In a scathing attack on crony capitalism that's fuelling the inequality in India, a latest Oxfam report says that the sectors creating new billionaires in the country are the 'rent-thick' and 'knowledge-based' sectors. The Oxfam analysis describes the rent-thick sectors as the industries that have access to natural resources and depend upon the government for licenses to trade. These rent-thick sectors include real estate, infrastructure, construction, mining, telecom, cement, and media. The knowledge-based sectors are the ones that involve research and development such as the IT and pharmaceutical sector.
The report specifically calls out the rent-thick sectors over the knowledge-based sectors for the spread of "crony capitalism". Citing the several scams that have hit the country in recent years, the report states that the richest in India have become rich, thanks to crony capitalism. "It is this crony capitalism which later surfaced in the form of various scams, such as the 2G spectrum scam and the coal scam. So is the case of real estate billionaires, many of whom benefitted from cheap land allotted to them by the governments," the report says.
"In 2004, of the 13 billionaires, two belonged to the pharmaceutical sector and two belonged to the IT sector; the remaining made their fortunes in rent-thick sectors. In 2010, of the 69 billionaires, 11 were from the pharmaceutical industry and six from IT. In comparison, 18 billionaires made their fortunes in construction and real estate (15 of them in real estate alone). Seven made their fortunes in commodities (metals and oil), and two in telecom. That makes 27 billionaires in rent-thick sectors," the report said. The total wealth of knowledge-based sectors (IT and pharmaceutical) is $55 billion, against $132 billion in the rent-thick sectors, the report said, adding the services sector accounted for only 20% of the total wealth of the 66 resident Indian billionaires.
The Oxfam report cites Forbes data to give a clearer picture of the value of assets held by the super-wealthy. "The wealth held by the Indian billionaires on the list increased by almost 10 times over a decade. The total wealth held by them is 15% of the GDP of the country; this increased from 10% five years ago. Four out of ten Indian billionaires have inherited their wealth," said the report. Interestingly, almost 40% of Indian billionaires have inherited their wealth; the inheritors account for almost two-thirds of the total wealth of billionaires, said the report.
The Oxfam report also cites Gandhi and Walton (2012) report that compared the total wealth of resident Indian billionaires to the GDP of the country. According to Gandhi and Walton report, the wealth of Indian billionaires was less than 5% of the GDP until 2005 but increased sharply to 22% in 2008; it, however, declined after the financial crisis to 10% in 2012. By the latest estimates, the total wealth of Indian billionaires is 15% of the GDP of the country; this has risen from 10% only five years ago. "Interestingly, almost 40% of Indian billionaires have inherited their wealth; the inheritors account for almost two-thirds of the total wealth of billionaires," says the report.
With an accumulated wealth of $400 billion, India is home to as many as 119 billionaires, of which 18 were added in 2018 alone. As per the study, India may produce 70 new millionaires every day for the next four years.