in income distribution between the bottom 50% and the top 1% in India. Over the years, while the top 1% saw their share of total income increase from 12% to 23%, the bottom 50% experienced a decline from 20% to 15%. The super-rich taking a bigger share of the national income

The chart above shows India as the second most inequitable nation globally in terms of the top 10%, taking 57.7% of the National Income. However, the top 1% share of 22.6% is the highest among all countries. So India tops the list in terms of the top 1%.

The Indian economic and political timeline may be delineated into four phases: 1. the era of various kings and kingdoms, (2) followed by British colonial rule starting in 1857, when the British crown took over the territories owned by East India, Company, until independence in 1947. (3) Post-independence, India adopted socialist policies until the landmark 1991 reforms, Socialist democracy. (4) 1991ushered in liberalization, privatization, and globalization, facilitating the rise of capitalism, which may be termed, democratic capitalism. However, this transition has recently led to Crony capitalism, where government policies often favour a select few. Reflecting on these changes, it becomes apparent that India has shifted from the dominion of kings, Maharajas to colonial rule, the British Raj followed by a phase of governmental control through licenses termed Licence Raj, and currently, the dominance of billionaires, Billionaire Raj.

The chart above tracks the income distribution trend spanning a century. In the twentieth century, income inequality reached its peak when the top 1% held 21% of the national income in 1940 during British rule. Following India’s independence and the adoption of socialist policies by the government, there was a steady decline, hitting a low of 6% in 1982. However, subsequent government policies have led to a rapid increase in inequality, progressively worsening over the years. Currently, the top 1% controls 23% of the national income, surpassing all previous records and marking the highest level globally. India now faces greater income inequality than it did under British rule. This trajectory is likely to persist unless there is a shift in the government’s approach and policies in the future.

Crucial election 2024: As India approaches the upcoming election, the crucial topic of inequality demands thorough discussion and resolution by competing political parties. Voters, too, should prioritize this issue when selecting the party at the polls. The forthcoming election will therefore bear substantial economic implications.

DISCUSSION

The following comments on the blog through social media need to be addressed.

1. Jose T Sebastian “The rich cannot grow richer without the conglomeration of the ordinary. Tatas employ more than ten lakh workers, Reliance around seven lakh, the Railways provide employment to nearly twelve lakh. The organised and segregated sectors provide nearly twenty crore employment which forms the backbone of the Indian economy. The rich isn’t a spreading banyan that defies all undergrowth. It’s the rich that needs the rest for its sustenance. More than seventy percent of all inputs required to run a business goes out as cost which reaches the society called the poor. They go out as wages, salary, cost of raw material, power tariff, tax and so on. It’s the capital or wealth reaching the proletariat whom we call the poor. While we claim that ninety percent of the wealth in an economy is concentrated on the ten percent that we call as wealthy, we conveniently forget that more than seventy percent of their accumulated wealth is ploughed back into the economy as capital at the disposal of the working class, we call as the poor. On another phase, in the capital market, it’s the fluctuation in the price of shares that determines the wealth of the so called rich. We should know that only around fifty percent of the shares are held by the promoters or the original owners, rest of the capital is the in the market as shares, for any one to buy. Blaming a few entrepreneurs, who took the initial risk to float a business, for the wealth created around them is quite unfair to my line of thinking. We acknowledge Newton as great for his discoveries. Edison holds our veneration for his numerous inventions. Einstein, the brain behind the atom bomb, too is held in reverence for his theories. When it comes to the entrepreneurs, who through relentless toil against setbacks amass wealth, they are termed bourgeoise. Businessmen get wealth for the risk they take and the labourers get wages for their services. As for GDP and GNI, income generated from production alone sustains an economy in the long-run. Extraneous income induce inflation as income exceeds production. Similarly increase in production without generating adequate income causes lack of demand for goods produced leading to recession, the dreaded fate of any economy. During hey days of IT revolution Sathyam and even Infosys sustained certain setbacks in this line. They sold their software at exorbitant prices paying far less to their employees. Many of their skilled employees provided support system to the vendees at much less rate than the vendors, denting their revenues. GATT (General agreement on tariff and trade) does not permit this imbalance and the business firms have their inbuilt mechanisms to regulate them. Why did Kitex leave Kerala for Telengana. ?They knew it’s too risky to do business in Kerala.”
2. Siby Antony “With due respect, your focus should be on creative ideas to increase the income level of bottom 30% to 50%. In my personal view, inequality of income is the least important subject in this election. Think of the entrepreneurs who put their head on the block, taken huge risks , gave employment to thousands and created value for thousands of stock holders.”
3. Milan Sam Mathew “Sir what I feel is if we are concerned about rising number billionaires, then we’ll be forced to go back to the socialist Era, which was proved a failure unequivocally.”

Reply to the above three:

Thanks, Jose for your view of the rich contributing to the growth of the economy and income for the poor, which is true. My focus is that in India the richest take away the junk of the national income on account of favourable policies of the govt, this is crony capitalism. This has made the disparity in India the highest among all countries, the developed and those following capitalist economies. Milan, we need not go back to socialism but can follow democratic capitalism with due regard for the poor. Siby, encouraging creativity and risk-taking are part of capitalism and should be given due recognition. As stated by Jose, the Kerala government’s antagonistic approach to entrepreneurs, is not what should be. We, as a democratic nation, should have a balanced outlook, where the entrepreneurs and the private sector are given due role, and the poor and the rural folks should be looked upon with due consideration.

Xavier William” If wealth were equally distributed no one would have the capital to take up large capital intensive projects. The Pharaoh was able to build the pyramids because the national wealth was concentrated in him. Similarly Alexander, Genghis Khan, Mohammed and other warlords were able to civilize large areas of the world in spite of their cruelties.
Some people are born capitalists or entrepreneurs or leaders or adventurers. Others are born to follow or to serve. The first kind, the enterpreuner kind, take great risks to achieve their aims. In the process they often resort to cruel and inhuman practices. Society may be able to enforce equality by laws, regulations and force. However it is a matter of time before inquality asserts itself and we have the rich-and-the-poor divide and the game starts all over again. The only consollation is that after each such revolution to assert equality the rich grow richer and the poor also better there lot. We are born unequal. Equality or egalitarianism is only a goal to aspire for but not achievable.”

Answer: William, the one you propose and advocate is the law of the jungle, where the mighty conquer the weak. We have in vast majority of the nations elected democratic governments with the statutory authority to regulate and govern the economy and the nation. They are entrusted with the duty to ensure the welfare of the people. This will prevent the few, who have wealth or the ability to take advantage of the others who are deprived.