Should India break up its big conglomerates? 30.3.23  India should dismantle its large conglomerates to increase competition and
reduce their ability to charge higher prices, former Reserve Bank of India deputy governor Viral Acharya has argued in a new paper for Brookings Institution, an American research group.

According to Mr Acharya, who is now a professor of economics at NYU Stern, "industrial concentration" - which refers to the extent to which a smaller number of firms account for total production in a country - fell sharply in India after 1991 when the country opened up its economy and state-owned monopolies began giving away their market share to private enterprises. But after 2015, it began rising again.

The share of India's "big five" conglomerates - the Reliance Group, Adani Group, Tata Group, Aditya Birla Group and Bharti Airtel - in total assets of non-financial sectors rose from 10% in 1991 to nearly 18% in 2021.

They "grew not just at the expense of the smallest firms, but also of the next largest firms", says Mr Acharya, because the share in total assets of the next five business groups halved from 18% to 9% during this period.

India is a big global player – but there are problems it must tackle   In a February column for Project Syndicate, the economist Nouriel Roubini had also expressed concerns about India's economic model of giving a few "national champions" or "large private oligopolistic conglomerates" control over significant parts of the economy.

"These conglomerates have been able to capture policymaking to benefit themselves," wrote Mr Roubini. The phenomenon was stifling innovation and disallowing entry of start-ups and other domestic entrants in key industries, he said.

India's policy of creating "national champions" is similar to those adopted by China, Indonesia and particularly South Korea in the 1990s, where a group of mostly family-run business conglomerates - called chaebols, of which smartphone giant Samsung is the most prominent example - dominated its economy.