VCCircle

nice article. nicer responses.

as an entrepreneur i do like to think that we are not going to remain a plutocracy in the near future (5-10) years.

i would be surprised if even 10% of the GDP is in 50 people's hands in this time period.

time will tell, but that's the way i am betting.

arvind

I came late to this party, but will leave some points nonetheless.

Pretty interesting perspective, Sourabh.

I think the fundamental point here veers gradually from the theme of plutocracy to political rent-seeking. We can debate, till cows come home, the causal sequence - what comes first; plutocracy or politics business nexus. But the end reality is that it exists; and exists in a big way. Further, our entrepreneurs, old and new (barring most of the IT people - do not forget Raju) have not glorified themselves as they have either exploited, colluded and connived that behaviour, at worst, or at best, have outsourced palm-greasing (political consultancy of a sort) and never raised a voice against that.

Anecdotally, about new entrepreneurs, there are very strong rumour about very strong political connections of a broking company - turned an NBFC - turned a real estate company - turned an enery infrastructure company. And tongues in New Delhi have been wagging for last few years about an IIM promoted edcuation company getting a large share of Sarva Shiksha Abhiyan contracts and their fantastic run in the capital markets. These rumours may or may not have credence, but I would stick my neck out and state that in India of last two decades, the credo among entrepreneurs of all vintage, is not to ask "How can I contribute to make this a great country?" but rather "How do I make money from this carnival?".

I will not be judgemental about the second ethos and call it immoral (that word does not exist in my world :-D), but without the first, the second will not be a valid proposition for a long time.

But all is not lost. We still have people like Nandan Nilekani.

Some really good points made by Ashish, Shiju and Bhavik. Though I am in agreement with most of what was said, I wanted to take issue with the following assertion by Shiju:
"In that sense we are no different from western liberal democracies where there are often short term nexus between politicians and business for mutual benefit"
While in principle I agree with the above, the degree to which US businesses can influence politicians and subvert the system is nowhere close to what Indian business houses can do and have done repeatedly in the past. In a country where even ordinary citizens can literally get away with murder, we have a long way to go to achieve parity with the West, when it comes to rule of law.

The point you both guys Ashish & Saurabh are trying to make are correct.

But in real world it's hard to find extremes. No Pure Plutocracy or Democracy can work.

Had plutocracy worked than Nandas (Escort) wadias, godrej, etc would have been still at the helm. Similarly had full Democracy worked we wouldnt had 80% of market cap in hands of few billionares.

But one very important thing is that the Democracy has enabled the people to think big and act upon to create big business. And once they attain some mass / size the same guy would want to play the 'Plutocracy' card to accelerate or maintain the growth.

So being in investor commmunity, looking at the stage the organisation one is investing in could help to strategise whether Plutocracy or Democracy strategy would work in favor while evaluating the deal.

To sum up briefly "THINKING BEYOND DCF is necessary."

Ashish

Very well said. A good response to an overly pessimistic article by Saurabh.

I could not agree more with Ashish Abrol. And let's not forget all the IT titans, of which Infosys is the poster boy of responsible business and Satyam demonstrated emphatically that in the end all the political patronage came to nought. And of the old guard Tata has always stood apart from the herd when it came to accommodating politics and politicians and that has not hurt them in the least.
The reality is that very successful business and their associated promoters will inevitably garner power and influence. The question is can they then subvert the rule of law to their own advantage? In Russia or some other countries they arguably can but in India, while in the short term it may appear so, I seriously doubt if anyone could in the mid to long term. In that sense we are no different from western liberal democracies where there are often short term nexus between politicians and business for mutual benefit. That is a far cry from saying India is a true plutocracy.

Whole lot of crap!

Hi Saurabh, Can I have the name/ contact of the political consultancy that your friend runs. I might need seed their consultation. (am an entrepreneur in the education space)

Reading your article, one might be tempted to think you were writing about an African nation where market economics is traded for favor, nepotism and patronage of the well connected. I dread to think this is the India we are growing up to be. I strongly disagree with your views and here is why.

Statistics can make for a compelling argument but sometimes it is equally important to look beyond the numbers to get a true sense of the issue at hand. As you clearly point out in the “why” of your article, 50 billionaires control 80% market capitalization. That shocking statistic should send a chill through the spine of anyone trying to make money in India without finding favor with the well connected. However, let’s look at the flip side of the same number. How many of the 50 billionaires you refer to in your article are a product of democratic India created in the last 20-25 years? How many of these 50 billionaires were created without the crutch of nepotism? Surely, the story of the two most powerful businessmen in India goes back only 25 years. Dhirubhai Ambani created an empire all by himself. Ofcourse, everybody has a story to tell about how he leveraged the system or the lacuna therein to create his empire. But my point to those naysayers is –it is a skill which anyone of us can use to our advantage to achieve the same results. Dhirubhai Ambani was a product of democratization. Just the opposite of plutocracy. Let’s look at some others. Sunil Mittal. Yes, his father was a MP but if you trace the history of Bharti, it is evident that his struggles were as genuine and difficult as anyone whose father might not have been a MP. His journey to the top of the pyramid of influential and well respected industrialists is 15 years old. Some more examples- Suzlon Energy, Vedanta. Further, you speak of the nexus between infrastructure businesses and the influential. Can you disregard the new companies created in the RE sector over the last 5 years –Omaxe, Parsvnath, Puravankara, Indiabulls. Are they all products of influence? I could go on and on. Infact, my question to you would be - what happened to the industrial stalwarts of the 60’s, 70’s and 80’s? What happened to Modi’s, Nanda’s of Escorts, Wadia’s and to some extent even Birla’s? If the efficient market hypothesis had been thrown out the window as you assert in your article, we would have seen very different people sitting atop the pyramid of wealth today. We should be all be glad that is not the India we live in.

Don’t get me wrong. India has many problems. We are hardly a model of a well run economy. Neither am I a romantic looking at Mother India with rose tinted glasses. However, I would have to disagree with your notion of describing India as a plutocracy. VC Circle itself is a fine example of the democratization I speak about. This extremely well run and focused website has made a business of reporting on entrepreneurial India’s dreams. Is that plutocracy or democratization? Look at some of the people who are starting companies. I read their backgrounds and I feel warmth in my heart as increasingly favor is making way for individual spirit, nepotism is making way for meritocracy. Will any of them displace the Ambani’s in the next two decades. I don’t know but what I do know is that they have a damn good chance of doing it if they put their hearts and minds to it. That is a good foundation to build a nation on.

Ashish Abrol