‘Wealth creators are seen as necessary evil’: Former CEA KV Subramanian on India’s socialist view on wealth generation in India

KV Subramanian, who served as the 17th Chief Economic Advisor to the Indian government from 2018 to 2021, said the third pillar of an economy is ethical wealth creation, which is often misunderstood in India.

In a podcast with ANI’s Smita Prakash, Professor Subramanian delved into the crucial role of wealth creators in driving India’s economic progress and explained why they are the backbone of a thriving economy.

Given our socialist past, we tend to view wealth and wealth creators as necessary evils, not evils that do the country a great service, he said.

Using specific anecdotes about a domestic helper and a wealthy man, he explained the value of wealth creators.

“I come from a lower-middle-class family, you know. We used to have a domestic helper. Now this lady worked not only in our family, but in nine other families, in other words, lower middle class families like us. This didn’t create much prosperity, as we provided a tenth of the domestic jobs. In contrast, the richest man in our city had about 100 people working for him between his business and his home. These were the people who earned much more than the domestic worker because he created wealth through his business etc. At the time I didn’t understand it, but now as an economist I understand that his wealth creation creates so many jobs for 100 people. In terms of quantity of jobs, a lower middle class family providing only a tenth of the job while the wealth creator provides 100 jobs means a thousand times more wealth creation in quantity and not just quality,” he explained.

Looking at wages, which actually paid people at least five times as much as a domestic worker, he added that valuing wealth creators in an economy is a correlation.

Professor Subramanian explained that, contrary to popular belief, wealth creators put their money into businesses, which in turn create jobs and wealth for others in a chain reaction.

Citing the example of Infosys, he said the IT company was founded in the late 1980s by essentially six people like Narayan Murthy, Nandan Nilekani and others. Today it employs millions of people. So it’s a company that has actually created so much wealth.

Subramanian also mentioned examples of new-age startups like Swiggy, Zomato, Flipkart etc., which are providing people with jobs.

He believes that the popular view of wealth creators is shaped by political rhetoric, which often demeans wealth creators.

He called on the common people to understand the nuance that wealth creators actually provide a very important service in job creation and not fall for such rhetoric.

Elaborating further on the culture of wealth creation in India, Subramanian also said that we write ‘shub labh’ next to the altar where we worship, which means ‘do good and actually make a profit from it’. “That is our culture. If you go back to the Riga Veda, which is actually known to be one of the oldest documents, there is a Shri Stukam which is actually a hymn to the goddess of wealth Lakshmi, who is our culture,” he added.

Subramanian also quoted British economist Angus Maddison, who said that from the first century to 1700, India was the world’s largest economic power, with a share of global GDP ranging from 24 to 32 percent. Maddison’s research into India’s economic history over a 2,000-year period also found that India’s GDP fell sharply during the British period.

Subramanian’s tenure as chief economic adviser was marked by his contributions in shaping India’s economic policies during crucial years, including the Covid-19 pandemic. He is now India’s Executive Director at the International Monetary Fund (IMF), where he continues to represent India on global economic affairs.