64 US-INDIA GLOBAL REVIEW JANUARY-MARCH 2018 businesses kept income off the books. Many listed companies diverted profits into the hands of controlling families by dubious means, cheating minority share- holders. Improving shareholder value meant higher stock market prices, which would have been welcomed in other countries but constituted a recipe for personal bankruptcy in India. High share prices meant high wealth tax lia- bilities that required promoters to sell shares to pay the tax, with the prospect of losing control. After 1991 direct tax rates grad- ually came down substantially (to 30 percent plus surcharges for individuals and corporations). The wealth tax on shares was abol- ished, making it possible to raise shareholder value without being penalized for it. Indeed, by keep- ing all profits in a company instead of milking them, a compa- ny could raise share prices and attract foreign investors at a hand- some premium, making honesty an ingredient for success. Foreign investors soon started paying much higher prices for companies with good governance than those with dodgy tactics. So corporate honesty began to be rewarded for the first time, and that (rather than any moral imper- ative) made Indian business cleaner. It attracted household investment and enabled ordinary citizens to participate in the stock market boom that raised the Sensex (India’s equivalent to the Dow Jones Index in the United States) from just 1,000 in 1991 to 28,000 in 2015. The corporate tax was cut from a maximum of 58 percent to 30 percent, yet corpo- rate tax collections increased from 1 percent of GDP to almost 6 per- cent at one point. That was a major reason for the revenue boom that facilitated increased spending on education, health, and infrastructure. Personal income tax rates also fell from 50 percent to 30 percent, but once again collections rose, from 1 percent of GDP to almost 2 percent. For the first time, real estate transactions in some cities were conducted entirely by check: earlier, a big chunk of the sale price was paid in black cash to escape high capital gains taxes and the stamp duty. The Bollywood film industry, once run entirely on black money financed by the underworld, is today reput- ed to make payments to top stars almost entirely by check.26 In many developing countries, a handful of crony capitalists (like Pakistan’s notorious 22 families) have dominated industries, thanks to their political contacts. India was no exception until 1991, because the license-permit raj made all clearances a favor to those with clout. But since then, economic liberalization has facili- tated the rise to the top of a vast array of new entrepreneurs. The best known are in software (such as Infosys, Wipro, and HCL), but many have also emerged in phar- maceuticals, as discussed earlier; in infrastructure (Adani, L&T); telecommunications (Bharti Airtel); steel (Jindal, Bhushan); and finance (ICICI Bank, HDFC Bank, Axis Bank, Kotak Bank, Yes Bank). Most amazing of all has been the rise of Internet-based compa- nies like Flipkart, Snapdeal, MakeMyTrip, Paytm, Ola Cabs, Zomato, Jabong, Naukri.com, and others, each valued at billions of dollars by international investors. Their market value vastly exceeds that of most traditional big busi- ness houses. Some of the new businesspeo- ple (notably in real estate and infrastructure) are called crony capitalists, and certainly they have strong political contacts. Yet they don’t get safe monopolies in return (as in Mexico), and many of them have suffered disastrous falls in recent years (such as DLF, Unitech, Lanco, and IVRCL). Kickbacks in India are more accurately called extortion by politicians than classical cronyism, because the returns to kickbacks are uncertain and sometimes dis- astrously negative. Economic lib- eralization and competition have led to the crash and sometimes bankruptcies of famous old com- panies (Hindustan Motors, Premier Automobiles, JK Synthetics, DCM), indicating stiff competition and survival only of the fittest. Of the 30 companies constituting the Sensex in 1991, only 9 were still there two decades later. This business churn indicates healthy competi- tion across industry as a whole. Former prime minister Manmohan Singh said of the new entrepre- neurs: “These are not the children of the wealthy. They are the chil- dren of liberalization.”27 Economic liberalization has benefited Dalits, the lowest of the Hindu castes, once condemned to the dirtiest work, such as cleaning latrines, cremating the dead, and handling dead animals and their hides. A seminal survey in two districts of Uttar Pradesh revealed striking improvements in the living standards of Dalits in the past two decades. TV ownership was up from zero to 45 percent, cell phone ownership was up from zero to 36 percent, two-wheeler ownership (of motorcycles, scoot- ers, and mopeds) was up from zero to 12.3 percent, and children eating yesterday’s leftovers was down from 95.9 percent to 16.2 percent.