From ‘entrepreneurial’ to ‘conglomerate’ capitalism


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THE last six years have been a period of political stability in India, definedin terms of a single party being in a position to form a majority government at the Centre and under an unquestioned leader able to enforce a near-presidential system of governance.1 Such powers vested in one person ina parliamentary democracy – manifested whether in unilateral executive actions taken on demonetization and lockdown, or ramming through constitutional amendments to unveil a nationwide Goods and Services Tax (GST) – were last seen during the Congress governments of Indira Gandhi and, perhaps, Rajiv Gandhi.

The last six years have also been marked by relative macroeconomic stability, again going by the traditional ‘3F’ bugbears – foreign exchange, food and fuel – that were precursors to past growth slowdowns and balance of payments crises in India. Since 23 May 2014, roughly the time the Narendra Modi government first assumed office, official forex reserves have risen from $ 312.66 billion (enough to finance 8.33 months of imports) to $ 541.43 billion (13.69 months) as on 28 August 2020. Public wheat and rice stocks, at 94.42 million tonnes as on 1 July, were 2.3 times the required minimum buffer for this date. Covid-19 is probably the first ever large-scale calamity in India not to have recorded any food riots or mass starvation, unlike the 1943 Bengal Famine and the great droughts of 1966-67 (Bihar) and 1972-73 (Maharashtra).

International oil prices have not only been benign during the Modi government’s tenure – the cost of crude imported by Indian refiners averaged $ 60.78 per barrel during 2014-15 to 2019-20, as against $ 93.97 in the preceding six financial years – but also helped bolster the Centre’s revenues by about Rs 150,000 crore annually through higher excise duties levied on petrol and diesel.

The above combination of both political capital and ‘3F’ comfort – in other words, no threat of government falling or a run on the rupee from massive capital outflows – is somethingno ruling dispensation in independent India has enjoyed for an extended period. Even the otherwise tranquil decade of the 1950s under Jawaharlal Nehru was constrained by foreign exchange shortages, with the total reserves depleting from $ 2.16 billion to a mere $ 637 million between 1950-51 and 1960-61. The subsequent decade was one of forex and food crises, derailing the Third Five-Year Plan and forcing ‘plan holidays’ from 1966-67 to 1968-69. In the 1970s, it was oil, while the eighties were about food, forex and the start of an era of minority governments from December 1989 till April 2014.2


Yet, what has been remarkable about the economic and political stability distinguishing the Modi regime is its also presiding over a manifest decline of Indian capitalist enterprise. Out of the top 200 listed Indian promoter-run companies ranked by total revenues in 2014-15, about 57 have since gone bust, been hauled to the National Company Law Tribunal (NCLT) by lenders or undergone management change.3

Some notable entities here are Essar, Anil Ambani, Videocon, Jaypee, Vijay Mallya, Gautam Thapar, Jet Airways, Zee/Essel, Bhushan, Malvinder and Shivinder Singh, Future Retail, Ruchi Soya, Binani Cement, Uttam Galva, Suzlon, Alok Industries, Amtek Auto, Hindustan Construction, GMR, GVK, Lanco, Gitanjali Gems, Monnet Ispat, Usha Martin, Jain Irrigation, Sintex Industries, Punj Lloyd, Patel Engineering, Gammon India, IVRCL, Simplex Infra, Unitech, JBF Industries, Bajaj Hindusthan, Shree Renuka Sugars, Aban Offshore, Rolta and Mercator.

