India ranks ninth in a list of 22 crony-capitalist countries in the world, said the latest issue of the Economist. It has held the position even in 2014, since the index was first published based on a study by members of Morgan Stanley Investment Management and Delhi's Centre for Policy Research.
However, India's crony-sector wealth has seen a reduction from 18 percent in 2008 to 3.4 percent of its gross domestic product (GDP) today, on a par with cronyism existing in developed economies such as Australia. Its non-crony-sector wealth amounted to 8.3 percent of the GDP.
Crony capitalism is a term used to describe an economy in which success in business depends on close relationship between businesspeople and government officials. Sectors which by default require liaison between business and government are called crony sectors (commodities such as casinos, oil and construction) and those that don't are non-crony sectors (technology, hedge fund, pharmaceuticals), according to a classification by the Economist.
The study basically narrowed down on Forbes Magazines' list of the world's billionaires and their net worth, and sorted each individual as crony or non-crony based on the industry they made their fortunes from.
"Over two decades, crony fortunes had leapt relative to global GDP and as a share of total billionaire wealth," the Economist noted, adding: "It may seem that this new golden era of crony capitalism is coming to a shabby end."
The Economist reported a steady shrinking of billionaire wealth by $1.75 trillion since 2014, a drop by 16 percent collectively. All the 22 economies too witnessed a combined shave-off of $116 billion in their crony wealth in the same timeframe.
"Thanks to tumbling energy and commodity prices politically connected tycoons have been feeling the squeeze in recent years," the study said, highlighting what it views as the main reason for the fall in the world's, as well as India's, crony sectors. "Emerging-market currencies and shares have fallen. Asia's long property boom has sputtered," it added.
Commodity prices apart, the weekly cited the optimist's perspective that backlash from the middle class across the world was another reason aiding the fall in wealth. As an example, it highlighted protest against graft by Indians and the repercussion of it seen in the Delhi elections. The country's national capital elected anti-corruption campaigner Arvind Kejriwal as its chief minister, it noted.
The report said active reforms by the Indian government and the Reserve Bank of India (RBI) has stopped the country's public sector banks from giving "sweetheart deals" to its business moguls. It noted that the vast majority of Indian billionaires are now from non-crony sectors.
"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," said the weekly.
Developing economies which account for 43 percent of global GDP also have 65 percent of the world's crony wealth, noted the report. These economies also witnessed a fall in their crony wealth from as high as 8 percent in 2008 to 4 percent of their GDP.
The index ranked Russia as the worst crony-capitalist country, followed by Malaysia, the Philippines, Singapore, Ukraine, Mexico, Indonesia and Turkey. India, Taiwan and China are ranked 9th, 10th and 11th, respectively.
In absolute numbers, China had the largest concentration of crony wealth of all the countries, at $320 billion. On the flip side, Germany, with least number of crony capitalists, ranked at the bottom of the index.