Prime Minister Narendra Modi says this is India’s decade. That claim rests heavily on a handful of dominant conglomerates.
Increasingly aligned with Modi’s priorities, the roughly half-dozen mega-firms—which include Reliance Industries and Adani Group, helmed by two of Asia’s richest tycoons—have the ability to raise vast sums of capital, and the experience and political connections to navigate India’s byzantine bureaucracy. Capitalizing on government subsidies and privatization plans, they are executing projects with a scale and speed that have eluded India in the past.
Among their ventures: A new airport for Mumbai, designed by the firm founded by the late Iraqi-British architect Zaha Hadid to look like a lotus flower, which is scheduled to start opening next year after the Adani Group took it over. When completed, it’s expected to connect to high-speed rail and handle 90 million passengers annually—only slightly fewer than Atlanta’s main airport, the world’s busiest, last year.
After spending more than $45 billion to build out telecommunications networks, Reliance Industries—a petrochemicals, textiles and retail juggernaut—is constructing factories to make solar panels and batteries for energy storage to position India as a credible alternative to China. It has pledged $75 billion in green-energy spending over the next 15 years.
The 155-year-old Tata Group, which took control of the formerly state-owned Air India last year, recently placed one of the largest orders in aviation history for 470 new aircraft. The salt-to-steel-to-software behemoth, which owns British automaker Jaguar Land Rover, is forging ahead with producing electric vehicles, military transport aircraft, smartphones and telecom hardware, with plans to invest $90 billion in India over five years.
Half a dozen conglomerates now control or have major stakes in 25% of India’s port capacity, 45% of cement production, a third of steel making, nearly 60% of all telecom subscriptions, and more than 45% of coal imports. An analysis by the Center for Monitoring Indian Economy, a research firm, shows that a quarter of all new investment proposals by private companies since 2014 have come from the companies.
“This is the period where it’s not the mad rush of entrepreneurs going out to build new capacities, to become great entrepreneurs—this is the era of great concentration,” said Mahesh Vyas, CMIE’s managing director.
Is this good for India, especially as it seeks to compete with China? The evidence is mixed. The mammoth firms can lead large breakthrough projects, but rising industrial concentration can also stifle competition and leave India’s plans vulnerable without broader private investment.
“It’s no longer that they’re taking the place of large public-sector firms, they’re now actually expanding at the expense of other private-sector firms,” said Viral Acharya, a former deputy governor of India’s central bank.
Recent research by Acharya, in a Brookings Institution paper, shows the largest conglomerates have since 2015 rapidly grown their market share, giving them greater power over prices for goods and services they sell. Prices have been rising faster than costs in some industries they dominate, such as cement, his research shows.
“People don’t see a point in entering any space where these big corporations are already,” said Rohit Chandra, an assistant professor at the Indian Institute of Technology—Delhi’s School of Public Policy. “You don’t want just a small group of companies winning everything over and over again.”
Together, the firms’ market capitalizations increased an average of 386% in the decade ending in December, more than double the broader market’s growth. Mukesh Ambani, who runs Reliance, is Asia’s wealthiest man. Beyoncé performed at his daughter’s wedding celebrations in 2018.
Gautam Adani, chairman of the Adani Group, became one of Asia’s wealthiest people, though his net worth has plunged this year.
The Adani Group’s tumultuous year so far exemplifies the danger of relying on a small group of conglomerates. A U.S. short seller in January targeted the energy and infrastructure business with allegations of stock manipulation and accounting fraud, leading Adani companies to lose tens of billions of dollars in market value.
The turmoil cast a cloud over the enterprise’s future expansion as it pays down debt to reassure investors. France’s TotalEnergies paused plans to partner with Adani to produce environmentally-friendly green hydrogen, saying in February the Adani Group “has other things to worry about.”
Adani Group has denied allegations that it committed fraud or stock manipulation. The company says it’s still expanding, including plans to redevelop Dharavi, a Mumbai slum featured in the 2008 film “Slumdog Millionaire.”
Academics and economists refer to the firms as “national champions,” a term that’s also been used to describe Chinese state-owned companies and South Korea’s private-sector chaebols. With state backing and coordination, the chaebols helped South Korea industrialize and turned it into an export powerhouse.
India’s model is shaping up to be a variant of the national-champions strategy, said Nouriel Roubini, an economist and emeritus professor at New York University. One difference with South Korea, he said, is that chaebols were nurtured by the state to be internationally competitive, while Indian companies are largely domestic giants.
The Modi government says it isn’t emulating the chaebol model. “I don’t know if Korea gave special dispensation to the chaebols, but in India, everybody competes on an equal footing,” Indian Commerce Minister Piyush Goyal said in an interview.
He said the conglomerates’ advantage comes from the fact that they have a legacy in India, people skills and managerial talent because of their size. “But other than that, all our projects are through transparent bidding mechanisms, and everybody has to compete to be able to get that business,” he said.