There are many other once-big names that have fallen by the wayside: Rana Kapoor of Yes Bank, Dewan Housing Finance, Moser Baer, Samtel, Electrosteel, Nagarjuna Fertilizers, Transstroy, Soma Enterprise, Era Infra Engineering, KSK Energy, Winsome Diamonds, Coffee Day Enterprises, Shakti Bhog Foods, and Cox& Kings. Some, like the venerable Shapoorji Pallonji Group, are heavily debt-ridden. Naveen Jindal’s Jindal Steel & Power and Ratan Jindal’s Jindal Stainless have also survived largely through support from other cash-rich companies (Sajjan Jindal’s JSW and Prithvi Raj Jindal’s Jindal-SAW) within the same extended family conglomerate.4


The above destruction of capital is ironical in many ways. The first is it happening under a regime with a strong leader at the helm and someone particularly known for his pro-business approach5 as well as commitment to sound macroeconomic policies: The Modi government’s record at inflation control, minimizing exchange rate volatility and fiscal discipline has definitely been superior compared to its predecessor.6

That links up with the second irony. This has to do with the phase of ‘entrepreneurial capitalism’ in India, from roughly 1991-92 to 2011-12, being coterminous with coalition governments and the high noon of regional parties. The primary driver of the former may have been the economic reforms that opened up new industries – from telecom, civil aviation and cable television to power, highways, ports, mines, banking and even dairy and modern rice milling – for private investment and also liberalized capital markets to enable fund raising, including through foreign equity and external commercial borrowings. But the fact that these avenues for capital accumulation arose and were seized during a time when no single party could exercise total dominance nationally, needs to be highlighted.


It’s not that the period since 2011-12 hasn’t produced new entrepreneurs. One can identify a few companies whose growth is a phenomenon ofthe last 10 years or less: Flipkart, Snapdeal, Paytm, Byju’s, Swiggy, Zomato, BigBasket, OYO Rooms, Ola Cabs, Patanjali Ayurved, Bandhan Bank, TeamLease and Dilip Buildcon. However, barring the last four, they straddle a narrow business segment of e-commerce. Overall, there has been a clear decline in both the supply of new capitalists and diversity of industries, and also more capital destruction than creation or accumulation.7


The first two decades after liberalization was a story of enterprise and, moreover, churn. Among India’s 50 biggest conglomerates in 2014-15, only 15 were part of a similar list of 1990-91. The 35 new entrants comprised many who were small, if not non-existent, in the pre-reform era: the likes of Vedanta, Airtel, Adani, Infosys, Jet Airways, IndiGo, Zee/Essel, GMR, Lanco, Future Retail, Sun Pharmaceutical, Aurobindo Pharma, Samvardhana Motherson, Amtek, Alok Industries and Welspun.

Such shuffling of the ranks of capitalists, to be sure, was not entirely a post-reform development. Martin Burn, Surajmull Nagarmull, the Calcutta based English agency houses of Bird Heilger and Andrew Yule, and Indra Singh (a rare Jat Sikh industrialist whose son Baldev Singh was independent India’s first Defense Minister) were in the big league till almost the early 1970s. They faded into oblivion just when Reliance, Essar, Ranbaxy, Hero, Raunaq Singh, Jindal and others had entered the scene. Changes to the pecking order were, however, far more rapid and extensive in the period after liberalization – only to be expected, given the reduced protection for incumbents through the lifting of entry barriers and new investmentopportunities arising, including in sectors hitherto reserved for state-owned enterprises.8

This is where the seeming paradox already posed in the previous section arises: To what extent was the phase of ‘entrepreneurial capitalism’, which also witnessed very high churn with more new players coming in than the ones dropping out, connected with the rise of regional parties and the era of coalition governments? Could the absence of a strong Centre have, in fact, been conducive to a capitalism that was fairly dynamic and entrepreneurial?


The intermeshing of business interests and politics in India – especially the relationship between the indigenous capitalist class and the Congress party during pre-Independence – is well documented.9 Not as much studied, though, has been the role of regional capitalists and their investments inprovincial parties and politicians. These connections were useful initially in industries such as sugar, liquor, hotels, real estate, transport, language press, cinema, road construction and public works department contracts at state level. The end of single-party majority rule and regional partiesbecoming key to government formation at the national level10 – precisely when the economy was opening up for private investment and the ‘animal spirits’ of entrepreneurs were being unleashed – provided further impetus to this mutually beneficial partnership.

