Reflecting the skewed performance of the economy, the stock markets have been in a frenzy, when the whole country and the majority of its population have gone through one of their worst periods in memory. In stunning contrast to the plight of the people, the IPO scene betrays a total unconcern for the setbacks to the economy. According to calculations by Bloomberg, the amount of money raised in IPOs this year has reached $8.8 billion, already surpassing the totals of the past three years though it’s only August. At the current pace, 2021 would exceed the all-time record of $11.8 billion. Founders, bankers, lawyers and advisers are racing to cash in on fervent demand for fresh public offerings. The performance reflects a boom in favour of start-ups, of which India has emerged as a major hub. Investments in start-ups imply greater risk and this would mean that those who invest in them have a lot of cash surpluses to spare.
The paradox is chilling. Leading Asia-Pacific current affairs magazine The Diplomat opened its story on the growing rich-poor divide in India, saying the day Mukesh Ambani became the fourth richest man in the world in October last year also witnessed the tragic incident of a labourer in Madhya Pradesh who had lost his job due to the lockdown killed himself and his three daughters by tying the girls to his waist and jumping into a well.
A recent Oxfam report on India’s rich-poor divide made disturbing reading. While noting that India is one of the fastest growing economies in the world, the report pointed out how it is also one of the most unequal countries. Inequality has been rising sharply for the last three decades, with the richest having cornered a huge part of the wealth created through crony capitalism and inheritance. They are getting richer at a much faster pace while the poor are still struggling to earn a minimum wage and access quality education and healthcare services, which continue to suffer. With Modi at the helm, this trend has become all the more pronounced.
According to the report, the top 10 percent of the population holds 77 percent of the total national wealth while 73 percent of the wealth generated in 2017 went to the richest 1 percent and 67 million Indians who comprise the poorest half of the population saw only a 1 percent increase in their wealth. The number of billionaires has increased from only 9 in 2000 to 101 in 2017. Between 2018 and 2022, India is estimated to have produced 70 new millionaires every day. Billionaires' fortunes increased by almost 10 times over a decade and their total wealth is higher than the entire Union budget of India for the fiscal year 2018-19, which was at Rs 24,422 billion.
An Azim Premji University study estimated that 75 million more people sunk into poverty because of the pandemic, which also saw a large number of small and medium-size businesses getting shut, in the process taking a heavy toll of jobs and incomes, resulting in a deep economic recession. The study found that around 230 million Indians have been pushed into poverty in the last one year. The rate of both rural and urban poverty increased by 15 and 20 percentage points, respectively. Around 150 million workers remained out of work by the end of 2020.
A survey of vulnerable households revealed that sample earnings fell by around 40-50 percent in April and May last year. On an average, monthly household income declined by 65 percent. An average Indian household lost about Rs 25,000 in income, equivalent to slightly more than a month’s earnings, in the first six months of the pandemic, as compared to the previous year. Further, the losses were disproportionately borne by the poorest, with the bottom 10 percent of households losing 30 percentage points more of their income than the top 10 percent. Even individuals with secure, salaried jobs—the cream of India’s workforce—saw their income decline by about 12 percent in 2020.
It is against such settings that the capital markets are booming. Sensex and other bellwether indicators are hoping from record to record, pointing to a complete disconnect with the economic situation faced by the majority. But for the miniscule minority, it is a whale of a time. (IPA Service)
MODI’S RURAL OBSESSION CAMOUFLAGES LARGESSE TO THE RICH
BOOMING IPO, STOCK MARKETS SHOW DISCONNECT WITH REALITY
K Raveendran - 2021-08-21 09:47
Prime Minister Narendra Modi often shrugs off the criticism that the rich have become richer and the poor poorer under his government as political grandstanding by opponents. But every new piece of information that is emerging on various aspects of the economy, particularly relating to money and investment, suggests that the devastation caused by the Covid pandemic, mostly due to mismanagement and the faulty policies of the government, has sidestepped the rich, who continue to flourish under the Modi dispensation. It is one thing for Modi to keep harping on his rural initiatives, expressed in all sorts of acronyms combining the fancy PM adjunct, but the real hard fact is that his policies have benefited the rich most and if anything the poor has become worse off.