OPINION | Balancing State power and market freedom in India

No advanced economy leaves its champions to fend entirely for themselves.

There is an instinctive unease whenever the state appears to stand behind a private conglomerate — an unease rooted in the fear of cronyism, of public power bending to private interest. Yet, modern enterprise history reminds us that the boundary between public purpose and private enterprise has always been porous. Every economy has, at decisive moments, acted to protect its largest firms, not out of affection for capital but in recognition of systemic interdependence.

The Uneasy Optics of State Support

The state’s relationship with enterprise is rarely a morality tale. It is an exercise in risk management. When governments in the United States poured hundreds of billions of dollars into saving its financial institutions and automotive giants during the 2008 crisis, it was not a celebration of capitalism but a containment of collapse. The political rhetoric of free markets did not prevent the nationalisation of private losses when the stability of the broader system was at stake. The same moral ambivalence underpins Washington’s interventions today — whether in shielding Silicon Valley behemoths from European regulation or in subsidising strategic industries through the Inflation Reduction Act or by weaponising Trade Tariffs to subjugate other sovereigns to become vassals.

No advanced economy leaves its champions to fend entirely for themselves. France’s Airbus, Japan’s Sony, South Korea’s chaebols, and even Germany’s Mittelstand enterprises have all benefited from the protective instincts of their states. The logic is simple: when scale itself becomes a national asset, failure is not a private affair.

India’s Moment of Reckoning

India is now confronting this same paradox in public view. The controversy over whether the government “nudged” public financial institutions to support the Adani Group has reignited an old question — where does economic stewardship end and favouritism begin? To call any intervention “cronyism” is easy; to understand its systemic rationale is harder. The Life Insurance Corporation of India (LIC), which bore much of the public scrutiny, has since clarified that its investments were prudent and that every rupee deployed has been fully recovered — a reminder that State-led market interventions, when well-governed, can stabilise rather than distort.

For an emerging economy whose financial architecture is still developing-scale compared to its ambitions, the collapse of a major conglomerate would not be a sectoral event but a national shock. The contagion would ripple through mutual funds, banks, pension assets, and the portfolios of millions of small investors. It would hurt global investor sentiments about Indian entities.

It is, therefore, both economically and politically rational for the state to act pre-emptively when such an event seems possible. The question is not whether the government should act, but how it does so — whether the support sustains stability without distorting competition.

This is not the first time India’s financial architecture has leaned on its public institutions to steady the market’s pulse. Over the past three decades, the Life Insurance Corporation, State Bank of India, and the erstwhile Unit Trust of India have all stepped in during periods of volatility — from post-liberalisation corrections to global crises — to restore confidence and absorb shocks. Many of those interventions have ultimately paid off handsomely, stabilising asset values and protecting investor interests. It is, therefore, neither new nor unusual for the sovereign to calibrate such responses. The judgment of when to intervene and how far to go must rest with the government and its regulators — as custodians of systemic stability.

Fairness, Accountability, and the Role of the State

Cronyism, in its truest sense, is not the presence of state intervention but the absence of fairness within it. When interventions shield inefficiency, or tilt the playing field in opaque ways, they cease to serve the public interest. But to mistake every act of stabilisation for crony favour is to misunderstand the nature of capitalism in an interdependent age.

It is worth recalling that India’s own liberalisation story did not begin by abolishing the state’s role in industry, but by redefining it. From licence raj to public-private partnership, from disinvestment to strategic stakeholding, the Indian state has continuously re-scripted its economic role — sometimes as a regulator, sometimes as an investor, sometimes as a rescuer. Fiscal incentives, sovereign guarantees, policy nudges, and regulatory discretion have replaced the old levers of direct ownership.

The modern Indian state remains a key shareholder in the nation’s economic destiny, expected to step in not only when markets fail but also when they falter in aligning with national priorities. The idea that markets alone can discipline capital is a fiction even the most market-oriented societies have long abandoned.

Yet, this responsibility must coexist with accountability. A company’s scale or systemic importance cannot exempt it from scrutiny, law, or consequence. To suggest that a firm is “too big to fail” is not to imply that it is too powerful to question. When wrongdoing harms competitors, defrauds investors, or corrodes public trust, it must face sanction — proportionate, transparent, and unflinching. But in the same breath, such a company must retain the right to be presumed innocent until proven guilty. The state cannot become both judge and rescuer, nor can the public discourse replace due process with populist trial. The integrity of markets depends as much on fair punishment as on fair protection.

Equally, it is the duty of the sovereign to ensure that its support to growth drivers across sectors continues as part of the national journey. The state must preserve strategic stability not only against economic turbulence but also against the orchestrated disruptions of non-state actors, speculative capital, or geopolitical design that can unsettle domestic markets. Today’s sovereign must also navigate emerging and often invisible risks — from cyber manipulation and data weaponisation to speculative capital flows and geopolitical disinformation — many designed with intent to destabilise or derail.

Strategic Self-Reliance and the Path Ahead

It is also rather rich when Western media lecture India on the moral architecture of markets and the ethics of state–corporate engagement. Their own democracies are deeply entangled with concentrated private power. From the open courting of cryptocurrency lobbies in Washington’s new political calculus to the revolving-door intimacy between Big Tech and government, the line between governance and wealth creation in the West has long blurred. The post-pandemic surge in billionaire fortunes, the monetisation of political influence, and the normalisation of regulatory capture within advanced economies reveal that ethical capital is no longer a Western monopoly to preach.

Global history over the past half-century — from OPEC shocks to the 2008 financial crisis, from the Asian contagion to the weaponisation of supply chains — affirms that the modern sovereign cannot be a passive referee. It must be an active guarantor of order in the market, ensuring that national growth, investor confidence, and sovereign interests remain insulated from manufactured chaos.

India must stay the course on building a prudential business architecture that protects national interests while preserving market credibility. Our institutions must remain strong enough to withstand turbulence, yet agile enough to support domestic enterprise when it matters most. Protecting India’s own champions is strategic self-reliance, the economic expression of Atmanirbharta. The task before the State is to balance the discipline of markets with the duty of nation-building, ensuring that capital serves the Republic, not the reverse.

(Srinath Sridharan is Author, Policy Researcher & Corporate Advisor, Twitter: @ssmumbai.)

Views are personal, and do not represent the stand of this publication.