Access to the seat of power in New Delhi made it possible to take up bigger projects, while helping expedite land acquisition and obtain coal and water linkages, environment clearances, construction permits, and bank financing. Liberalization may have abolished conventional licensing, but the scope for patronage and executive discretion had actually expanded in such areas of statutory approvals and natural resources allocation.11


Epitomizing the above upstart or even crony capitalism (more on this later) are the ‘Andhrapreneurs’ or businessmen from undivided Andhra Pradesh, mainly belonging to the Kamma, Reddy and Raju landowning communities.12 Some of them – GVK Reddy of GVK, T. Subbarami Reddy of Gayatri Projects, K. Sambasiva Rao of Progressive Constructions andV. Nageswara Rao of SEW Infrastructure – had even from the late sixties to the eighties executed works in irrigation projects such as Nagarjuna Sagar, Srisailam, Somasila and Telugu Ganga.

But their real growth – and also that of G.M. Rao of GMR, L. Rajagopal of Lanco, N. Nageswar Rao of Madhucon, Rajendra Prasad Maganti of Soma Enterprise, C. Visweswara Rao of Navayuga, Y.S. Chowdary of Sujana, Sridhar Cherukuri of Trans-stroy, E. Sudhir Reddy of IVRCL, A. Rami Reddy of Ramky Infra,K.S. Raju of Nagarjuna Fertilizers, A.V.S. Raju of Nagarjuna Construction, D.V.S. Raju of Gangavaram Port, and C. Srini Raju of Sri City – came during the first two post-reform decades. That was the time they graduated from piecemeal contracting to building full-fledged national highways, international airports, ports, power plants, metro rail sections, tunnels, river bridges, irrigation dams and water supply systems.


Today, all of them – barring maybe Navayuga and the last three Raju concerns – are either history or pale shadows of their not-too-distant past. Even the Navayuga Group earlier this year sold a 75% controlling stake in its Krishnapatnam port to Adani Ports. The latter had previously evinced interest in buying the Gangavaram port of D.V.S. Raju as well.13 These apart, the Adani Group has recently taken over the Mumbai International Airport from its original debt-strapped majority owner and operator, GVK.14

The downfall of the ‘Andhra-prenueurs’ has been largely courtesy excessive risk-taking and piling up of debts for implementing capital intensive projects that, even if they got off the ground, failed to generate the cash flows needed to service the loans. Such risk-taking would have been no less a result of confidence acquired from political connections forged in a competitive electoral democracy. Andhra Pradesh was an exclusively Congress-ruled state till the 1983 assembly elections, which brought a new Telugu Desam Party (TDP) to power. TDP’s profile rose nationally, too, when it became part of coalition non-Congress, non-BJP governments at the Centre in 1989-90 and 1996-98.15 The party’s outside support was further crucial to the first BJP-led National Democratic Alliance government under Atal Bihari Vajpayee from 1998 to 2004.

It would be a mistake, nevertheless, to attribute the rise of the ‘Andhrapreneurs’ solely to the TDP. Andhra Pradesh also sent the largest contingent of Congress Members of Parliament to enable the formation of the United Progressive Alliance governments in 2004 and 2009. And this entire coalition period, from the mid-1990s onwards, was when the ‘Andhra-preneurs’ made hay by leveraging connections now extending to New Delhi. Some of them became MPs of both TDP (N. Nageswar Rao and Y.S. Chowdary) and Congress (Sub-barami Reddy, K. Sambasiva Rao and L. Rajagopal).

The party ended when theModi-led single-party majority NDA government assumed office in May 2014. By then, their woes from taking on too much debt while on an airport-, power plant- and four/six laneexpressway-building spree had multiplied. Joining the BJP (Y.S. Chowdary and Sambasiva Rao) or the newly ascendant Telangana Rashtra Samithi (Nageswar Rao) and YSR Congress (A. Rami Reddy) couldn’t improve their fortunes. It was too late.16


India’s has been a unique crony capitalism model of moneybags grabbing licenses or landing contracts by virtue of having the right connections. Its distinctiveness, however, has derived from being organically linked to electoral politics. Every party/politician typically would have a chosen set of businessmen for bestowing favours and receiving funding in turn. To the extent this allowed for the emergence of new tycoons, including from diverse regional and social backgrounds, it translated into a different kind of crony capitalism. This was a capitalism where the ‘cronies’ did not remain the same and businesses couldn’t be cornered by a narrow oligarchy whose composition hardly changed over time. Rather, there was fair bit of churn.


