India ranks 9th in crony capitalism

India is ranked at ninth position in crony-capitalism with crony sector wealth accounting for 3.4 per cent of the gross domestic product (GDP), according to a new study by The Economist.

In India, the non-crony sector wealth amounts to 8.3 per cent of the GDP, as per the latest crony-capitalism index. In 2014 ranking also, India stood at the ninth place.

Using data from a list of the world’s billionaires and their worth published by Forbes, each individual is labelled as crony or not based on the source of their wealth.

The study, however, has praised India for its clean-up act.

“Encouragingly, India seems to be cleaning up its act. In 2008 crony wealth reached 18 per cent of GDP, putting it on a par with Russia. Today it stands at three per cent, a level similar to Australia. A slump in commodity prices has obliterated the balance sheets of its Wild West mining tycoons. The government has got tough on graft, and the central bank has prodded state-owned lenders to stop giving sweetheart deals to moguls. The vast majority of its billionaire wealth is now from open industries such as pharmaceuticals, cars and consumer goods. The pin-ups of Indian capitalism are no longer the pampered scions of its business dynasties, but the hungry founders of Flipkart, an e-commerce firm,” The Economist said.

Germany is cleanest, where just a sliver of the country’s billionaires derives their wealth from crony sectors.

Russia fares worst in the index, wealth from the country’s crony sectors amounts to 18 per cent of its GDP, it said.

Russia tops the list followed by Malaysia, the Philippines and Singapore. “Thanks to tumbling energy and commodity prices politically connected tycoons have been feeling the squeeze in recent years,” the study said.

Among the 22 economies in the index, crony wealth has fallen by $116 billion since 2014. “But as things stand, if commodity prices rebound, crony capitalists wealth is sure to rise again,” it added.

The past 20 years have been a golden age for crony capitalist tycoons active in industries where chumminess with government is part of the game.

Their combined fortunes have dropped 16 per cent since 2014, according to The Econo-mist updated crony-capitalism index.

“One reason is the commodity crash. Another is a backlash from the middle class,” it said.

Worldwide, the worth of billionaires in crony industries soared by 385 per cent between 2004 and 2014 to $2 trillion, it added.