Model Answer
0 min readIntroduction
India’s economic liberalization, initiated in 1991, aimed to foster efficiency and inclusive growth. However, the benefits of this growth haven’t been equitably distributed, and concerns regarding ‘elitist bias’ and ‘crony capitalism’ have increasingly come to the fore. These issues, characterized by preferential treatment for a select few and undue influence of vested interests, have arguably eclipsed the fundamental goals of maximizing economic efficiency and achieving distributive justice. This has resulted in a skewed development model where gains are concentrated amongst a small segment of the population, hindering broader socio-economic progress.
Understanding ‘Elitist Bias’
‘Elitist bias’ refers to a systemic tendency in policymaking to favor the interests of the elite – typically the wealthy, politically connected, and highly educated – over the needs of the broader population. This manifests in several ways:
- Policy Formulation: Policies are often designed with the needs of large corporations and affluent individuals in mind, neglecting the concerns of small businesses, farmers, and marginalized communities. For example, tax policies often provide more benefits to high-income earners than to lower-income groups.
- Access to Resources: Elite groups have disproportionate access to crucial resources like credit, land, and education, perpetuating existing inequalities. The higher education system, despite reservations, still favors those with better schooling and financial resources.
- Regulatory Capture: Regulatory bodies are sometimes influenced by the industries they are supposed to regulate, leading to lax enforcement and favorable rulings for powerful entities.
Understanding ‘Crony Capitalism’
‘Crony capitalism’ is an economic system in which success in business depends on close relationships between business people and government officials. It can be distinguished from free market capitalism, where success depends on market forces. Key features include:
- Rent-Seeking: Businesses focus on obtaining economic gains through manipulation of the political environment rather than through productive activities.
- Favoritism and Corruption: Government contracts, licenses, and subsidies are awarded based on personal connections rather than merit. The 2G spectrum allocation scam (2010) is a prime example.
- Lack of Transparency: Decision-making processes are opaque, making it difficult to hold those in power accountable.
Impact on Efficiency
Both elitist bias and crony capitalism significantly undermine economic efficiency:
- Misallocation of Resources: Resources are directed towards projects and businesses favored by those in power, rather than those with the highest potential for economic return. This leads to lower overall productivity and slower economic growth.
- Reduced Competition: Crony capitalism stifles competition by creating barriers to entry for new businesses and protecting established players. This reduces innovation and consumer choice.
- Increased Transaction Costs: The need to navigate complex networks of influence and corruption increases the cost of doing business, discouraging investment and entrepreneurship.
The stalled infrastructure projects in India, often attributed to land acquisition issues and regulatory hurdles, exemplify the impact on efficiency. These delays are frequently linked to vested interests and lack of transparent decision-making.
Impact on Distributive Justice
The consequences for distributive justice are equally severe:
- Widening Inequality: The concentration of wealth and power in the hands of a few exacerbates income inequality and social disparities. According to Oxfam’s ‘India Inequality Report 2023’, the top 10% of Indians own 77% of the country’s wealth.
- Limited Social Mobility: Elitist bias and crony capitalism create barriers to social mobility, making it difficult for individuals from disadvantaged backgrounds to improve their economic prospects.
- Erosion of Public Trust: The perception that the system is rigged against the common person erodes public trust in government and institutions.
The agrarian crisis in India, characterized by farmer distress and suicides, is partly attributable to policies that favor large agribusinesses and neglect the needs of small and marginal farmers.
Interlinkages and Synergies
Elitist bias and crony capitalism are often mutually reinforcing. Elite groups use their political connections to secure favorable policies and contracts, further consolidating their economic power. This creates a vicious cycle of inequality and corruption. The recent controversies surrounding the Adani Group, involving allegations of regulatory lapses and preferential treatment, highlight this interconnectedness.
Conclusion
The dominance of ‘elitist bias’ and ‘crony capitalism’ in India poses a significant threat to the nation’s economic and social progress. While economic liberalization has unleashed growth potential, its benefits have been unevenly distributed. Addressing these issues requires comprehensive reforms, including strengthening regulatory institutions, promoting transparency and accountability in governance, and enacting policies that prioritize inclusive growth and distributive justice. A shift towards a more equitable and meritocratic system is essential to unlock India’s full potential and ensure a more prosperous future for all its citizens.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.