The progress of the Indian economy and political democracy practiced by it since Independence can make Indians proud. However, it raises some serious concerns at the same time. As the recent elections would show, one of the most important issues raised were if India has substituted the old crony socialism of the past with crony capitalism of the present, "where the rich and the influential are alleged to have received land, natural resources and spectrum in return for payoffs to venal politicians". This concern was raised by Raghuram Rajan, the Reserve Bank of India (RBI) governor at the Twentieth Lalit Doshi Memorial Lecture in Mumbai.

Rajan said crony capitalism kills free enterprise and competition, and substituting special interests for public interests is also harmful to democracy. He said many complain that Indian politics is deprived of honest men, but when middle class professionals or other such groups stand for elections with a hope to clean politics, they end up losing their deposits. He argued that the lack of transparency in the system survives because the venal politician "is the crutch that helps the poor and underprivileged navigate a system that gives them so little access".

Rajan spoke of a vicious cycle where the people vote for a politician because he can tweak the system a little in their favour, which otherwise does not let the common man access what is their right.

He explains, "The poor and the under-privileged need the politician to help them get jobs and public services. The crooked politician needs the businessman to provide the funds that allow him to supply patronage to the poor and fight elections. The corrupt businessman needs the crooked politician to get public resources and contracts cheaply. And the politician needs the votes of the poor and the underprivileged. Every constituency is tied to the other in a cycle of dependence, which ensures that the status quo prevails."

Rajan says the inherent contradiction in the system lies in the fact that the people must reduce their dependence on public goods or public jobs for their survival. But to get out of the dependence, they would first need the aid of public education and healthcare to be able to procure a private job.

He argued that direct cash transfers instead of actually providing services like food grains in the public distribution system (PDS) system could work. He says direct cash transfers are not without its own problems, but making them conditional (like partially given in coupons to be spent on specific material) could make it work.

Rajan said financial inclusion is crucial to bring people out of their poverty and rid them of the clutches of the venal politician. He spoke elaborately on the role of the RBI in assuring the financial inclusion.

Read the full text of the speech here.