India’s Billionaires On A Tear As 1.3 Billion People Lose

Few countries would downplay the number of new billionaires their economy is minting. That is, unless you’re Indian Prime Minister Narendra Modi in the year 2022.

It was nearly eight years ago that Modi and his Bharatiya Janata Party took power with bold plans to reform the economy and reduce inequality. Yet 2014 seems a long, long time ago when you absorb the latest findings from Oxfam.

All along, there was scant evidence Modi’s policy priorities significantly spread the benefits of rapid gross domestic product. In the last two years, though, the gap between Modi’s rhetoric and the actual results reached cartoonish proportions.

Poverty-fighting group Oxfam calculates that the richest Indians more than doubled their fortunes during the Covid-19 era, while poverty worsened markedly.

True, the rich almost everywhere are having a great pandemic as central banks drive stocks and real-estate values into the stratosphere. India, though, is in league with sub-Saharan Africa in terms of lost living standards during the pandemic period.

Fully 84% of households suffered statistically significant declines in income. In 2020, for example, the ranks of poor Indians doubled to 134 million, a surge coinciding with notable increases in suicide rates among vulnerable socioeconomic segments, Oxfam reports.

Again, the uber-rich getting richer is a global phenomenon. Oxfam highlights how the fortunes of the world’s 10 wealthiest people—all white men—essentially doubled over the last two years. When Covid hit, they had a collective $700 billion. Today, that concentration is about $1.5 trillion.

Yet, Oxfam says, “the stark wealth inequality in India is a result of an economic system rigged in favor of the super-rich over the poor and marginalized.”

And India’s worsening inequality is impossible to downplay. Oxfam says the country added 40 new billionaires last year—bringing the total to 142—even as the nation’s health infrastructure buckled. Its billionaire class now boasts roughly $720 billion in combined wealth, topping the poorest 40% of the population. The solution, Oxfam says, is a bold revisiting of policies to redistribute wealth.

Specifically, the group recommends a 1% “surcharge” on India’s richest 10%. That, it claims, would “fund inequality combating measures such as higher investments in school education, universal healthcare, and social security benefits like maternity leaves, paid leaves and pension for all Indians.”

Will Modi’s BJP do just that? The odds aren’t great. Consider the extent to which Modi has veered toward quick fixes and low-hanging-fruit moves to open an uncompetitive economy.

In 2014, Modi declared India open for business as never before. Though he increased foreign investment opportunities in several sectors, the really big reforms to agriculture, land and a more productive taxation system fell by the wayside.

Protectionism, meantime, returned in a big way. Modi’s government turned its back on bilateral trade deals like Asia’s Regional Comprehensive Economic Partnership, the largest ever. Modi’s predecessor, Prime Minister Manmohan Singh, entered at least 10 free-trade deals over 10 years. Modi? Zero.

Instead, since 2014 there have been more than 3,000 tariff increases affecting 70% of India’s imports, says Arvind Subramanian, Modi’s former chief economic advisor.

As 2022 begins, only about 40% of the working age population is engaged in the formal economy. It’s one of the worst ratios among big economies and falls disproportionately on young workers. It was a “demographic dividend” that the BJP claimed was India’s secret weapon when taking power 2,795 days ago. Modi dazzled young Indians with Donald Trump-like talk of making India great again.

In fact, Modi took office on the strength of a “3Ds” mantra of demographic advantage, democracy and demand. Yet Modi did more chest-thumping than structural reforming to level playing fields. Democratic institutions are weaker than they were in 2014. As a result, a handful of billionaires, new and old, reaped the biggest benefits of this latest phase of the Modi era.

Had Modi done more to address the “rigged” system Oxfam highlights, India’s poor might’ve entered the Covid crisis on sounder footing. Had he focused more on economic modernization and less on promoting Hindu nationalism, India might be wooing more of the foreign investment zooming to China, Vietnam and Bangladesh.

Instead, India entered the Covid era with serious pre-existing conditions that the pandemic has exploited ruthlessly. One is the endemic corruption that Modi promised to eradicate.

In 2020 alone, India’s ranking on Transparency International’s corruption perceptions index plunged six places to 86th from 80th. New Delhi’s scores in press freedom surveys plunged even more precipitously.

Countries minting new billionaires is a good thing. It’s a natural part of the progression from socialist to market economy. Yet when a poverty-plagued, geopolitically vital nation is producing only billionaires, it’s not just the 84% of Indians falling behind who have a problem. It’s the entire global economy.