In today’s Finshots, we tell you how India’s economy could change if we got back all the wealth the UK took from us.

The Story

Billionaires saw their wealth grow three times faster in 2024 compared to 2023. And if you’re wondering where all this wealth is coming from, well, there are two main sources.

The first is what you’d expect ― inherited money, shady dealings or monopolistic power. The second is from the wealth that was brutally extracted from colonies their ancestors once ruled.

You see, these billionaires mostly live in wealthy nations that make up just one-fifth of the world’s population. Yet, these countries hold a massive share of global wealth. So it’s hard to ignore how colonialism might have funnelled riches into their pockets while leaving others struggling to catch up.

And it’s not us saying this. A recent Oxfam report called ‘Takers, Not Makers’ sheds light on how colonialism might have ended on paper, but its effects linger. It points out how inherited wealth, often untaxed, keeps the rich getting richer while leaving others behind.

Take India, for instance. Between 1765 and 1900, colonial rulers siphoned off $65 trillion from the country. For context, that’s over twice the GDP of the US today and a whopping 17 times the UK’s. And shockingly, over half of this wealth or $34 trillion, ended up with the richest 10% globally.

Now, we know what you’re thinking. How did colonial rulers extract so much wealth from us, a fortune that still fuels global billionaires today?

Look, before and during colonial times, India ran a large trade surplus with the rest of the world. During the East India Company’s rule, Indian goods were literally exported for free because the company paid Indian producers with taxes collected from Indians themselves. Later, when the British Crown took over, foreign buyers paid in gold or British currency. But, Indian exporters were still paid using Indian taxes. 

This meant that India’s export income never stayed in the country. Instead of being used to develop industries or infrastructure in India, the money was used to fund Britain’s global expansion and build infrastructure in the US and Europe.

If that money had stayed in India, it could have financed industrialisation, similar to what was happening in Japan at the time. 

So Oxfam now suggests that it’s time the richest, who’ve benefitted most from colonialism, bear the cost of reparations.

So here’s a thought. What if India could regain all this looted wealth?

To begin with, we could completely wipe out all our external debt! External debt is essentially the amount of money a country owes to foreign creditors like foreign governments or international financial institutions such as the International Monetary Fund (IMF) and the World Bank. You see, as of September 2024, India’s external debt sits at around $710 billion. If we got $65 trillion back, we could clean up that debt in the blink of an eye, as it’s just a measly 1% of this dreamy windfall. Not just this, it also means saving over $20 billion in interest payments every single year.

Even after paying off the massive debt, 99% of this money would still be left, which could be redirected to where it truly matters, like building infrastructure.

Picture a high-speed rail network that connects every corner of the country. Expressways that cut travel time in half, modern airports in even the smallest towns, and well-equipped ports that make India a global trade powerhouse. And trust us, India could make this happen with just 3% of that money, creating millions of jobs and laying the foundation for decades of economic growth.

And we’re not pulling this figure out of thin air. A Knight Frank report estimates that India needs a $2.2 trillion investment in infrastructure to hit a $7 trillion economy by 2030. Plus, a World Bank report suggests that India will need $840 billion over the next 15 years or about $55 billion annually, to meet the demands of its rapidly growing urban population.

So, with the kind of money we’d get from the UK, we’d be all set!

Next up is housing for all. Imagine a future where no one has to live in unsafe conditions. Through the Pradhan Mantri Awas Yojana, we could replace slums with safe, modern homes and make affordable housing a reality for everyone.

Besides, we could fix education and healthcare, the two areas where India faces the biggest challenges.

See, currently, India spends about 4% of its GDP on education. But global benchmarks suggest we need to double that to see real progress. By investing in free, world-class schools and universities in every district, we could train students in cutting-edge fields like AI. Throw in scholarships that ensure no talent leaves the country, and we’d be fully utilising our young population or demographic dividend — creating a highly skilled workforce that could even help us transition into a high-income nation!

How cool is that!

And healthcare? Right now, it gets just about 2% of GDP annually. Bump that up to 5% of GDP over the next decade would mean modern hospitals, better access to healthcare in rural areas and a much healthier, more productive workforce. Maybe it could even reduce healthcare expenses for people as many individuals currently face the risk of falling into poverty after a single hospitalisation for a fatal disease.

Then there’s India’s ambitious renewable energy goals. The country has pledged to hit net zero by 2070. But with a windfall like this, we could fast-track the transition, cutting the timeline by a decade or two.

And let’s talk about per capita income. To truly join the league of superpowers like the US and China, we’d need to go from $2,600 today to over $20,000. With the right investments, this dream could inch closer to reality. It might even help us realise NITI Aayog’s (National Institution for Transforming India) vision of a developed, prosperous India through Viksit Bharat by 2047.

But there’s a catch.

When a massive sum of money enters an economy all at once, it can create a situation where too much money chases too few goods. And that’s a recipe for inflation or prices skyrocketing and making life harder for everyone.

So, what’s the solution, you ask?

History offers some lessons. Other countries that have experienced windfalls, like oil-rich nations, show us the importance of prudent fiscal management. If India avoids reckless spending and focuses on sustainable development, inflation can be kept under control.

But let’s think long-term. Norway is a shining example here. Its massive sovereign wealth fund, built on oil revenues, generates billions every year. For the uninitiated, a sovereign wealth fund is essentially a government-owned investment fund that grows by investing in assets like stocks and real estate. And in 2023, Norway’s fund posted a record $210 billion in profits, largely from tech stock investments.

And guess what? India plans to create something similar. So imagine parking just half of that $65 trillion in a sovereign wealth fund. Even with a modest 5% return, it could generate $1.5 trillion every year. This kind of money could fund welfare schemes, build world-class infrastructure or even cushion us during national emergencies.

Sure, inflation is a concern. But with thoughtful planning, phased investments and sound monetary policies, India could strike a balance between growth and stability. This wealth could truly benefit everyone without destabilising the economy.

So, what do you think? Could this dreamy scenario ever become reality? And can India reclaim its looted wealth from the UK?

Well, we’ll leave you with that thought.

Until then…

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