India's top 5 family groups held 60% of corporate income: study

Five of India's largest family business groups collected more than 60% of corporate income over the past two decades, a study published in the World Bank Economic Review found. The groups – Reliance, Adani, Birla, Om Prakash Jindal and Tata – together commanded that share of gross revenue between 2001 and 2020.

Reliance and Adani alone accounted for at least 20% of total income each throughout the period, the study said. The Om Prakash Jindal and Tata groups saw their shares rise steadily, though both stayed below 10%. Birla was the exception. Its share in total gross revenue declined over the two decades.

The paper, titled "Business Groups, Concentration and Market Power in India," was authored by Simon Commander, visiting professor at IE Business School in Madrid, and researchers from other universities. They used data from the Prowess database maintained by the Centre for Monitoring Indian Economy. Income was defined as gross revenue from operations, excluding financial income.

Market concentration overall has fallen since liberalisation, the study acknowledged. That decline came mainly from the shrinking public sector. Private sector concentration also dropped. At the NIC-3 level – the Statistics Ministry's most granular industry classification – the share of industries with low concentration rose substantially. The largest five firms still controlled more than half the revenues in roughly 74% of those NIC-3 industries, the authors wrote.

Family business groups also diversified across sectors. The top 25 groups together represented over 15% of India's GDP in 2020, measured by the value of goods and services they sold.

Government policy may have reinforced the trend. New Delhi's approach of treating certain business groups as "national champions" between 2000 and 2013 likely contributed to higher concentration, the authors concluded. That policy preference, they said, appears to have had limited success in addressing the consequences for competition.

"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," the authors wrote in the paper.

The authors argued that standard tools like competition policy, taxation or outright prohibitions would not be effective at curbing the power of entrenched family business groups. They floated a specific alternative: setting a maximum market share that any single business group can hold in a sector, with mandatory divestment if that ceiling is breached.

"Competition policy, taxation or prohibitions will not be as effective in addressing entrenched family business group power in Indian market," they wrote. "Setting specific limits to the maximum market share that a business group can hold and a subsequently divesting when a specified level is reached can be explored as a policy option."

The study's findings come as India's economy continues to grow at a fast clip, with corporate profits rising and the stock market near record levels. The dominance of a handful of family groups raises questions about the distribution of economic gains and the effectiveness of antitrust enforcement.

The Competition Commission of India has stepped up scrutiny of mergers and acquisitions in recent years. The study's authors suggested that structural measures, not case-by-case review, may be needed to prevent concentration from deepening further.

Reliance and Adani have expanded aggressively into telecommunications, energy, infrastructure and consumer goods. Tata and Jindal have focused on steel, automobiles and chemicals. Birla has a large presence in cement, metals and financial services. Their combined revenue share, the study noted, has remained sticky even as new entrants have emerged in technology and e-commerce.

Foreign investors and domestic institutional funds have piled into these groups' listed entities. That has given them access to cheap capital for further expansion. The study did not examine the role of capital markets directly, the authors noted that the groups' access to finance may reinforce their market position.

The paper is one of the few to quantify the income share of India's top family business groups over a long time horizon. Earlier reports by Credit Suisse and others had highlighted similar trends, the World Bank study uses a consistent methodology across two decades.

The study's policy recommendation – a hard cap on market share – is likely to draw pushback from industry lobbies. No major economy currently enforces such a rule for private conglomerates. The authors acknowledged the idea is exploratory.

The paper appears in the World Bank Economic Review, a peer-reviewed journal.