Veteran banker Uday Kotak said rapid consolidation in the Indian industry has led to concentration of business power in a few hands. This he suggested may pose a limitation to achieving India’s long-term growth potential. “There are significant new investments happening in India by only a few groups. What India needs is many flowers to bloom” Kotak said.
Kotak was answering questions related to private investments not picking up in a big way as anticipated, at the India Today Conclave on October 4. “I am saying something close to my heart. What we are seeing today is that many, many people are not going ahead and taking the animal instinct calls as a result of which we are seeing significant consolidation and concentration.”
Explaining why private investments are not picking up, he said, expounded on three reasons. He said, a lot of global uncertainty may be weighing on corporates’ minds. “Besides, there is a need to look at India’s competitiveness, especially with respect to China.”
Despite China going through so much trouble, why is it that India continues to have a massive trade deficit with China, close to a $100 billion a year. “Why is it that India cannot manufacture, and find it cheaper to import from China?” Kotak asked a rhetorical question. “We need to ask the tough questions. Why is it that corporate India cannot compete with China?"
Kotak said, the government is doing the right thing by increasing public spending. It also needs to create an environment where corporate India is ready to big calls investing into the future. “I am not saying that policy is skewed, but what I am saying is that policy must encourage many flowers to bloom,” he re-iterated.
Kotak cited some examples to demonstrate his point. “Look at the telecom sector if we met here five years ago, there were 13 players and now at the best we are two and a half. Let us look at the airline industry, you have consolidated to two and a quarter. Similarly, in the steel sector, two big guys and a lot of small guys.”
Kotak said that massive consolidation has happened and continues to happen, and with that (there is) the consolidation of business power as distinct from wealth, in a few hands. “This can give us results in the short run, but in the long run we would want many, many businesses to flourish in India.” Said Kotak.
“India hence needs free and fair markets which should be backed by policy. I would like to see a stronger role of the competition commission of India.” It is good to see a few businesses flourish, but it will be even better if many more Indian firms flourish, Kotak said striking an optimistic note.
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