Outgoing US President Joe Biden in his farewell address spoke of “dangerous concentration of power in the hands of very few ultra-wealthy people, and the dangerous consequences if their abuse of power was left unchecked,” underlining threats to the institutions that govern American society by placement of plutocrats in bodies deciding public policy and the monopolistic control over personal data and misinformation campaigns by some wealthy individuals ~ which was shaping political discourse and public perception. Mincing no words, Mr Biden warned the American public against oligarchs who posed a threat to American democracy, basic rights and freedoms and equality of opportunity.

What Mr Biden said is deeply relevant for most countries, because concentration of wealth is taking place at an unprecedented rate the world over, including India. According to UBS Billionaire Ambitions Report, India which is ranked at the 140th position in terms of per capita GDP, ranked third globally in billionaire count in 2024, with 185 billionaires, behind only the US and China. We added 32 billionaires in the past year, reflecting a 21 per cent increase in number of billionaires ~ and a remarkable 123 per cent growth since 2015.

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The combined wealth of Indian billionaires increased by 42.1 per cent over the year to reach US $905 billion. These figures appear incongruous vis-à-vis the average monthly consumption expenditure in rural (Rs.4,122) and urban areas (Rs.6,996) in India (Source: Household Consumption Expenditure Survey 2023- 24). More significantly, the dominance of the wealthy is increasing in the corridors of power; in the showdown between the research firm Hindenburg and Adani Group, the Adanis unabashedly equated themselves with India with no demur from the Government.

The reasons for the unequal growth in India are rooted in history; the first Industrial Revolution that swept Europe in the eighteenth and early nineteenth century reached India only in the twentieth century, but the fourth Industrial Revolution soon overtook it ~ in the early part of twenty-first century. Thus, industrial growth of several centuries was telescoped in a span of seventy-five years; right after new industries based on new machines, powered by new energy sources, and organised in new business structures took root, digitalization and artificial intelligence (AI) drove another quantum transformation. This phenomenal growth in the Indian economy post-liberalisation gave rise to a community of enterprising, ultra-rich people in India. “Crony capitalism” was a term used to describe the worst characteristics of the politics of early 2000s.

Closed networks of business groups and their connection to political power centres, corruption, and nepotism, had promoted an ugly form of capitalism, resulting in bank frauds and the like. A similar situation had obtained in 1997 in the so-called Tiger economies ~ South Korea, Taiwan, Singapore, Indonesia, Malaysia, Thailand and Vietnam ~ that had clocked some of the most impressive growth rates in the world. Sadly, it is widely perceived, that during the last decade the ‘crony capitalism’ of UPA 2 era has been replaced by an oligarchy; the rich have flourished, while the poor bore the brunt of the Covid pandemic, reverse migration, agricultural crisis, and the collapse of many small and medium businesses.

Presently, corporate profits are at dizzying heights and billionaires are being minted at record speed. Concomitantly, Government spending on health and education is decreasing in real terms. Another disturbing development is the growing propensity of the Government to lease out public assets to private parties, neglect the peoples’ carriers, railways and buses, and change laws, like the Forest Act, SEZ Act and Coal Mining Rules, to benefit certain parties. The present economic situation has to be seen in the perspective of changes in Indian society in the last seventy-five years; a feudal structure was replaced by a more egalitarian one, but even as things changed, the essence remained the same; dominant castes remained dominant in the countryside, and everywhere the feudal elite were replaced by empowered politicians, bureaucrats and industrialists, leaving the bottom layer as it was.

True, some of the disadvantaged broke out of the poverty trap, but they were in a small minority. Even the so-called middle class did not fare much better. According to People Research on India’s Consumer Economy (PRICE), about 40 per cent Indian households, with an annual income between Rs.6 lakh and Rs.36 lakh, constitute the middle class. The PRICE survey suggests that while income of middle class households has stagnated, high inflation, particularly of food, high direct (income-tax) and indirect (GST) taxation, house rents, and interest rates, has made their life miserable.

Currently, when tax collections, both direct and indirect, and the Government’s spending on infrastructure are at record levels, economists are suggesting that further growth of the economy will depend on a rise in consumption levels, and the time may have come for the Government to cut taxes so that people in the lower and middle brackets have more spending power. Not surprisingly, the Confederation of Indian Industry (CII) wants the government to “focus on enhancing disposable incomes and stimulating spending to sustain economic momentum.” In this fraught scenario, battling with raging inflation, serving and retired Government employees welcomed the setting-up of the Eighth Pay Commission.

The politically-inclined labelled announcement of the Pay Commission as a ploy to garner votes in the Delhi elections. However, private sector bosses are watching the developments with trepidation, because an increase in emoluments of government employees may lead to demands for increasing pay in the private sector, also. An editorial, in a leading daily, summarised fears and misgivings of the private sector:

a) Senior bureaucrats enjoy ‘nawabesque’ benefits but are paid less;
b) Retired Government employees live in the lap of luxury;
c) The Old Pension Scheme (OPS) may return, casting an onerous burden on the Government;
d) Presently, Government jobs are much more paying at the entry level, which the private sector cannot match. The emoluments of new recruits being high, the Government is unable to fill cutting edge positions, while young men/women do not want to join the private sector; e) Therefore, entry level wages for Government employees have to be lowered, perquisites cut and retirement benefits slashed.

There is a saying that if you give out peanuts you will only get monkeys. The reason that Government has been able to attract talent is because it is a model employer, and has an equitable pay structure ~ the pay of the top bosses is only twelve times more than that of their peons, while in the private sector a pay differential of five hundred times between maximum and minimum pay is considered normal. The New Pension Scheme (NPS) has proved unpopular, because pension under NPS is a fraction of pension under OPS ~ insufficient even to keep body and soul together.

An intelligent approach would be to bridge the gap between OPS and NPS, by increasing contributions and managing NPS better, and not abolishing pension altogether. Finally, most civil servants will quit Government service if perquisites of top government servants are cut without a significant increase in pay. Probably, instead of blaming the Government for paying well, the private sector can get better talent by having a more equitable pay structure. Breast-beating by such apologists reminds one of the Coketown rich: “They were ruined, when they were required to send labouring children to school; they were ruined when inspectors were appointed to look into their works; they were ruined, when such inspectors considered it doubtful whether they were justified in chopping people up with their machinery; they were utterly undone when it was hinted that perhaps they need not always make quite so much smoke (Hard Times by Charles Dickens).

US Presidents from Thomas Jefferson to Jimmy Carter to Joe Biden have warned against emerging oligarchies, but all were unable to prevent their growth. Therefore, an oligarchical set up for Government may be inevitable, which was explained by Albert Einstein in the following words: “Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development…

The result of these developments is an oligarchy of private capital, the enormous power of which cannot be effectively checked even by a democratically organized political society. This is true since the members of legislative bodies are selected by political parties, largely financed or otherwise influenced by private capitalists who, for all practical purposes, separate the electorate from the legislature. The consequence is that the representatives of the people do not in fact sufficiently protect the interests of the underprivileged sections of the population.”

(The writer is a retired Principal Chief Commissioner of Income-Tax)