That model is under siege, though, from two forces. The first is economic, specifically the accelerated movement towards industrial concentration and market dominance by large firms or conglomerates. Across many sectors today – telecom, airlines, steel, cement, aluminium, synthetic fibres, polymers, paints, cars, trucks, two-wheelers, tractors, tyres, consumer electronics and electricals, toiletries, tea and biscuits – there are two, at most three, players commanding more than 50% market share.17 What’s more, some groups have market leadership that straddle multiple industries: Reliance (petrochemicals, telecom and retail), Tata (steel, commercial vehicles, salt and IT services), Aditya Birla (cement, aluminium and chlor-alkali) and Adani (ports, private power, branded edible oils and now airports).

The trend of industrial consolidation – more and more sectors being taken over by fewer and bigger entities – has been greatly facilitated by demonetization and GST that have eroded the competitive advantage smaller firms hitherto had from dealing in cash and not paying full taxes. If liberalization had removed entrybarriers erected by the earlier License Permit Raj, these are now being resurrected through a new rules-based tax-compliant capitalism that forecloses accumulation possibilities for Small Capital or its becoming big down the line.18


Regulatory burden aside, barriers to entry in the new ‘monopolist’ or ‘conglomerate’ phase of Indian capitalism would also take the form of higherinvestment requirements in most industries. As projects turn increasingly capital intensive, arriviste competitors will find it that much tougher to put in matching promoters’ equity or mobilize funds through traditional routes such as selling land, pawning family gold and borrowing from relatives, friends and community networks. Further aiding the ongoing transition from ‘entrepreneurial’ to ‘conglomerate’ capitalism are insolvency resolutions – banks taking defaulting companies to NCLT and initiating recovery via sale of their underlying assets to new promoter-investors19 – and the Covid-induced lockdown, which has proved the last straw for overleve-raged liquidity-squeezed corporates.

Reflecting the new reality is Reliance Industries: Amid the worst economic crisis afflicting India indecades, Mukesh Ambani’s company could effortlessly mop up Rs 152,056 crore by selling 32.97% in its digital services subsidiary Jio Platforms to Facebook, Google and 11 other global investors, in addition to Rs 53,124 crore through a rights issue. All this between 22 April and 15 July 2000 at the height of the pandemic!


Political forces are equally undermining the old dynamic crony capitalism model. The BJP under Modi is a monolith like Indira Gandhi’s Congress, which too in its heydays faced littlepolitical competition within or outside. Such a party can afford to operate a centralized funding system that overwhelmingly relies on Big Capital to meet its requirements. Sugar barons, liquor contractors, land sharks, grain commission agents and flour millers may have mattered in earlier times, but not any longer.

Not only have regional capitalists been rendered irrelevant – their support isn’t needed when unlimited corporate funding is possible through electoral bonds that protect the donor’s identity and the contributions are tax-deductible to boot – even politicalactors may not want to establish or join state-level parties if they believe that single-party majority governments are a stable feature of the polity.20 The mutually beneficial partnership between the aspiring politician and the small-to-middling capitalist becomes unviable in the event.21

The big corporates, on the other hand, have gone beyond playing ball to even aligning their business strategies with the avowed policy goals of the Modi government. Mukesh Ambani has thrown his weight behind the latter’s Digital India programme, while speaking out against ‘data colonization’ and emphasizing that ‘India’s data must be controlled and owned by Indian people and not by corporates, especially global corporations.’ Gautam Adani’s statement that India’s dependence on Chinese solar gear imports will fall from 90% to ‘negligible’ levels in ‘3-5 years’ has, likewise, been matched by Modi’s exhortations to boost domestic production capacity in modules, cells and batteries.


