In fact: The old pecking order changeth

In an interview to this newspaper (‘Reforms mean empowerment of poor. We have most successful financial inclusion programme’, July 18, 2016), Finance Minister Arun Jaitley pointed to the radical shake-up in the highest echelons of India Inc. that has happened post reform: “Take the list of 20 largest business groups in India pre-1991, and see how many of them have survived in the first 20. Prepare a list today in 2016, and you will see the difference.”

He couldn’t be more right. Among the country’s current top 20 business houses — leaving out multinationals and institution-owned companies such as Larsen & Toubro, ICICI and HDFC — only seven figured in a similar list for 1990. In comparison, the top-20 club of 1951 and 1990 had as many as 11 common names, while also covering a longer period than the 25 years after economic reforms.

The extent of ‘churn’ is even more if we were to consider a larger list comprising 50 houses. In this case, there are just 15 of them today who were also present in 1990: Tata, Reliance, (Aditya) Birla, Essar, Mahindra, Bajaj, R P Goenka, Godrej, Murugappa, TVS, (Gautam) Thapar, Wadia, J K (Singhania), Apollo Tyres and MRF (Mappillai), in that order.

If 35 out of India’s 50 biggest conglomerates now weren’t part of this league 25 years ago, it amounts to a fair bit of churn at the top. The story becomes even starker when one looks at the many names that were small, if not non-existent, prior to 1991



Among these “children of the 1991 reforms” — the evocative phrase used by former Prime Minister Manmohan Singh, again in an interview to The Indian Express (’25 years on, Manmohan has a regret: In crisis, we act. When it’s over, back to status quo’, July 1, 2016) — are Vedanta, Bharti Airtel and Adani. In the period preceding liberalisation, Vedanta’s promoter Anil Agarwal was a scrap metal dealer and small-time jelly-filled cables manufacturer. Airtel’s Sunil Mittal was, likewise, a struggling assembler of push-button telephones importing components from Taiwan, while Gautam Adani had a modest polyvinyl chloride granules trading business.

Mittal and Adani owed their meteoric rise to the country’s telecom and ports sectors being opened up for private participation, while Agarwal made it big mainly through acquiring the state-owned Bharat Aluminium and Hindustan Zinc in the early 2000s, under the then NDA government’s aggressive disinvestment programme. From virtually nowhere, their groups now rank among India’s top 10 conglomerates.

One could identify other houses as well whose entry to the top-50 list can be specifically linked to reforms — liberalisation, privatisation and globalisation. They are mostly in businesses that were either thrown open to private players (aviation, infrastructure, banking) or thrived because of export competitiveness resulting from rupee devaluation and integration into global value chains (IT/software, pharma, auto ancillaries, textiles).
Grandhi Mallikarjuna Rao of GMR, Naresh Goyal of Jet Airways, Rahul Bhatia of InterGlobe Aviation (IndiGo), Uday Kotak of Kotak Mahindra Bank, and the Lagadapati family of Lanco Infratech are obvious examples of “children” who benefited from the opening up of new sectors. In the latter category of gainers from globalisation are Infosys, Sun Pharmaceutical Industries, Samvardhana Motherson, Amtek, Alok Industries, Welspun and Aurobindo Pharma. And to this list of non-entities before 1991, one can also add Future Retail (Kishore Biyani) and Gitanjali Gems (Mehul Choksi).

Besides them, there are those who may have been known, but were certainly not big enough to make it to the top-50 list in the pre-reform period: Jindal, Jaypee, Wipro, Videocon, DLF, HCL, Hero, Max India, Amalgamations, Torrent, Hinduja, Rajan Raheja, Ajay Piramal, Dr Reddy’s Laboratories, Lupin, Cipla, UPL (Shroff) and Asian Paints.
But churn is as much about new players coming in as the ones dropping out. The dropouts from the top-50 list of 1990 include Mafatlal, Modi, M A Chidambaram, Shri Ram, Mallya (his exit is relatively recent, though), Bangur, Kirloskar, Walchand, Escorts, Kasturbhai Lalbhai, Garware, Sarabhai, B M Khaitan (Williamson Magor), Bhiwandiwala, Chowgule, Khatau, Lohia (LML), M S Oberoi, Kapal Mehra (Orkay), Praful Shah (Garden Silk), B V Raju (Raasi Cement), V Ramakrishna (KCP), Sahu Jain, Raghu Mody (Rasoi Group), G K Naidu (Lakshmi Mills), Apeejay Surrendra, GTC (Sanjay Dalmia), Nirlon, India Cements, Shri Ambica Mills, Ferro Alloys Corporation (Saraf) and H C Kothari. Not many would recall some of these names today, just as few knew of a Gautam Adani, N R Narayana Murthy (Infosys) or Dilip Shanghvi (Sun Pharma) back in 1991.

Churn, to be sure, isn’t an altogether new phenomenon. For instance, there were at least four major conglomerates of the 1951 list — the legendry Sir Rajendra Nath Mookerjee’s Martin Burn, the two Calcutta-based English agency houses of Bird Heilger and Andrew Yule (one cannot really call them multinationals), and the house of Indra Singh (a rare Jat Sikh industrialist whose son Baldev Singh was independent India’s first Defence Minister) — that had faded into oblivion by the seventies.

But changes to the pecking order have been far more rapid and extensive in the post-reform era — only to be expected in a relatively open and deregulated economy, where incumbent firms enjoy less protection against foreign as well as domestic competition. A list of the top-50 conglomerates five years from now could well see some of the current names — Jaypee, Videocon, Lanco, Alok Industries or even GMR — drop out. Their places may be taken by the likes of Flipkart, Snapdeal, Paytm, Ola Cabs, and others who did not even exist ten years ago!
The other interesting part relates to community origins. In the 1990 list, as many as 30 out of the top 50 business houses had promoters from traditional mercantile castes such as Bania/Jain/Marwari, Parsi, Gujarati Lohana and Nattukottai Chettiar.

That hasn’t changed all that much. The current list of 50 has 22 Banias/Jains/Marwaris (Reliance, Aditya Birla, Vedanta, Bharti, Jindal, Adani, Essar, Videocon, Sun Pharma, Bajaj, RPG, Torrent, Alok, Welspun, Piramal, Jet, Gitanjali, Lupin, J K, Biyani, UPL, Asian Paints), three Parsis (Tata, Godrej, Wadia), two Sindhis (Hinduja, Raheja), and one Lohana (Kotak), Chettiar (Murugappa) and Komati/Arya Vaishya (GMR) each.
But there are also eight Punjabi Khatris/Aroras (Mahindra, Motherson, Hero, Max India, Amtek, Thapar, Apollo Tyres, IndiGo), four Brahmins (Jaypee, Infosys, TVS, Amalgamations), two Reddys (Dr Reddy’s, Aurobindo Pharma), two Muslims (Wipro, Cipla), and one Christian (MRF), Jat (DLF), Kamma (Lanco) and Nadar (HCL) each.

Published on IndianExpress

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