Going by the report, in India too, the crony wealth as a percentage of GDP has fallen drastically from 18 per cent of GDP in 2008 to 3 per cent in 2016.

The Economist report based on its crony capitalism index shows that crony capitalists, world over, are facing a downfall. It gives examples from various countries, where cronies are being chased by local governments and investigators and how their wealth has crashed over years.

Going by the report, in India too, the crony wealth as a percentage of GDP has fallen drastically from 18 percent of GDP in 2008 to 3 percent in 2016. Based on the nominal GDP numbers, in absolute terms the crony wealth has fallen to Rs 3.4 lakh crore (on Rs 113.5 lakh crore nominal GDP in 2016) from Rs 9 lakh crore (on Rs 49.9 lakh crore nominal GDP in 2008). It’s certainly good news and, if true, the world is changing as a better place to live.

The report acknowledges the factors that have caused this. “A slump in commodity prices has obliterated the balance sheets of its Wild West mining tycoons. The government has got tough on graft, and the central bank has prodded state-owned lenders to stop giving sweetheart deals to moguls.” In the Indian context, of these factors listed by the Economist, the only convincing ones are the fall in commodity prices and slowdown in world economies.

The dictionary meaning of the word crony is a ‘close friend or companion’, normally used in the context where this companion (a politician in power or a businessman) is willing to give or accept a dishonest help. So, usually, when we say he is a crony capitalist, the person has received some favors from his political connections to grow his wealth, which in the normal course of law and regulations, he wouldn’t have received. In other words, they are beneficiaries of pure favoritism.

In the context of the Economist report, there are two major questions here:

First, how does one know if an industrialist is crony capitalist or not? This is what the Economist has said how it has arrived at the crony list. “Our index builds on work by Ruchir Sharma of Morgan Stanley Investment Management and Aditi Gandhi and Michael Walton of Delhi’s Centre for Policy Research, among others. It uses data on billionaires’ fortunes from rankings by Forbes. We label each billionaire as a crony or not, based on the industry in which he is most active.”

There is a problem with labeling someone as “crony” (someone in an unholy relation) just because they are operating in a sector where there is a good chance of government favoring the party or offering opportunity for ‘rent-seeking income’, which, as the Economist says, happens ‘when the owners of an input of production—land, labour, machines, capital—extract more profit than they would get in a competitive market. Cartels, monopolies and lobbying are common ways to extract rents.’

Unless the charges of unholy nexus or favoritism are proved without doubt, it isn’t fair to tag someone as a crony or crook. In that sense, the Economist list is actually a list of ‘probable cronies’ or ‘potential cronies’ than ‘cronies’ as we know them.

In the Indian context, even if one assumes that those listed by Economist are fine cronies (who have benefited from favouritism either in the form of getting licences they shouldn’t have in proper channels or opportunity for ‘rent-seeking income’), the crash in their wealth has hardly anything to do with the other two factors used in the context—the government’s fight against graft or the banking sector clean up given that the period mentioned is 2008-2016.

The efforts to cleaning up bank balance sheets and preventing evergreening has happened only in the last one year or so when the RBI withdrew the regulatory forbearance on rejigged loans and later set a deadline for banks to clean up their balance sheets. Secondly, the government action against cronies was virtually absent when UPA was in power and whatever efforts began happened after the Modi-government came to power in May 2014 -- not long enough time for crony wealth to erode to such extent.

Hence, we have no reasons to believe that the crony hunt that has reflected in their wealth erosion has anything to do with Modi-government’s anti-graft measures or banking sector clean-up so far.

The only major case of Indian crony-hunting in the Modi-era, as the Economist highlighted, is that of ‘ponytailed Indian tycoon’, Vijay Mallya, who is now fighting his case on the Rs 9,000 crore loan default to 17-banks from London.

This is not to deny the fact that Modi-government has acted on cronies compared with the UPA-regime by more prudent ways of allocating natural resources and daring to take action against corporate tycoons. But, there is no evidence to believe that’s the primary reason which caused the drop in ‘crony’ wealth.

As former RBI deputy governor, K C Chakravarty pointed out in an interview to New York Times, Mallya is only the symptom of the underlying problem and the not the problem. The real, bigger crooks are out in the open. It’s too early to even imagine that the crony-political nexus is broken. The larger issues lie in transparency in political funding. Till the time politicians thrive on corporate money, there is no end to cronyism.

One shouldn’t be surprised if another report surges with a finding that crony wealth (cronies as defined by Economist) has surged again when commodity prices and global equity, currency markets rebound and property prices spike. In the phase of prolonged economic slowdown, not just cronies, even non-cronies have lost wealth. That’s the real reason for their drop in the wealth rather than political, regulatory actions.