In India, like elsewhere in the US and Japan, the dominance of very large companies or conglomerates has been growing in recent years. The trend of industry consolidation has proceeded apace with more and more sectors being taken over by fewer and bigger entities. The 20 most profitable firms now generate 70 per cent of the country’s profits, up from 14 per cent 30 years ago, according to Marcellus Investment Managers’ blog “Behold The Leviathan: The Remaking of Indian Capitalism”.  

Two, at most three players, command a dominant share of profits in diverse sectors like telecom, airlines, steel, cement, aluminium, synthetic fibres, polymers, paints, cars, trucks, two-wheelers, tractors, tyres, consumer electronics and electricals, toiletries and biscuits.

The conglomerates have a huge footprint in more than one industry. Reliance Industries Limited straddles petrochemicals, telecom and retail. At the height of the pandemic in 2020, Reliance raised $20 billion (Rs 152,056 crore) by selling a 32.97 per cent stake in its digital services to Facebook, Google and 11 global investors. The Tatas are big in steel, commercial vehicles, salt and IT services. Aditya Birla is dominant in cement, aluminium and chlor-alkali.

Reliance & Adani 

Gautam Adani is one of India’s biggest private airport operators, largest private ports operator and thermal coal power producer. Both Reliance and Adani Group have recently unveiled big-ticket plans to enter the renewable energy space. The latter expects, in fact, to become the world’s largest renewable energy company by 2030.

Scarcely a day passes without news of a big-ticket acquisition or investment by Reliance or Adani biting into every lucrative business venture in India and South Asia. Reliance Industrial Investments and Holdings, a wholly-owned subsidiary, recently inked an agreement to acquire 73 per cent of Mandarin Oriental in New York for its hospitality and retail business interests. It already has stakes in EIH (Oberoi Hotels) and Stoke Park in the UK.  

The group, which has a huge war chest from the stake sale in Reliance Jio and recent $4 billion bond issue, has also taken a 25.8 per cent stake for $200 million in a quick commerce start-up firm Dunzo to bolster its retail business. The group intends to build its customer-facing retail business and telecom services to match its oil to chemicals vertical.

Adani, whose prominence has meteorically risen since Narendra Modi was elected India’s Prime Minister in 2014, has also forayed into South Asia. On September 30, 2021, the group signed an agreement to take a 51 per cent stake to develop the Colombo West International Container Terminal at the Colombo Port which is located amidst the busiest shipping routes in the Indian Ocean. How this deal came about is unclear as there was no competitive bidding or selection process involved. Colombo has repeatedly referred to the Adani Group as a “nominee” of the Indian government although the latter has denied recommending anyone for the project, according to The Hindu. Last year, the group abandoned plans to build a container terminal project in Myanmar due to US sanctions.

Crony capitalism 

Observers consider all of this as evidence of rampant crony capitalism and underscored the danger that it poses to India’s growth story. India has the “dubious distinction” of the largest number of billionaires per trillion dollars of GDP; many of them have amassed wealth from land, real estate and natural resources due to proximity to the government. This eliminates competition, discourages innovation, widens disparities and slows growth.

The dark side of crony capitalism is reflected in the sharp rise in big-ticket corruption after reforms were implemented since 1991, a fact that upsets even the ardent advocates of liberalization. The late Indian economist I.G. Patel admitted that one of his greatest disappointments was that reforms have not “made much impression on corruption”.

While big business historically has had a close relationship with the Indian State, the fact remains that there has been a fair amount of churn among the cronies. As Harish Damodaran has argued in Seminar, out of the 50 biggest conglomerates in 2014-15, only 15 were part of a similar list of 1990-91. The 35 new entrants comprised many who were small, if not non-existent, in the pre-reform era - the likes of Vedanta, Airtel, Adani, Infosys, IndiGo, GMR and Lanco, among others.  

Links with powers that be 

Clearly, this is not capitalism where cronies remained the same and businesses cornered by an oligarchy whose composition hardly changed over time, according to him. Even so, there is no doubt that the conglomerates now in prominence have interests aligned with the political leadership. 

That said, the growing dominance of a handful of very large companies and industrial consolidation has also been facilitated by the networked economy -- highways, cheap flights, broadband, GST – which has allowed large, efficient firms to use superior technology and better access to capital to squash smaller competitors and change the template of conglomerate capitalism akin to the US, as argued by Marcellus’ blog.

(The writer is an economics and business commentator based in New Delhi. His views are personal. He may be contacted at nchandramohan@rediffmail.com)