The Crossbill Team
India’s corporate landscape may have become more competitive since economic liberalisation, but a small group of family-controlled conglomerates has continued to command a substantial share of business activity, according to a study published in the World Bank Economic Review.
The study, titled ‘Business Groups, Concentration and Market Power in India’, found that the five largest family business groups — Reliance, Adani, Birla, Om Prakash Jindal and Tata — together accounted for more than 60% of corporate business revenue between 2001 and 2020.
Authored by Simon Commander, Saul Estrin, Naveen Joseph Thomas and Varun Lingineni, the research examined the evolution of market concentration and industry-level market shares, alongside the extent to which major family business groups strengthened their positions through expansion and diversification.
Reliance and Adani maintained a combined share of at least 20% of total income during the period studied. The Jindal and Tata groups increased their respective shares over time but remained below 10% each. Birla’s share of total gross revenue, meanwhile, declined steadily, although the group continued to have a concentrated presence.
The researchers found that overall market concentration declined as competition increased following liberalisation. However, the trend did not significantly weaken the dominance of large family business groups. The top 25 family business groups alone accounted for revenues equivalent to more than 15% of India’s GDP in 2020.
The study also found little change in the composition of the leading business groups despite the opening up of the economy. The researchers pointed to limited turnover among the biggest groups, suggesting that established conglomerates continued to retain significant advantages.
“Prominent FBGs – such as Adani and Reliance – are, moreover, widely perceived as actively leveraging their close connections to politicians and exploiting opportunities provided by policy regimes and their loopholes,” the study observed.
At the industry level, the researchers found that the dominance of the largest groups remained significant. The five biggest family business groups controlled more than half of revenues in nearly 74% of industries classified at the NIC-3 level.
At the same time, concentration across the broader economy declined. “The 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,” the authors noted.
Diversification was another defining feature of the major family business groups. The study found that they expanded “rapidly” into multiple sectors, particularly between 2000 and 2010. Much of this expansion took place across different industries rather than through deeper consolidation within their existing sectors.
The researchers also examined mark-ups as an indicator of market power. While mark-ups among family business groups declined marginally between 2000 and 2013, they subsequently increased sharply. The authors found that this rise was strongly associated with increasing concentration at the NIC-3 level.
“This may also indicate political economy effects,” the authors concluded.
The study linked part of the increased concentration to government policies between 2000 and 2013 that favoured certain business groups as “national champions”. It argued that the resulting concentration had implications for competition and innovation.
“To 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,” it said.
The researchers argued that India may need to rethink its policy framework as large family business groups become increasingly entrenched. They said policies should address the advantages enjoyed by established groups and their potential impact on competition and innovation.
“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,” they stated.
One option proposed by the authors is a more stringent approach under which specific ceilings could be imposed on the maximum market share a single business group is permitted to control. Such limits could eventually require existing groups to divest assets where their holdings exceed the prescribed thresholds.
The study’s findings suggest that while liberalisation has reduced concentration in several parts of the Indian economy, the enduring strength and diversification of its largest family business groups remain a significant challenge for competition policy.
The study, titled ‘Business Groups, Concentration and Market Power in India’, found that the five largest family business groups — Reliance, Adani, Birla, Om Prakash Jindal and Tata — together accounted for more than 60% of corporate business revenue between 2001 and 2020.
Authored by Simon Commander, Saul Estrin, Naveen Joseph Thomas and Varun Lingineni, the research examined the evolution of market concentration and industry-level market shares, alongside the extent to which major family business groups strengthened their positions through expansion and diversification.
Reliance and Adani maintained a combined share of at least 20% of total income during the period studied. The Jindal and Tata groups increased their respective shares over time but remained below 10% each. Birla’s share of total gross revenue, meanwhile, declined steadily, although the group continued to have a concentrated presence.
The researchers found that overall market concentration declined as competition increased following liberalisation. However, the trend did not significantly weaken the dominance of large family business groups. The top 25 family business groups alone accounted for revenues equivalent to more than 15% of India’s GDP in 2020.
The study also found little change in the composition of the leading business groups despite the opening up of the economy. The researchers pointed to limited turnover among the biggest groups, suggesting that established conglomerates continued to retain significant advantages.
“Prominent FBGs – such as Adani and Reliance – are, moreover, widely perceived as actively leveraging their close connections to politicians and exploiting opportunities provided by policy regimes and their loopholes,” the study observed.
At the industry level, the researchers found that the dominance of the largest groups remained significant. The five biggest family business groups controlled more than half of revenues in nearly 74% of industries classified at the NIC-3 level.
At the same time, concentration across the broader economy declined. “The 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,” the authors noted.
Diversification was another defining feature of the major family business groups. The study found that they expanded “rapidly” into multiple sectors, particularly between 2000 and 2010. Much of this expansion took place across different industries rather than through deeper consolidation within their existing sectors.
The researchers also examined mark-ups as an indicator of market power. While mark-ups among family business groups declined marginally between 2000 and 2013, they subsequently increased sharply. The authors found that this rise was strongly associated with increasing concentration at the NIC-3 level.
“This may also indicate political economy effects,” the authors concluded.
The study linked part of the increased concentration to government policies between 2000 and 2013 that favoured certain business groups as “national champions”. It argued that the resulting concentration had implications for competition and innovation.
“To 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,” it said.
The researchers argued that India may need to rethink its policy framework as large family business groups become increasingly entrenched. They said policies should address the advantages enjoyed by established groups and their potential impact on competition and innovation.
“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,” they stated.
One option proposed by the authors is a more stringent approach under which specific ceilings could be imposed on the maximum market share a single business group is permitted to control. Such limits could eventually require existing groups to divest assets where their holdings exceed the prescribed thresholds.
The study’s findings suggest that while liberalisation has reduced concentration in several parts of the Indian economy, the enduring strength and diversification of its largest family business groups remain a significant challenge for competition policy.
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