The Indian economy, across sectors, is dominated by duopolies

Source– The post is based on the article “The Indian economy, across sectors, is dominated by duopolies” published in “The Indian Express” on 17th April 2023.

Syllabus: GS3- Economy

Relevance– Structure of the economy

News– The article discusses the issues of monopoly in Indian markets.

What is the nature of market concentration in the manufacturing sector?

Automobile sector- It in India is dominated by Maruti Suzuki and Hyundai. Both are foreign-owned. Together, they account for six out of every 10 cars sold in the country.

If Tata Motors is added, these three players control almost 70% of the total car market. It is the third largest player. Mahindra which ranks fourth in terms of market share

Two-wheelers segment. Three players — Hero MotoCorp, Honda and TVS Motor — account for nearly three-fourths of the total market. Two of these – Hero and TVS – are Indian-owned and Honda is a subsidiary of a Japanese firm.

Gadgets segment– The mobile phone market in India is dominated by the Chinese brands Xiaomi, Vivo and Realme, and Samsung.

Vivo, Realme, Oneplus and Oppo are reportedly linked to the same Chinese company. Together these companies controlled roughly 70% of the market in 2022.

The smart TV market is similarly dominated by the likes of Xiaomi, Samsung and LG.

Similar patterns can be observed in other consumer appliance markets as well as in various segments of the FMCG market.

Core infrastructure- Indian players exercise more control here. In steel, the four biggest companies — JSW Steel, SAIL, Tata Steel and JSPL — control more than half the market. Three of these are domestic private-sector firms, while one is a public-sector enterprise.

Similarly, the four biggest Indian cement firms command half of the market share in the country.

Other areas- Such examples of market concentration can also be seen in other segments, especially in certain commodities and related segments.

The lines of demarcation between foreign and domestic players across markets are not exactly clear. There are examples of companies such as Asian Paints, Amul and Pidilite who hold a commanding position in markets where foreign competition is limited.

There are state-sanctioned monopolies in the provision of utilities such as electricity and water. These markets are largely the preserve of the public sector.

What is the nature of concentration of ownership in the service sector?

Similar patterns of market concentration can be observed here. Online markets tend to be dominated by foreign players or by firms heavily financed by foreign funds. Other service segments are more titled towards domestic players.

The telecom sector is dominated by two large players called Jio and Airtel and a weak third player. Together, Jio and Airtel account for more than two-thirds of the market. Both are controlled by Indian promoters.

The airline industry is also now dominated by two players — Indigo and Tata. The two airline groups accounted for more than 80% of the domestic market share in the current year.

In the private banking space, HDFC, ICICI and AXIS account for a significant share. All of them have sizable foreign ownership. Concentration is also evident in airports and ports.

Similar patterns can be observed in online markets as well. The retail market is dominated by Amazon and Flipkart. The payments market has been cornered by PhonePe and Google Pay. Food delivery is split between Zomato and Swiggy; and transportation between Ola and Uber. Most of these companies are either foreign-owned or majorly backed by foreign players.

What are the impacts of market monopolies?

The concentration of ownership in the hands of a few big firms has been linked to higher prices for consumers, a declining share of labour income and rising wage inequality.

There is also the possibility of the more dominant firms influencing government policy to restrict competition. This can be done by high entry barriers and distorting the playing field to the disadvantage of their competitors.

This can be achieved by raising import duties, tight regulations or licensing requirements, changing the rules of the game to restrict competitors or even making it difficult to sign beneficial free trade agreements.