Rise of Oligarchy in India and Pakistan

[Riaz Haq]

Is India an oligarchy controlled by its 55 recently-minted billionaires whose wealth equals one-sixth of their country's GDP?

The answer to this question came when, as part of India's 2G scandal revelations, the Billionaire businessman Mukesh Ambani was quoted as bragging that the ruling Congress Party is "Apni Dukan" (our shop), implying that he owns the ruling party. The scandal also produced evidence of collusion of India's corporate-owned mainstream media in their deliberate attempts to impose a blackout on the whole affair until it was finally broken by the relatively obscure Open magazine.



Here's an excerpt from today's New York Times story that captures the essence of crony capitalism and the rise of Indian oligarchy as being among the world's largest:

"India’s billionaires control a considerably larger share of the national wealth than do the superrich in bigger economies like those of Germany, Britain and Japan. Among the Indian billionaires included on the most recent Forbes rich list, a majority have derived their wealth from land, natural resources or government contracts and licenses, all areas that require support from politicians."

Among India's powerful billionaires, the New York Times story particularly features Gautam Adani whose cozy relationship with Gujarat Chief Minister Narendra Modi has made him the tenth richest man in India. It says that "Mr. Adani has benefited from various governmental approvals and also bought coastal land from the Gujarat government at very low prices — in one instance paying as little as $540 an acre. Once he completed infrastructure, Mr. Adani sold land at a handsome profit to corporations locating inside the economic zone, including one parcel to Indian Oil Corporation, a state-owned firm, for $54,000 an acre."

The New York Times compares India's new billionaires with America's robber barons during the Gilded Age, a period of rapid economic growth which preceded the deep depression of 1893-1897.

The extraordinary power and influence of India's super rich has played out to the detriment of ordinary Indians who make up the world's largest population of poor, hungry, illiterate and sick people. It poses a serious challenge to India's democracy, often claimed as the world's largest, to meet the very basic needs of its people in whose name the rulers supposedly govern the country. It also raises the specter of significant social strife which could spark a bloody revolution shaking the Indian society to its core.

Back in 1988, Pakistani economist Dr. Mahbub ul Haq said that "our system has all the worst features of oligarchy and democracy put together." It now appears that India's system today is not much better than Pakistan's which has less inequality between the rich and the poor.

Related Links:

Haq's Musings

India's 2G Scandal

Bloody Revolution in India?

Is There a Threat of Oligarchy in India?

Political Patronage in Pakistan

India at Davos 2011: Story of Corruption and Governance Deficit

Challenges to Indian Democracy

India After 63 Years of Independence

[Riaz Haq]

Here's a News story on increasing private wealth in Pakistan:

KARACHI: Pakistan has seen significant increase in the number of wealthy people as compared to a total of approximately 22 families during the era of Field Marshal General Ayub Khan in 60s, experts told The News.

According to a study of a financial think-tank from Switzerland, there are 415 people in Pakistan, who own more than $30 million each as compared to 310 last year, registering an increase of 33.9 percent, which is a record in Asia. Collective income of these people remained around $50 billion, the study revealed.

Only seven to eight business groups of the 22 families continue to operate their businesses significantly and the remaining families have either closed their businesses or have shifted abroad.

Dr Ishrat Husain, former governor of the State Bank of Pakistan (SBP), and a renowned economist, said only Dawoods, Adamjees, Sehgals, Shaikhs, Nishats and a few others have survived the economic ups and downs during this period, while Haroons, Batlas, Valikas, Isfahanis, Noons, and Rangoonwalas, have disappeared from the economic scene.

The nationalisation process in 70s also affected their economic position, he said, adding that some of the families went abroad and later shut their businesses due to one reason or the other. “Disputes and rivalries within the family and group also forced them to wind up their businesses,” Dr Husain said.

In 1947, the first budget projected a revenue of Rs150 million and the government had to borrow Rs80 million from the Habib Bank Limited to pay salaries to its employees and meeting other contingencies.

Likewise, Dentonic tooth powder was the first industrial project launched in the country followed by the inauguration of the first soft drink, Pakola, which was launched by the then prime minister.

Dr Riaz Shaikh, head of Social Sciences at Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST), said that several well-established individuals and families had emerged after the nationalisation process initiated by Zulfikar Ali Bhutto. “Now the number of such individuals and families has increased to hundreds, if not thousands,” he said.

