- Monday, March 03, 2025
By: Shubham Ghosh
Viral Acharya, former deputy governor of India’s central bank — the Reserve Bank of India (RBI) — feels India should break up its giant conglomerates in order to raise competition and curb their ability charge higher costs.
The 49-year-old economist, who served in the RBI in 2017-19, said this in a new paper for the US-based research group Brookings Institution.
Acharya, who teaches economics at New York University Stern School, said “industrial concentration” (the extent to which a small number of firms account for the country’s total production) plummeted in India after 1991 when it saw liberalisation and state-owned monopolies started giving away their market share to private bodies, the BBC reported.
After 2015, it started rising again, according to him. The share of the South Asian nation’s “big five” conglomerates — Reliance Group, Adani Group, Tata Group, Aditya Birla Group and Bharti Airtel — in total assets of non-financial sectors went up almost twice in three decades — from 10 per cent in 1991 to almost 18 per cent in 2021.
Acharya said they grew not only at the expense of the smallest firms but also the next largest ones. He explained that the share in total assets of the next five business groups reduced by 50 per cent from 18 per cent to nine per cent in the same period, the BBC report added.
While Acharya said there could be many factors driving this, including the ability to acquire big distressed companies, growing appetite for mergers and acquisitions and India’s conscious industrial policy of creating “national champions via preferential allocation of projects and in some cases regulatory agencies turning a blind eye to predatory pricing”, he cautioned that the trend also gives rise to concerns such as the risk of “crony capitalism”, meaning political connections and inefficient allocations of projects and taking on excess debt to fund self-expansion and denying competitors entry into the market.
