Is there a threat of oligarchy in India? That was the blunt question posed by Raghuram Rajan, professor of finance at the University of Chicago, former chief economist of the International Monetary Fund and head of the committee on financial sector reforms in India. He was speaking at a function organized by the Bombay Chamber of Commerce and Industry on 10 September.

Illustration: Jayachandran / Mint

We have asked this question earlier in these columns, though in terms of the persistence of crony capitalism and business oligopolies. So, it is heartening to see Rajan train his guns on the same issue. “With the right policies and some luck, we will become a middle-income constitutional democracy in my lifetime. But inaction, coupled with bad luck, could make us an unequal oligarchy or worse — perhaps far sooner than we think,” he said.

Rajan pointed out that Russia has the most billionaires per trillion dollars of national output. India comes second. The reason why Russia has so many billionaires is well known. They are largely the oligarchs who stole national wealth during the corruptions and hasty privatizations of the Boris Yeltstin era. Vladimir Putin is now at war with these oligarchs as he attempts to build a repressive system of state capitalism in Russia.

India has its genuine billionaire entrepreneurs who have grown rich by doing well in competitive industries such as software. But the predominant source of plutocratic wealth in India is from three factors — land, natural resources and government licences. With a few honourable exceptions, most of India’s billionaires have benefited from sweet deals in real estate, mining, telecom, oil and such like. “Too many people have gotten too rich based on their proximity to the government. If Russia is an oligarchy, how long can we resist calling India one?” asked Rajan.

This is a cause for worry. This newspaper is a strong votary of capitalism based on free markets and liberal institutions: an open economy and an open society. But we share Rajan’s concerns about the potential decline into iniquitous oligarchy.

India has still not gone down the path of Putin’s Russia, but there are reasons to worry each time telecom licence norms are tweaked or farmland is handed over to developers and business houses for a song. The task will then be saving capitalism from the capitalists, as a book by Rajan is titled.

Are business lobbies too close to the government? Write to us at views@livemint.com