India's crony wealth plummets to 3.4%
According to a study by the Economist, India ranks ninth in the world crony-capitalism index with crony wealth accounting for 3.4% of GDP down from 18% in 2008. Key factors responsible are a slump in commodity prices, weak currency, end of the property boom in Asia and the Modi-government's tough stance on corruption. Russia tops the list, followed by Malaysia and the Philippines.
Crony capitalism is a description of capitalist society as being based on the close relationships between businessmen and the state. The success of a business is dependent on the favoritism that is shown to it by the ruling government and not on free market values and rule of law. This can be in the form of tax breaks, government grants and other incentives.
Using data from Forbes list of the world's billionaires and their worth, each individual is labeled as crony or not based on the source of their wealth. Germany is cleanest, where a small fraction of the billionaires' derive their wealth from crony sectors. Crony capitalism in Russia is at an all time high, with crony wealth accounting for 18% of its GDP.
While the index ranks China at the 11th spot, it still has the biggest concentration of crony wealth in the world at a staggering $360 billion.
According to the Economist, there has been a backlash against cronyism from a growing middle class in the emerging world. Another reason leading to the decline of crony-capitalism is the fall in global prices of mines, steel mills and oil-fields and real estate sectors. These sectors are closely associated with crony capitalists. In India, pharmaceuticals and consumer-goods are major contributors to current billionaires' wealth.
According to the Economist, globally, the worth of crony capitalists rose by 385% between 2004 and 2014, to $2 trillion. However, among the 22 economies in the index, crony wealth has shrunk by $116 billion since 2014.