The first modern book in economics was called the “Wealth of Nations” because its writer, Adam Smith understood (and transmuted the idea) that the key to prosperity and growth was the generation and distribution of wealth – not just the flow of income. Recent interest in economics has started to return to this question especially in the context of today’s rich countries. The academic attention on the metamorphosis and concentration of wealth has so far excluded poor countries. In fact the study of the wealth of poor nations should be a core question in development economics (over income growth) because wealth tends to cumulate all past prosperity or disparity.
I found it notable that despite the detailed historical analysis in Piketty’s book Capital in the 21st Century, there was no mention of Indian wealth (Piketty did study top Indian incomes). To an extent this is understandable because data on India is so limited and unreliable that documenting it would require a book in itself. Till date, the Indian central bank (RBI) does not follow the tradition of publishing regular household and private sector balance sheets at market value, to assess accumulation and asset prices. And yet due to its sheer size and importance, India presents a unique challenge to the notion of prosperity – it is simultaneously home to some of the wealthiest and poorest global citizens. In the past, the question of India’s colonial subservience was related to the drain of wealth, rather than income – the British enriched themselves at the cost of their prized colony. What happened once India became independent?
My new paper “Capital and the Hindu rate of growth: Top Indian wealth holders 1961-1986” tries to answer this question for a particular historical phase in Indian history. Read More »