Book of the week: The Billionaire Raj

The Billionaire Raj: A Journey Through India’s New Gilded Age
by James Crabtree
Oneworld (£18.99)

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The Chinese economy is now the largest in the world after America’s (once you adjust for different prices). India is catching up fast. It is now in third place and its growth rate suggests it’s only a generation away from overtaking the US. However, the benefits of this growth have been shared unequally. A small number of super-rich “Bollygarchs” have become wealthy beyond their wildest dreams, while millions still live in abject poverty. This book investigates whether this is a passing phase, much like the one the US passed through in the 19th century, or something that could end up strangling development, as in Russia.

Fall of the licence Raj

The book is divided into three parts. The first three chapters deal with the rise of India’s new elite. The next section looks at how these oligarchs are trying to use political connections to entrench their advantage by securing unfair access to scarce resources. The final four chapters look at specific sectors, such as banking and real estate, which provide clues about what might happen in the future. The final chapter examines how the election of the current prime minister, Narendra Modi, who has pledged to overhaul the nation’s economic and political structure, might end up changing things.

Crabtree’s basic thesis is that Indian economic policy has gone through two main phases. Between 1947 and 1991 India combined state ownership with strict control of the private sector – the so-called “licence Raj”. Although effective in reducing inequality, it produced slow economic growth and brought India to the brink of bankruptcy. There followed a wave of deregulation and privitisation that kickstarted growth and allowed outsiders to challenge the old commercial elite, but also enabled the super-rich to pull away from the rest of society. The challenge for India’s leaders now is to curb corruption and inequality without reverting to the failed Gandhi/Nehru consensus.

India has a long way to go before it is rid of corruption, and Crabtree is critical of Modi’s efforts so far, seeing him as too timid. However, on balance he thinks the general direction of travel is right. He is confident that India will be able to reform itself in a way that simultaneously reduces poverty, but keeps economic growth moving along nicely.

The book raises more questions than it answers and doesn’t quite keep up with Modi’s latest reforms, but it is a well-written, readable, balanced and objective guide to the evolving Indian economy.