Sajjan Jindal’s promise to stop raw material imports from China and source refractories for its steel plants from Brazil and Turkey, and Vedanta Group’s Anil Agarwal’s call for giving precedence to the state owned Bharat Heavy Electricals over Chinese power equipment suppliers, are similarly in tune with the Modi government’sgeopolitical agenda.

Such aligning of business strategy, needless to say, has a strong self-serving element – whether to do with Ambani’s own digital and online retail ambitions, Adani’s recent foray into solar manufacturing or Vedanta’s interest in privatization of public sector undertakings. Clearly, this is a new phase of capitalism in India where large corporate ‘national champions’ and a ‘strong’ state are rewriting the old rules of the game.



1. On this, Arghya Sengupta, ‘A Presidential System Masquerading as a ParliamentaryDemocracy’, The Telegraph, 20 June 2019 and Shashi Tharoor, ‘4 Years of Modi Rule Convinced me that we need presidential system’, The Print, 7 August 2018.

2. The data sources for the above are the Reserve Bank of India’s Weekly Statistical Supplements and Handbook of Statistics on Indian Economy for various years; Food Grain Bulletin (June 2020) of the Ministry of Consumer Affairs, Food & Public Distribution; and Petroleum Planning & Analysis Cell in the Ministry of Petroleum and Natural Gas.

3. These companies had total revenues inexcess of Rs 3,000 crore each for 2014-15 and are taken from Business Standard, BS 1000, February 2016. Public sector undertakings, foreign owned and independent companies like ITC, L&T and the now-bankrupt IL&FS are excluded.

4. The promoters of the four companies are the sons of O.P. Jindal. They are formally under the umbrella of the O.P. Jindal Group, headed by the founder’s wife Savitri Jindal.

5. That reputation was earned while Modi was Gujarat chief minister from 7 October 2001 to 22 May 2014. Between 13 September 2013 (when he was declared the Bharatiya Janata Party’s prime ministerial candidate) and 16 May 2014 (the day the national election results were declared), the Bombay Stock Exchange’s benchmark Sensex soared over 22%, from 19,733 to 24,122 points.

6. The best evidence of that is petroleum. The Modi government, instead of passing on the benefits of low global crude prices to consumers, has raised excise duties on diesel and petrol. These went up from Rs 3.56 and Rs 9.48 to Rs 17.33 and Rs 21.48 per litre, respectively, between June 2014 and February 2016, before being cut by Rs 1.50/litre each in September 2018. But since March 2020, they have been further hiked to Rs 31.83 and Rs 32.98 per litre, respectively. As a result, the Centre’s budgeted subsidy on petro-products, at Rs 96,880 crore in 2012-12 and Rs 85,378 crore in 2013-14, exceeded its corresponding revenues from excise of Rs 63,478 crore and Rs 67,234 crore. But by 2016-17 and 2017-18, the subsidy outgo (Rs 27,539 crore and Rs 24,460 crore) stood far below the excise collections on petro-products(Rs 227,131 crore and Rs 208,781 crore) for these two years. While subsidy is now mostly limited to sales of LPG cylinders and providing connections to poor/low income households, diesel and petrol have turned into huge revenue sources for the government (Indian Petroleum & Natural Gas Statistics 2018-19, February 2020, Ministry of Petroleum and Natural Gas).

7. On this, see Harish Damodaran, ‘From the Creation to the Destruction of Capital’, in Niraja Gopal Jayal (ed.), Re-forming India: The Nation Today. Penguin Random House India, Gurgaon, 2019, pp. 117-34 and ‘Death of Enterprise’, The Indian Express, 29 June 2019.

8. Harish Damodaran, ‘The Old Pecking Order Changeth’, The Indian Express, 21 July 2016. Also, Gita Piramal, ‘Big Business and Entrepreneurship’, Seminar 528, August 2003.

9. Claude Markovits, Indian Business and Nationalist Politics 1931-1939: The Indigenous Capitalist Class and the Rise of the Congress Party. Cambridge University Press, Cambridge, 1985 remains a classic work.

