Conglomerates & brandless growth

Source: The post is based on the article “Conglomerates & brandless growth” published in Business Standard on 18^th March 2023.

Syllabus: GS 3 – Economy

Relevance: Issues with Indian Conglomerates

News: The article discusses the problem with Indian conglomerates.

Which companies in India are conglomerates and what are the common things amongst them?

Companies such as Adani, Ambani, Tata, Birla, and Vedanta are conglomerates in India, i.e., they are large corporations.

Things which are common amongst them are – a) they are all legacy or family-controlled enterprises, b) these have most of their businesses in areas which are highly regulated by the government, c) none of them owns a truly global Indian brand.

Since these conglomerates work in areas which are highly regulated by the government, the allegation of cronyism is often put forward by the opposition.

What are the arguments against cronyism?

Areas such as ports, airports, require both government as well as private players to work together for the development.

Further, it is important for the government to work closely with powerful Indian conglomerates to compete with others across the world, especially to counter China’s Belt and Road Initiative in the nation’s interest.

Hence, the issue of cronyism or to say the government is supporting just one enterprise (Adani) is baseless. However, the government must provide a level playing field for all in these sectors rather than cooperating with a few.

Read More: Billionaire Raj: The rise of India’s multi-business conglomerates

What are the concerns with these conglomerates?

These conglomerates have not been able to build a global Indian brand. Global brands can be classified into three categories: Country, company and product brands.

In the first category, India has Yoga, ayurveda, etc. that has built the brand of India globally. In the second category, we have powerful Indian company brands known across the world like Tata, Reliance, etc.

However, the list in the third category is empty because none of these companies have been able to build a product brand that rules the world.

India does not have a purely homemade car, a two-wheeler, a software or operating system. Even though there are GI tags for most of the agri products, none of those acts as a brand that represents India globally.

Almost all the garments produced in our factories and exported are sold under the labels of international store chains. Although India is making a lot of mobile phones for export but none of these carry an Indian brand name.

The government has pushed for domestic manufacturing, but it is pushing it in the same direction as our software industry, i.e., outsourcing.

What can be the way ahead?

The success of Indian conglomerates not only lies in improving the domestic economy but also in making a brand that is recognised globally and represents India.

Therefore, there is a need to look in that direction by holding necessary discussions with the stakeholders.