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Sarosh Bana For The Straits Times

The rich are always with us

Published on Jun 16, 2014 12:00 PM
Overall, 18.78 million families, or 17 per cent of urban India, live either out in the open or in informal housing such as slums. Yet India is also home to 70 billionaires (in US dollar terms), which is even more than the number in developed countries such as Germany, Switzerland, France and Japan. -- TABLA FILE PHOTO

Poverty is a numbing reality in India. It is widely estimated that 37 per cent - or over 460 million - of the country's population of 1.25 billion fall below the poverty line. This makes the country home to a third of the world's poor.

Yet, the extremities are vast and ironical. India also happens to be home to 70 billionaires (in US dollar terms), which is even more than the number in developed countries such as Germany, Switzerland, France and Japan. Hurun's 2014 Global Rich List, released by a China-based research firm in February, notes that the tally was 17 more than that of the year before and would have been far higher if the Indian rupee had not fallen 12 per cent against the US dollar in the previous 12 months. The combined wealth of these super-rich in India is a staggering US$390 billion (S$487.9 billion).

Reliance Industries chairman Mukesh Ambani, the richest Indian, is ranked 41st in the Hurun list of wealthy individuals. He has a personal fortune of US$18.6 billion. He also has the dubious distinction of having the most expensive house in the world, worth US$1 billion. Mr Ambani, his wife and three children live in this 27-storey 48,780 sq ft residence in Mumbai.

The building has six underground levels of parking and three helicopter pads, and is maintained by a staff of 600.

Yet 42 per cent of Mumbai's population of 22 million live in slums. And overall, 18.78 million families, or 17 per cent of urban India, live either out in the open or in such informal housing.

India's 814 million voters participating in the recent general elections have also seen an unprecedented roster of wealthy candidates. Analysing the financial details of 3,305 of the 3,355 candidates in the fray, the Association for Democratic Reforms calculated that the average value of the assets held by each candidate was US$1 million.

The richest among them was Mr Nandan Nilekani, co-founder of IT firm Infosys, with assets worth over US$1.3 billion. It is not surprising, therefore, that total election spending reached US$5.1 billion, making the polls the second most expensive in the world after that of the US.

Indians are also the largest depositors in overseas banks. Indian citizens have an estimated US$500 billion of illegal money stashed in tax havens. The Central Bureau of Investigation says that the country's economy has been blighted immeasurably by this flow of capital to places such as Mauritius, Switzerland, Liechtenstein and the British Virgin Islands.

Curiously, while malnutrition accounts for nearly half of child deaths in India, the economy has improved sufficiently for the country to have displaced Japan as the world's third-largest economy in terms of purchasing power parity (PPP), the World Bank reported recently. PPP is used to compare economies and incomes of people by adjusting for differences in prices in different countries to make a meaningful comparison.

India has yet to establish a widely accepted definition of poverty. After 2004-2005, the country set the poverty line at 16 rupees (26.9 US cents) per day, which in PPP terms had been equivalent to one US dollar per person.

But in 2012, after surging inflation compelled a revision, Mr Montek Singh Ahluwalia, deputy chairman of the country's Planning Commission, announced that anyone able to spend above 23 rupees (38 US cents) a day in rural areas and 29 rupees (48 US cents) in urban areas would not be considered poor.

His evaluation of the cost and standard of living outraged the public, especially when it was discovered that his own foreign trips between May and October 2011 alone had cost a daily average of US$3,360.

The new benchmarks of poverty have nevertheless been retained, enabling the Planning Commission to claim that the number of those living below the poverty line has declined to 21.9 per cent of the population from 29.8 per cent in 2009-2010.

But the suggestion that this amount of money was adequate for people to survive on has been widely disputed.

Some critics assert that if the poverty index were to be raised to a realistic level, then as much as 70 per cent of India's population would be considered to be living below the poverty line.

In a recent report, the McKinsey Global Institute, the business and economics research arm of global consultancy major McKinsey & Company, estimated that on average, just half of the public money spent in India on basic services actually reached the people as real benefits. Coining the term "empowerment line" for people able to meet the basic needs of food, energy, housing, drinking water, sanitation, health care, education and social security, it pointed out that 56 per cent of the country's population lacked the means to meet these needs.

The government has attempted to shift part of the burden of relieving poverty onto Indian industry.

Last September, it legislated a new Companies Act, which mandated that all profitable companies with a turnover of US$167 million and more, or a net worth of US$83 million or more, or net profit of US$833,333 or more, would, from fiscal year 2014-15, have to spend each year at least 2 per cent of the three-year average profit on corporate social responsibility programmes.

The government's inability to provide for the masses has spawned a vast number of non-governmental organisations (NGOs), most of which are rendering critical services that local, state or national governments should have been providing. There are an estimated two million such NGOs across the country, probably the highest tally in the world.

But as a report by global management consultancy firm Bain & Company on the state of Indian philanthropy has documented, wealthy Indians give a lot less to charity than their US or British counterparts do.

Private giving in India accounts for only between 0.3 per cent and 0.4 per cent of the gross domestic product, significantly behind the United States, at 2.2 per cent, and the United Kingdom, at 1.3 per cent.

The writer is the executive editor of Business India in Mumbai.