Families of Agha Khan, Kasuri that owns a school chain, Patel family that owns hospitals and Malik Riaz, top real estate developer, along with several others are some of them.
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A few top families in the list included Sehgals, Habibs, Dawoods, Adamjees, Crescent and Valikas.
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(Shahid) Rahman wrote that nationalisation retarded Pakistan’s growth in many ways but its worst consequence was the scars inflicted on the psyche of the big businesses, which were flourishing even after passage of two decades. “It alienated the industrialists from the economic mainstream and, as if by a collective decision, several of the original 22 families who pioneered development in Pakistan switched off investment in the long gestation projects,” he wrote.

The Pakistani businessmen who were planning mega projects in 1971 and are still capable of setting up mega projects resigned to remain spinners, sugar manufacturers or at best cement manufacturers.

Field Marshal Ayub Khan’s decade of development (1958-68) divided the society into two categories, privileged and underprivileged, which led to the explosive situation of the 1970’s, culminating in the severance of Pakistan and induction into power of a socialist government of Bhutto.

The second phase, (1971-77) under Pakistan People’s Party was the era of dismantling monopolies, nationalisation, hitting at the power base of industrial barons and clipping their wings, while 11 years rule of General Zia-ul-Haq was the period of status quo for the economy....

http://www.thenews.com.pk/Todays-News-3-217083-Record-increase-in-n...

[Riaz Haq]

What if Modi becomes prime minister?
Myth 1: Modi is a development man
This cannot be further from the truth. Gujarat has always been a developed state from the time it was carved out of Bombay state in 1960. Economic indicators clearly show that Gujarat under Modi has been ‘worse off’ than under previous governments (even the BJP one before him).
The fact is that foreign direct investment in Gujarat has taken a severe beating in the last few years and even local investment is far below what is being flaunted. Regarding social indicators, Gujarat fares poorly.
A UNICEF report published in 2013 says social development in the state has not kept pace with economic development; almost every second child in Gujarat under five years old is undernourished, while three quarters are anemic.
Myth 2: The Gujarat carnage is a thing of the past and Modi has been given a “clean chit”
Many believe the courts exonerated Modi of involvement in the Gujarat anti-Muslim riots in 2002. The hard facts are, however, very different. First of all, no court has given Modi a clean chit.
True, there is a Special Investigation Team (SIT) report that says there is not enough evidence against Modi.
But this has been challenged, with the petitioner Zakhia Jafri being given leave by Ahmadabad magistrates to question the merits of the SIT report in a higher court.
Raju Ramchandran, appointed by the Supreme Court as amicus curiae for many of the Gujarat riot cases, asserts that there is enough evidence to prosecute Modi on several counts with regard to the violence in 2002, in which more than 1,000 people died.
Modi has neither shown any remorse nor taken responsibility for the killing of innocent people under his watch. The least a chief minister could have been expected to do was to enforce law and order and protect the life and property of every citizen in his state. That he ignored this responsibility, there is no doubt among many. That he has denigrated minorities has been documented by the print and the electronic media.
Myth 3: Modi has “made up” with the minorities
There are some claiming to be representatives of minority Christian and Muslim communities who sing Modi’s praises.
A careful analysis indicates these people have vested interests, especially in business, and are not really interested in their community or what is happening to minorities in the country.
In 2003 Modi introduced an anti-conversion law and established rules to govern the implementation of this law in 2008.
It is perhaps one of the most draconian laws in the history of democratic India. It forbids a citizen from converting to another faith unless she/he has permission from civil authorities.
Even now, police and intelligence officers constantly visit Christian institutions and Christians in general, making all kinds of inquiries and demanding to check baptism registers and other records.
Myth 4: Modi is not corrupt
In May 2012, anti-corruption campaigners Anna Hazare and Arvind Kejriwal visited Gujarat. They came away declaring it the most corrupt state in the country. Why they have not continued to highlight corruption in Gujarat is anyone’s guess.
Several years ago, the Tata Motor Company was allowed to establish a plant to build the “world’s cheapest car” in Gujarat with surprising ease, flouting every rule in the book and even the state’s industrial policy.
http://www.ucanews.com/news/what-if-modi-becomes-indian-premier/70249

[Riaz Haq]

$59 billion in unpaid bank #debt by rich borrowers in #India sparks outcry. Non Performing #Loans jump 450% #Mallya http://fw.to/YY4lCZG 

Bad Loans Of State Banks = Defence + Education + Roads + Health Spends. #Mallya just 1 of few thousand defaulters. http://www.indiaspend.com/cover-story/bad-loans-of-state-banks-defe... …

If the unpaid loans made by India’s public-sector banks were recovered, they would be enough to pay for India’s 2015 spending on defence, education, highways, and health, according to an IndiaSpend analysis.

