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Even as allegations of corruption fly thick and fast, India might have seen less crony-capitalism vis-à-vis 22 other countries over the past seven years, indicates an index of The Economist magazine. This, apparently, happened with India taking measures to nab those found guilty of corruption.
But, before one begins to gloat over the country’s achievement on this front, there comes a dampener. The magazine has also blamed corruption and ineffective ways of dealing with it for India’s economic growth rate plummeting to a decade low of five per cent in 2012-13.
The country’s position among 23 countries on the crony-capitalism index improved three notches from sixth in 2007 to ninth in 2014 (the higher the ranking, the worse the performance). Hong Kong, ranked first in 2014, saw the highest crony-capitalism, while Germany the least.
“One of the most improved countries is India, which moved from sixth place in our ranking to ninth,” said an article titled ‘Our crony-capitalism index — Planet Plutocrat.’ One might wonder as to how India saw less impact of crony-capitalism when charges of corruption were being levelled in quick succession against some key Central and state ministers, as well as businessmen, and a whole anti-graft movement occupied the public mind space.
The magazine report answers: India’s legal system is trying to jail a minister accused of handing telecom licences to his chums.
The reference is to former telecom minister A Raja, who was arrested on February 2, 2011, and placed in judicial custody at Delhi’s Tihar jail for 15 months. On May 15, 2012, he was granted bail by the Supreme court. Raja is seeking re-election from the Nilgiris Lok Sabha constituency on a Dravida Munnettra Kazhagam ticket.
The article says recent graft scandals and a slowing economy have hurt many of its (India’s) financially-leveraged and politically-connected businessmen, while those active in technology, pharmaceuticals and consumer goods have prospered.
The crony-capitalist index is based on work by Ruchir Sharma of Morgan Stanley Investment Management and Aditi Gandhi & Michael Walton of New Delhi’s Centre for Policy Research, besides others.
The index used Forbes data to calculate the total wealth of the world’s billionaires active mainly in rent-heavy industries and compared the total to world gross domestic product for drawing a sense of scale.
The index shows results for 23 countries — the five largest developed ones, the 10 largest developing ones (for which reliable data are available), and a selection of eight smaller ones where cronyism is thought to be a big problem.
In a separate chapter on India, The Economist comes down heavily on corruption in India. It says, of the 10 biggest family firms by sales, seven have faced controversies. The brash new tycoons who came of age during the boom years of 2003-10 are also under a cloud.
It refers to a recent poll that showed 96 per cent of Indians said corruption was holding their country back, while 92 per cent thought it had got worse over the past five years. One senior figure in the ruling Congress party worries about the feeling that “the law for the common people doesn’t apply to the political princelings and industrialists”, says the article.
The article, ‘Fighting Corruption in India: A Bad Boom’, calculates the gains from rent-seeking over the past decade has peaked at about $80 billion. “That is equivalent to seven per cent of the stock market’s value today. It is worth noting, though, that the share of GDP for the rent-seeking billionaires and the premium on politically-connected firms are no longer than what they were in the boom years,” it adds. Faced with this mess, it says, private firms have cut investments; a fall in investment from 17 per cent of GDP in 2007 to 11 per cent in 2011 is a reason why GDP growth rate has slumped to five per cent, the lowest for a decade.
And, ineffective efforts to deal with corruption seem only to have made things worse. “India’s cranky legal system, its overlapping investigative agencies and its raucous media have meant that responses to the problem may have done as much to paralyse business in general as to punish wrongdoers.”
Few senior people go to jail; but officials fear being accused of malfeasance, so many think the safest course of action is to make no decisions at all, notes the article.
However, there is a ray of hope. And this comes from market forces and the forthcoming general elections. As the article sums it up, “perhaps market forces and a backlash from voters will turn the tide”.