Modi’s supporters say his administration is seeking to partner with the private sector at large, not specific companies. Government policies, they say, have attracted multinationals such as Apple, which is diversifying its supply chains outside China, while also spawning an ecosystem for startups. On a visit to the U.S. this week, Modi is poised to strengthen defense and economic ties between the U.S. and India.
Harish Damodaran, an editor at the independent Indian Express newspaper and author of books on business, uses the term “conglomerate capitalism” to describe the country’s corporate landscape. While the government doesn’t typically direct the companies to make particular investments, he says the centralization of political power under Modi has led to a shift in their favor.
The firms find it easier to deal with a single power center in New Delhi rather than the patchwork of regional political heavyweights that flourished before Modi’s rise, and are aligning their strategies with his goals, he said.
Adani, who has a longstanding relationship with Modi, emerged as a key infrastructure builder over the past decade. His industrial group, India’s largest private port operator, controls a string of seaports and terminals. It is building highways, power-transmission lines and networks to supply natural gas, and modernizing airports that were previously state-run.
An Adani spokesman said the group has created a successful template for infrastructure development that draws on 20,000 vendor companies. A large country like India isn’t dependent on any one conglomerate or group of companies, the spokesman said.
The Tata Group didn’t respond to requests for comment. A Reliance spokesman said its expertise in executing large projects, including the world’s largest oil refinery in Modi’s home state of Gujarat, has benefited India. Reliance executives say it doesn’t receive special treatment from New Delhi, but that Modi’s goals and the goals of Ambani, Reliance’s chairman, overlap.
“Reliance has always believed in working for the country, and that what’s good for India is good for Reliance,” a spokesman said.
Reliance’s telecom venture shows what deep-pocketed conglomerates can do—and the potential pitfalls.
In 2010, before Modi became prime minister, Ambani set out to build India’s first 4G, or fourth generation, mobile network, a radical departure from Reliance’s main businesses at the time. Incumbent telecom providers such as Bharti Airtel and Vodafone Group were mostly focused on 3G. Average data prices in India at the time were among the world’s highest.
Launching in 2016, Reliance’s service, called Jio, ran advertisements on newspaper front pages with its blue logo, and below it a photo of Modi, who was elected two years earlier. “Dedicated to India and 1.2 billion Indians,” the ads said. After critics complained about what they called the inappropriate use of Modi’s image, the prime minister’s office said it hadn’t granted Jio permission, and Jio apologized.
Jio initially offered free voice calls and text messages. Unlimited internet data was free for the first six months and after that cost consumers a quarter of the industry average.
The result was a colossal data binge, with hundreds of millions of people getting online for the first time. It also caused a price war with rivals that put many out of business and collapsed competition.
Jio’s subscriptions grew rapidly, and now stand at 430 million, making it the top player. It has attracted billions of dollars of investment from Facebook parent Meta Platforms, Alphabet’s Google, and other investors.
As price wars dragged on, Jio’s rivals—who also faced other regulatory and judicial setbacks—warned that unsustainably low prices were pushing the heavily-indebted industry toward a crisis. India’s government had to step in with a relief package in 2021 that temporarily froze payments the companies must make to New Delhi for using airwaves, among other steps.
Reliance is expanding further. Last year it spent about $11 billion, more than any other carrier, on 5G spectrum. It’s also making a push into retail with an e-commerce platform, JioMart, which competes against Amazon.com and Walmart’s Flipkart.
JioMart caused a backlash among small Indian businesses that have long controlled distribution of goods such as soap and packaged snacks from manufacturers to neighborhood stores.
JioMart began selling consumer goods to mom-and-pop stores at prices below what it cost these middlemen, said Dhairyashil Patil, president of the distributors’ federation. The middlemen, numbering around half a million, rapidly lost business, Patil said.
“The modus operandi of JioMart is creating a monopoly,” he said. “The way to create a monopoly in a market is to give heavy discounts…kick out the competition from the market and then rule.”
Patil says protests and negotiations with manufacturers have stabilized prices, but distributors are monitoring JioMart’s practices. A Reliance spokesman said the company is focused on benefiting consumers.
Other industries have seen the number of companies capable of executing big-ticket projects shrink over the past decade. Many took on too much debt and went bankrupt, or were bought by the heavyweights.
Adani Group earned a reputation as an aggressive bidder for government contracts and concessions. After authorities in 2018 moved to privatize the operation of six Indian airports, the company, with no experience in managing airports, bid for the right to operate all of them.
Its bids were the highest. It went on to also take the reins of Mumbai’s airport, making Adani one of India’s largest private operators of airports, a business it entered in 2019.
“Our strategy is simple,” the airport business’s chief executive, Arun Bansal, said recently. “To create scale.”