10. Between the 1991 and 1999 Lok Sabha polls, the vote share of regional parties – those drawing electoral support from narrow geographical bases – increased from 26% to 46% (Adam Ziegfeld, ‘Coalition Government and Party System Change: Explaining the Rise of Regional Political Parties in India’, Comparative Politics 45(1), October 2012, pp. 69-87).

11. Kanchan Chandra has pointed out that the post-reform Indian state has withdrawn from the economy partially, ‘through its policies of delicensing, de-reservation, and deregulation’. But this ‘retreat of patronage from some areas of the economy has been accompanied by a relocation to others’. (‘The New Indian State: The Relocation of Patronage in the Post-Liberalization Economy’, Economic and Political Weekly 50(41), 10 October 2015, pp. 46-58).

12. They are dealt with in more detail in Harish Damodaran, India’s New Capitalists: Caste, Business, and Industry in a Modern Nation. Revised and Updated Edition. Hachette Book Publishing India, Gurugram, 2018.

13. Boby Kurian and Piyush Pandey, ‘Adani in Talks to Acquire Gangavaram Port for $2.1b’, Times of India, 15 July 2015 andP. Manoj, ‘Adani Looks to Acquisitions for Expanding Ports Empire’, Mint, 21 July 2015. Krishnapatnam and Gangavaram, both in Andhra Pradesh, are the country’s second and third largest private ports after Adani’s own at Mundra in Gujarat.

14. Adani has also successfully bid for six state-run airports (Ahmedabad, Lucknow, Mangalore, Jaipur, Guwahati and Thiruvanathapuram) that were put up for privatization. Besides, it is building a new Navi Mumbai International Airport that was earlier to have been developed by GVK.

15. The party’s P. Upendra, who happened to be the father-in-law of Lanco’s L. Rajagopal, was Union Information & Broadcasting Minister in the 1989-90 National Front government. B.B. Ramaiah (a promoter of Andhra Sugars) and K. Yerran Naidu held the Commerce and Rural Development portfolios, respectively in the 1996-98 United Front government.

16. A story in contrast is of P.V. Krishna Reddy whose Megha Engineering & Infrastructures started off with small irrigationcontracts from the mid-nineties and registered spectacular growth in the last 10 years. The company was awarded bulk of the Kaleshwaram Project, billed as the world’s biggest lift irrigation scheme, by the TRS government in Telangana. Even the multipurpose Polavaram Irrigation project’s construction in Andhra Pradesh, which the earlier TDPadministration had first assigned to Trans-stroy and then Navayuga (both Kamma concerns), has since been given to it by the YSR Congress government of Jaganmohan Reddy.

17. On the extent of increase in market concentration since 2013-14 in key industries, based on the Herfindahl-Hirschman Index, see Krishna Kant, ‘Winner Takes All’, BS 1000 Annual, March 2020. Also worth reading is ‘Behold The Leviathan: The Remaking of Indian Capitalism’, Marcellus Investment Managers, 13 May 2020 (

18. On GST’s impact on Small Capital, see Harish Damodaran, ‘Losing the Middle’, The Indian Express, 22 July 2017.

19. Such buyouts have been both NCLT-mediated (Bhushan Steel and Usha Martin by Tata Steel, Monnet Ispat and Bhushan Power & Steel by JSW, Essar Steel by Arcelor Mittal, Electrosteel by Vedanta, Binani Cement by UltraTech, and Alok Industries by Reliance) and outside its purview (Future Group’s retail and wholesale businesses by Reliance and the power plants of Lanco, GMR and Gautam Thapar/Avantha Group by Adani).

20. On the latter point, see Ziegfeld, fn. 10.

21. There are such close associations involving even BJP leaders – for instance, between former party president Nitin Gadkari and Virendra Mhaiskar of IRB Infrastructure Developers or Madhya Pradesh ChiefMinister Shivraj Singh Chouhan and Dilip Suryavanshi of Dilip Buildcon. It is another matter that neither Gadkari nor Chouhan are too powerful in the current Modi-Amit Shah BJP dispensation.