These bad loans, or gross non-performing assets (NPAs) as they are called in banking parlance, of public-sector banks crossed Rs 4.04 lakh crore ($59 billion), a rise of 450% since March 2011.

Private-sector banks also have an NPA problem, but their bad loans are less than half the level of public-sector banks, which account for 73% of all lending.

The crisis in Indian banking, which IndiaSpend has repeatedly flagged (here, here and here), has now reached a point where the NPAs of many public-sector banks are higher than their net worth.

This affects their ability to make fresh loans to business, and these bad loans are ultimately paid for by India’s taxpayers, the final guarantors of government-owned public-sector banks, as editor and columnist T N Ninan recently wrote in Business Standard.

“So what is to be done?” he wrote of the banking crisis. “The easy option is to take more of your tax money and give it to the same banks, on a platter. The government has talked of giving them another Rs 2.4 lakh crore—which works out to Rs 10,000 from every family, rich and poor.”

“Indeed, 19 of 24 listed government banks’ stocks now quote at less than half of book value, some at a discount of 75 per cent. Clearly, investors still think these banks’ books are akin to fiction.”

[Riaz Haq]

The richest 1% of #Indians now own 58.4% of #India's wealth. #Modi #BJP #Oligarchy

http://www.livemint.com/Money/MML9OZRwaACyEhLzUNImnO/The-richest-1-...

In the last two years, the share of the top 1% has increased at a cracking pace, from 49% in 2014 to 58.4% in 2016.

The richest 1% of Indians now own 58.4% of the country’s wealth, according to the latest data on global wealth from Credit Suisse Group AG, the financial services company based in Zurich. Credit Suisse has published the report every year since 2010.

The share of the top 1% is up from 53% last year. In the last two years, the share of the top 1% has increased at a cracking pace, from 49% in 2014 to 58.4% in 2016

Does that mean the trend of the very rich getting richer is because of the Modi government? Not really—as the chart shows, the share of the top 1% in the country’s total wealth improved from 40.3% in 2010 to 49% in 2014. But the numbers do suggest that the very rich are expanding their share at a faster clip now. The richest 10% of Indians haven’t done too shabbily either, increasing their share of the pie from 68.8% in 2010 to 80.7% by 2016. In sharp contrast, the bottom half of the Indian people own a mere 2.1% of the country’s wealth.

Data from Credit Suisse shows that India’s richest do well for themselves whichever government is in power. In 2000, for instance, the share of the richest 1% was a comparatively low 36.8% of the country’s wealth. In the last 16 years, they have increased their share from a bit more than a third to almost three-fifths of total wealth.

[Riaz Haq]

Here are a couple of excerpts from "Playing with Fire" by Pamela Constable:


"Sugar is critical commodity in a country (Pakistan) where people consume vast amounts of sweet tea, soft drinks, and cakes, using about 4 million metric tons of sugar a year. .....Sugar is also very profitable. Pakistan is among the top five producers of sugar cane in the world, employing more than two million seasonable laborers at harvest time, and sugar refining is the second largest agribusiness after flour milling. According to National Accountability Bureau, a majority of country'd eighty-plus sugar mills are owned by political families, including Sharifs and Bhuttos, as well as members of parliament and several military-controlled enterprises." 

"In Pakistan, the sugar industry is actually a political industry in which powerful politicians on all sides are involved", said a 2009 statement from the SugarMills Workers Federation that described how the big millers cheat mall growers through fake middlemen, then manipulate sugar prices by pressuring the government to stimulate or discourage exports depending on how much cane has been harvested."


"Throughout the 1990s, during two periods of rule by Sharifs and two by his archrial Benazir Bhutto, the privatization process became a game of grab and run. Investing of investing in solid projects, many business groups colluded with corrupt officials to make quick profits. They borrowed huge sums (from state-owned banks) without collateral, created and dissolved ghost factories, purchased state assets at token prices, avoided paying taxes, defaulted on shaky loans, or deferred paying them indefinitely....Major defaulters and beneficiaries of loan write-offs, granted by both the Bhuttos and Sharif governments, included some of Pakistan's wealthiest business families-- Manshas, Saigols, Hashwanis, Habibs, Bhuttos and Sharifs......using the National Accountability Bureau (NAB), the (Musharraf) regime (after year 2000) went to prosecute eighteen hundred cases of corruption to recover nearly $3.4 billion in assets." 

https://books.google.com/books?id=Y-wU1aVyM9IC&pg=PA40&lpg=PA40&dq=pakistan+sugar+mafia+politician&source=bl&ots=W7LPxh8OQW&sig=9zTBvtFc...