Good times for the super rich
While the poor in India continue to struggle for existence.
It is good to know that India's rich are getting richer. The country's billionaires' club is expanding. Fifty-six new members joined the club, last year. Old ones are amassing more wealth every year than ever before. Some are shedding sticky assets after squeezing them for years when they were good. The higher GDP growth is clearly contributing to their higher wealth creation and retention. "India is now the third largest billionaire creating country in the world. When India's GDP touches $ 6 trillion by 2022, we expect the number of billionaires to at least double," said Anas Rahman Junaid, Managing Director and Chief Researcher, Hurun Report India. Even a large section of India's literate poor is happy to know that the country is doing well in producing billionaires in comparison with other developing and developed nations. Their feeling is almost on the same lines as those of India's famished and undernourished getting exhilarated to hear that so many of their country's representatives booked gold in the recent Gold Coast Commonwealth Games.
Indian billionaires are also happy that the government's financial reforms are progressive as well as protective about wealth creation. In fact, the bankruptcy law has provided a big breather to loan-defaulted big business houses to dump their financially losing enterprises without themselves losing much. In the last one year, over 1,500 insolvency applications have been filed, of which around 200 have been admitted by National Company Law Tribunals. The new bankruptcy code marks a big shift in the balance of power between debtors and creditors. Banks, and other creditors, no longer need to be at the mercy of defaulted big borrowers and vice versa.
Failed big borrowers can dump their stricken assets after siphoning off large undisclosed sums that formed part of inflated project and other costs, funded by banks after 'careful' survey. Let the other creditors and suppliers, and, of course, gullible minority ordinary shareholders suffer. The likes of Anil Ambani of Reliance Communications, Venugopal Dhoot of Videocon, the Ruia family of Essar Steel, Brij Bhushan Singal of Bhushan Steel, Jaiprakash Gaur of the Jaypee Group, and L. Madhusudhan Rao of Lanco Infratech are among several of Indian billionaires who may be happy to lose their irrecoverably loosing concerns under heavy debt burden, although they may not officially admit.
Last year, India's central bank released a list of a dozen companies that account for a quarter of all bad loans at Indian banks and face liquidation under India's new Insolvency & Bankruptcy Code. Essar Steel is probably the most prominent of them. The company reportedly has debts of nearly $7 billion, more than $5 billion of which is labelled non-performing. Another big defaulter in the RBI list is Bhushan Steel, which produces steel sheets for the auto industry and owes banks $6.9 billion. The company's chairman, Brij Bhushan Singal, dropped off in 2014. Singal's estranged older son, Sanjay Singal, who runs his own steel business and is weighed down by debt of $5.7 billion -- according to an ICICI report--lost his spot in 2015. The bankruptcy law is expected to partly diminish the debt scare of promotors, associates and suppliers. Major sufferers will be ordinary shareholders, who trusted those family-managed stock exchange-listed companies. Rich promoters and business entrepreneurs may concentrate on newer projects in newer fields.
However, global social research bodies are not quite impressed about India's lopsided economic growth, building more billionaires and reducing the burden of otherwise rich corporate debtors. India's economic growth has achieved little to improve the lot of the poor, educated or uneducated, jobless or partly employed. At least half of the country's under-18 population lives in acute poverty, reveals an Oxford University study. The study surveyed 103 low and middle-income countries. Under-18 children were found to constitute 34 per cent of the total population. The poor constituted 48 per cent. It was based on a measure that assesses a range of deprivations in health, education, and living standards. "These new results are deeply disturbing as they show that children are disproportionately poor when the different dimensions of poverty are measured," said Sabina Alkire, Director of Oxford Poverty & Human Development Initiative (OPHI) at the University of Oxford. The research examined the latest figures for the Global Multidimensional Poverty Index (MPI) by age group to analyse the particular situation of 1.8 billion children in 103 countries.
According to the OPHI, half of South Asia's children and two-thirds of Sub-Saharan children are multi-dimensionally poor. In 36 countries, including India, at least half of all children are MPI poor. India has been ranked 100th among 119 developing countries on the Global Hunger Index (GHI), behind North Korea, Bangladesh and even the besieged Iraq, though ahead of Pakistan. India was ranked 97th, the previous year. The country's hunger problem is driven by high child malnutrition, and underlines the need for stronger commitment to the social sector, the International Food Policy Research Institute (IFPRI) said in its report.
Unfortunately, India's policymakers seem to be more concerned about bridging digital divide than the growing rich-poor divide. India's poverty rate appears to be outnumbering its population growth rate. The present number of India's poor is more than the total population of some 350 million of undivided pre-Independent India in 1946. This is a matter of big concern. It is more so because so far, no government had undertaken a serious study on the state of poverty in India. Few will disagree that despite being divided by religions, castes and sub-castes, mother tongues, and lifestyles in the absence of proper shelter, education, and healthcare, India's poor have little complaint about the rich. Few are bothered about how India added 56 new $ billionaires in 2017 alone, despite a slowing economy and demonetisation. This social trend is disturbing.
(The views expressed are strictly personal)