India’s Conglomerates Are Getting Too Big For Comfort

Context:

This article is expressing concerns with the financial divide among the business groups. 

• India’s big businesses seem to be thriving, but small- and medium-scale firms, and informal enterprises are not doing well and are yet to recover their COVID-19-inflicted losses.

Need for Big Businesses and Industries:

• Development: By the investment, they made to the development of businesses helps in the development of the nation like job creation, unemployment and poverty reduction, etc.
  • India has 112 million working-age people between the ages of 20 and 24. In the absence of government jobs, this demographic dividend is accelerating towards the private sector.  
• Profit to the Government: The big businesses and industries pay high amounts of taxes to the government, hence helping in the growth of the nation. 
  • According to an estimate, a 2% tax on the top 100 billionaires would give the government enough money to raise health expenditure to 3% of the GDP.
• The Face of the Nation: Big industrialists represent the face of their nation likeBill Gates, Elon Musk, Mukesh Ambani etc.
  • As per Oxfam India’s report, the total number of billionaires in India increased from 102 in 2020 to 166 billionaires in 2022, which is an indication of the growing economy in India.
• Investment & Technology Upgradation: Big industries attract a huge amount of foreign investments which help in bringing new technologies too. Hence, increasing the capital and development of the domestic economy. 
  • As per World Investment Report, 2022, most of the investments in India were made in the information and communication technology (ICT) and the construction industry.
  • Investors concluded deals worth over $650 million in the first quarter of 2020, mostly in the digital sector.
• Reduction in Imports: With the advancement of new technologies in the industries, these are helping in reducing imports and reducing the capital deficit of the nation. 
  • Example, the TATA group, Reliance and Adani have established their defense manufacturing companies which are helping in reducing defense imports and indigenization of defense products.
• Philanthropy: India industrialists and businesspersons are well known for their philanthropy. 
  • As per the EdelGive Hurun India Philanthropy List for 2022, Industrialist and founder of HCL Technologies Shiv Nadar has reclaimed ‘India’s most generous’ title with an annual donation of Rs 1,161 crore. Many more Indians hit their name in the list like Azim Premji, Mukesh Ambani, Kumar Mangalam Birla, Susmita and Subroto Bagch etc.

Concerns with the Industrial Conglomerates:

• Profiteering: By using market power, big industrialists compress the competition. It results in profit inflation or profiteering, through the manipulation of costs and prices.
• Inequality: Industrial Conglomerates results in extreme asset and income inequality. 
• Dilution by Impacting: Industrial Conglomerates triggers efforts to influence institutions of democracy and dilutes the role of the civil society as a countervailing power. 
• Crony capitalism: Industrial Conglomerates sometimes leads to undue corporate influence over political processes and the formulation of policy.
  • A political-economic system in which success in business depends on close relationships between business people and government officials, rather than on merit and competition. 
  • Examples: The 2G spectrum scam, Coalgate Scandal etc. 
• Distrust Scenario: This inequality amongst the economy sector creates distrust in the economy leading to decreased capital inflows and thus investments.  
  • Example: A recent revelation of such facts about Adani Group by the Hindenburg Report.
• Few Ethical Concerns:
  • Inequality: The huge wealth of big industrialists is often seen as morally wrong when many people in the world live in extreme poverty.
  • Exploitation of Workers: Low wages and poor working conditions provided to the workers by various big industrialists is a big rising concern.
  • Tax Avoidance: Many billionaires take advantage of loopholes to avoid paying taxes on their income.

Conclusion

• Liberalization opened up Indian markets, and subjected much of Indian business to global competition, state intervention was modified to protect and promote sections of big business. 
• After more than 30 years of liberalization of 1991, it’s not the time, only to regulate markets to address the malicious outcomes, but there is a strict need to physically prevent the growth of dominant businesses and excessively large conglomerates.

News Source: The Hindu