India's 36 Billionaires & The Billion With Just $36

This has to be the most naive piece of propaganda-masquerading-as-financial-journalism I've seen in a long time:

Beijing, Mar 11: Indians topping Forbes' list of Asian billionaires, replacing the Japanese, have flabbergasted the Chinese, who are regularly reading that India is not shining as reported by the Western media and experts.

"I am surprised that Indians have topped the Forbes' list of Asian billionaires," Chen Yu, a media consultant said.

"I must change my distorted impressions about India," she said.

With 36 of its citizens worth over a billion dollars, India replaced Japan as Asia's top breeding ground for the super-rich, the Forbes 2007 listing of billionaires said this week.

Amongst the top dozen Asian billionaires, there were eight Indians led by steel baron, L N Mittal. Asia added 54 new billionaires in the last one year, 14 of which were from India. In other words, every fourth new Asian billionaire was from India.

Compared to the impressive performance by Indian entrepreneurs, the only mainland Chinese to figure among the top 70 richest amongst Asians was Yan Cheung, the self-made woman entrepreneur of Nine Dragon Paper Co, who is the richest in China.

Unfortunately, the assumptions made herein are all too often made by people lacking understanding in what constitutes a successful economic environment, but it makes a good point about the often forgotten ingredients of capitalism.

It's often assumed that the richer the people in an economy, the more impressive it is. In fact, more often than not, nothing could be further from the truth.

Here is what the message of the article really reads: compared to India, China resembles a hub of stability and economic growth (this alone should sound warning signals to those thinking of investing in India right now too). Because when you have a country with piss-poor infrastructure development, more than 80% of the entire country living below the international poverty line, and weakly power outages, all having the highest number of billionaires in the region says is that compounded to these problems, you have an enormous wealth distribution problem, where a disproportionate amount of capital is concentrated within a very thin slice of your society.

One of the criticisms most of often lobbed at a system of open-markets is the inherent inequality such a system creates, but in reality nothing could be further from the truth. It's the reason economies like the U.S.A. and the U.K. are, for example, stronger and more stable than say, the Chinese or the Indian economies. The fact is, in order to have an efficient market system, with long-term sustainable growth created by constant re-investment and spending, the ideal system is one in which more people have more-or-less the same reasonable level of capital available to them, rather than one where a slice of society owns everything. This is only logical: the more market actors, the broader the spread of investment and spending in an economy.

This article is also a a great example of another often-made mistake by even quite senior market analysts: that you can use the same comparables for emerging markets as you can for developed countries. The reason it's impressive when an economy such as the United States' announces the number of billionaires has increased is that proportionately speaking, there's a pretty good spread of the wealth in the economy already, so the number generally indicates a surge in entrepreneurial activity prompted by aggressive capital markets. In India, where one billion people would be happy with $36, 36 billionaires is quite another story altogether.

By advertising that despite shaky capital markets, inefficient transportation, loose power lines (and that's being generous), 75% of her female population currently completely illiterate, India has the highest number of billionaires in Asia, the country only serves to re-enforce the risks and inefficiency in her economy. That's not to wipe India off the emerging markets watch-list, but it is a red light.

Comments

[China Law Blog]

Interesting way to look at it, and I think I agree.

[Balaji Viswanathan]

While, I agree to the general fact that a lot of Indians are abject poor and far from reaching the billions, what you need to understand about India is about the momentum currently generated. So, its not that India has covered too much of distance, its that it is going under very high velocity trying to catch up for centuries of lost time.

The 36 are just an example of what an open market could do and what the last few years of reforms have done. Everyone knew China was developing fast, but in just last 3 years India has started to displace China in many of the lists - not just fortune lists, but US visa lists, Fortune company lists, entrpreneurship lists, etc.

So for starters, for all the hype about China, name 3 Chinese private companies? I can at best get to teh recent Lenovo. But, beyond that? See the fortune lists of Indian companies, they are way ahead of China. Even Steel, where China leads everyone in the world, there is not notable Chinese producers. Does it ring a bell, you scholar on investing!!!

So, if you take the fact that Indians have displaced Chinese as the most number of overseas students in top US universities, most number of companies started in Silicon valley by non-Americans are Indians, India has over 100,000 millionaires in US alone and growing at a splending rate with a collective worth of expat Indians topping $1 trillion, and all in just a decade. Or why not you notice the board rooms of companies from CISCO, Microsoft, Vodafone, Pepsi, GE...

While it is ridiculous to say that India has overtake China in overall economy, but the fact that momentum is strong for running businesses is what matters. While you can build our achille's heel infrastructure with some difficulty over the next 2 decades, is there any plan for Chinese transition to democracy?

[Harish]

Well, I doubt the idea of considering anything related to a country's economy based on how many millionaires or billionaire's it generated or it even has...primarily because people invest in different countries. Take mittal for example, he has i believe 90% of his investments and money outside india...even if it be 60%, he is not a billionaire who india created (his customers elsewhere created his wealth), and he is not investing all that money into india (although excepting a part of it in a new steel company he is being encouraged to build)...mittal steel if i am right doesn't even have their stocks in indian exchanges where indians can invest. so mittal being a billionaire cannot say or change anything at the economic growth level or our stock indices. similar are many of the billionaires, they have a considerable portion of their investments outside.

so you can't really come to an understanding like a thin section alone is rich here and the rest is all poor (80% poor we were before the millenium, new stats are better)

india i think is actually distributing the riches currently, because only recently we are having considerable, sustainable growth in all sectors...though growth initiated with software last decade. if you look at our taxes via recent budgets (finmin.nic.in), and if you look at the disbursal, i think you will see that the distribution is well happening.

comparions with chinese are always there, because china is a huge neighbour and they are showing huge growth all sides...but what is growth and how safe is investing there, if growth is not sustainable (which like you quoted, they themselves have come out in the open)... investing in india is still safer than china (don't get me wrong.. i am not saying this because i am an indian), because growth here is easily sustainable, we are democratic so investments don't have to fear future bad government policies (democracies experiment and implement policies, or easily retract bad policies based on how it affects sectors).