Even as the country becomes one of the great economic growth stories of the 21st century, significant members of the Indian elite fear it may be following Russia in developing a kind of crony capitalism dominated by powerful insiders. A slew of recent corruption scandals – notably in telecommunications – has nourished anxieties that the combination of fantastic wealth creation and weak governance threatens to undermine India’s long-term success.

Not for nothing has Joseph Stiglitz’s Globalization and its Discontents emerged as a favorite read among India’s supreme court judges and policy-making classes. Attention has focused on the insights of the former World Bank chief economist on how Russia mismanaged the transition from communism to the free market: while a handful of people became very wealthy, conditions for most worsened as national income declined.

Tony Jesudasan, an aide to Anil Ambani, one of India’s most powerful industrialists, says “judicial activists” in India are gripped with the notion that Asia’s third-largest economy is following Russia’s example in creating a generation of oligarchs. Prof Stiglitz’s bestseller of almost a decade ago serves, he observes wryly, as a handbook for judges eager to take on India’s large business families.

Twenty years on from reforms that prised open India’s economy, the system still favors the insider. Cronyism harms India’s growth story and frustrates multinationals from abroad, which consider India a formidable place for those who do not know the “right people” on the inside. Accusations of influence-peddling by powerful entrepreneurs, combined with a colluding state bureaucracy, has led commentators such as Arun Poorie, editor-in-chief of India Today Group, to identify corruption as the “biggest issue” confronting the country.

Fantastic wealth creation amid weak governance is deepening anxieties about long-term economic success. Regulation that can be trampled over, alongside a widening gap between the rich and a largely poor population, invite unflattering global comparisons. Also, says Manmohan Singh, prime minister, the developments have dangerously sapped Indians’ confidence in themselves.

International investor sentiment has picked up on the mood and turned sharply for the worse. Foreign capital flows have fallen. “Nine out of 10 clients are not positive on India in the near future,” says Suresh Mahadevan, head of research at UBS Securities in Mumbai. “Most of the bad news is already in the [market] price.”