\u2018Business Groups, Concentration and Market Power in India\u2019<\/a>, published in the World Bank Economic Review on August 10, authored by Simon Commander, Saul Estrin, Naveen Joseph Thomas and Varun Lingineni, found that the \u2018big five\u2019 of India \u2013 Reliance, Adani, Birla, Om Prakash Jindal and Tata Groups \u2013 put together, controlled over 60% of business revenue between 2001 and 2020.\u00a0<\/p>\nThe study examined this through two key markers \u2013 market concentration and market share by industry, and consolidation of position by expansion or diversification.<\/p>\n
Of the five family business groups (FBGs), Reliance and Adani Groups have consistently constituted at least 20% share in total income, whereas the shares of Jindal and Tata Groups, though risen steadily, have stayed at less than 10% of income shares.<\/p>\n
For the Birla Group, on the other hand, the share in total gross revenue has reduced steadily during the study period, although it still remained concentrated.\u00a0<\/p>\n
The study noted that the concentration in the market has reduced as competitiveness increased after liberalisation. However, it did not prevent these family businesses from dominating the market.\u00a0<\/p>\n
In fact, the top 25 FBGs\u2019 revenues accounted for more than 15% of the gross domestic product (GDP) in 2020, the study showed.<\/p>\n
Further, there has been limited turnover in their ranks, even in the face of market liberalisation, it stated.\u00a0<\/p>\n
\u201cProminent FBGs \u2013 such as Adani and Reliance \u2013 are, moreover, widely perceived as actively leveraging their close connections to politicians and exploiting opportunities provided by policy regimes and their loopholes,\u201d the study observed.<\/p>\n
\u201cThe paper finds that market concentration has indeed been declining during that period, mainly due to policy-induced shrinkage of the public sector. Concentration has also been falling for the private sector and for the FBGs. Thus, at the NIC-3 level (National Industrial Classification-3, a statistics ministry-managed industry group tier by specific subsectors), the proportion of industries with low concentration has risen considerably over the period,\u201d the authors noted.\u00a0<\/p>\n
The big five firms controlled more than half of the revenues in around 74% of NIC-3 industries, the study found.<\/p>\n
The study also noted that family business groups have diversified \u201crapidly\u201d across different sectors during this period, especially from 2000 to 2010. Much of this diversification has been across, rather than within, sectors, it noted.<\/p>\n
On the concentration of market power, the authors crucially noted, while the FBGs\u2019 mark-ups indicate these declined marginally between 2000 and 2013, it \u201cthen rose sharply, a change strongly correlated with increases in concentration at NIC-3 level\u201d.\u00a0<\/p>\n
\u201cThis may also indicate political economy effects,\u201d the authors concluded.\u00a0<\/p>\n
The study stated that the Indian government\u2019s approach of showing preference for some business groups as \u201cnational champions\u201d in the period between 2000 and 2013 may have led to the higher concentration.<\/p>\n
\u201cTo date, public policy appears to have achieved, at best, limited success in addressing the consequences of this increased concentration for competition, whether in terms of market power in specific sectors or with respect to the level of overall concentration in the economy,\u201d it said.<\/p>\n
The authors noted that there was a need for India to develop new policies in the face of FBG entrenchment.\u00a0<\/p>\n
\u201c…to address the powerful incumbency advantages and the dampening consequences for competition and innovation, policy in developing countries needs to address the incentives for businesses to operate as business groups. In fact, a number of countries have sought to implement such policies, but to date, as in India, experience suggests that although prohibitions and taxation can help on occasion, they are not always effective,\u201d they stated.<\/p>\n
The authors suggested that a more radical approach by setting specific limits to the maximum market share that a business group can hold could be explored. Eventually, existing firms would have to divest to ensure that the thresholds are not exceeded.\u00a0<\/p>\n
This article went live on August sixteenth, two thousand twenty six, at seventeen minutes past two in the afternoon.<\/p>\n
The Wire is now on WhatsApp. Follow our channel <\/a>for sharp analysis and opinions on the latest developments.<\/p>\n","protected":false},"excerpt":{"rendered":"Of the top five family businesses, Reliance and Adani Groups have consistently constituted at least 20% share in…\n","protected":false},"author":2,"featured_media":640631,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[174],"tags":[112797,115307,79,179,18,111161,270942,19,17,270943,121101,72531],"class_list":["post-640630","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-adani-group","tag-aditya-birla-group","tag-business","tag-economy","tag-eire","tag-family-business","tag-family-business-groups","tag-ie","tag-ireland","tag-om-prakash-jindal","tag-reliance","tag-tata-group"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/117106952897833465","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/640630","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=640630"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/640630\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/640631"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=640630"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=640630"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=640630"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}