When it comes to corporate life, the conventional negative narrative that is spun around India is that of crony capitalism. Since political parties routinely accuse each other of crony capitalism and the media loves carrying stories about billionaires who have gamed the system, this has become the default mental model used by many to understand India. Indeed, celebrated books are written on this subject, including James Crabtree’s vividly written book from three years ago, ‘The Billionaire Raj’.
However, as I explain in this piece, the conventional narrative around scams and cronies doesn’t even begin to describe either the scale of the challenges or the opportunities India faces as it tries to make the transformation from what the World Bank calls a lower-middle-income country with around $2,000 per capita income to an upper-middle-income country (which are nations with a minimum per capita income of $4,000).
Let me begin with the challenges facing India before I go on to the opportunities.
Challenges facing India
As my colleagues and I have described in our new book ‘Diamonds in the Dust: Consistent Compounding for Extraordinary Wealth Creation’, the major challenge India faces is thuggery by business owners who are not crony capitalists – they are just corrupt businessmen. Many of these businessmen fly under the radar – they are not household names and when they run away from India after looting billions from their shareholders and from their lenders, it is not front-page news.
In our book, we have analyzed this underbelly of Indian capitalism, companies that have meaningfully diminished your net worth, although you might not be aware of the same. For example, we have described at length a company called Cox & Kings. The company has a long and interesting history but if you look at the firm’s accounts carefully, as the Enforcement Directorate recently did, you find that billions of dollars – raised in the stock market and from the banks – disappeared.
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