By Gajendra Singh
India’s economic landscape is undergoing significant transformation, marked by rapid technological advancements and increasing market dominance by large corporations. While this growth brings many opportunities, recent market events have raised concerns about the concentration of market power and its potential to disrupt the economic equilibrium. Instances like the sharp hike in mobile data prices, the shortage of essential medicines due to API supply chain issues, and rising electric vehicle (EV) prices illustrate the challenges of balancing corporate growth with consumer welfare. These developments underscore the need for fostering healthy competition and boosting domestic production to ensure sustainable economic growth.
The Rise of Market Concentration
The latest Herfindahl-Hirschman Index (HHI) Survey by the Competition Commission of India (CCI) provides a stark picture of market concentration across critical sectors:
Telecom Sector: Reliance Jio, Bharti Airtel, and Vodafone Idea (Vi) control 82% of the market, with Jio and Airtel alone accounting for 67%.
Banking Sector: Five major players, including SBI (23%), HDFC (16%), and ICICI (13%), dominate 71% of the market share.
Pharmaceuticals: India remains 70% dependent on imported active pharmaceutical ingredients (APIs), which makes the sector highly vulnerable to global supply chain disruptions.
Electric Vehicles: Three companies—Tata Motors (52%), Mahindra (23%), and MG (11%)—command 86% of the EV market.
E-Commerce: Amazon (32%), Flipkart (30%), and Reliance (18%) hold a combined market share of 80%.
Such monopolistic tendencies create significant challenges for small and medium enterprises (SMEs), which account for 30% of India’s GDP and 45% of exports. Struggling to compete with corporate giants, many traditional businesses risk extinction, further aggravating market concentration and stifling innovation.
Impact on Consumers and the Economy
For the average Indian consumer, the consequences of this market concentration are profound:
1. Rising Prices: As competition decreases, prices tend to rise. The 40% hike in mobile data costs is a direct result of limited competition.
2. Reduced Accessibility: The merger of major banks has led to the closure of rural branches, restricting financial services in underserved areas.
3. Supply Vulnerabilities: Dependence on imported APIs has caused medicine shortages, jeopardizing public health.
4. Limited Choices: The dominance of a few players in the EV and e-commerce sectors reduces consumer options and undermines the spirit of a competitive market.
These challenges highlight the urgent need for regulatory interventions to ensure fair competition and protect consumer interests.
A Path Forward: Promoting Healthy Competition
To address the structural issues in these sectors, India must adopt a multi-faceted approach:
1. Telecom Sector
The telecom industry’s high market concentration calls for measures to encourage new entrants and support smaller players. Regulatory bodies should ensure fair access to infrastructure and prevent predatory pricing practices that drive smaller competitors out of the market. Promoting regional telecom providers and leveraging public-private partnerships could also balance the market dynamics.
2. Pharmaceutical Industry
The pandemic exposed India’s vulnerability in the pharmaceutical supply chain, emphasizing the need for self-reliance in API production. Reducing import dependency from 70% to 40% within five years is an achievable target. Incentivizing domestic manufacturing through subsidies, tax benefits, and research grants can foster innovation and strengthen the sector. Establishing pharmaceutical clusters and streamlining regulatory approvals will further support this transition.
3. Banking Sector
While consolidation has strengthened major banks, it has marginalized smaller financial institutions and rural branches. Integrating traditional financial services with digital platforms can enhance inclusivity and accessibility. Encouraging regional banks and cooperative institutions to innovate will ensure financial services reach underserved areas.
4. Automobile and EV Industry
India’s ambitious target of achieving 30% EV penetration by 2030 hinges on reducing dependency on imported components. Developing a robust domestic supply chain for batteries and other critical EV parts is crucial. Government support for EV component manufacturing, coupled with initiatives like the Production Linked Incentive (PLI) scheme, can accelerate this process.
5. E-Commerce Sector
The e-commerce space requires stringent regulations to ensure fair competition. Addressing aggressive pricing strategies and creating opportunities for smaller players can prevent monopolistic practices. Establishing an Indian e-commerce platform that promotes local businesses and products can level the playing field.
The Role of Government Policy
The government must play a proactive role in fostering a competitive environment that supports domestic production and protects consumer interests. Key policy recommendations include:
Regulating Market Concentration: Introducing stricter antitrust laws to prevent monopolistic practices and ensure equitable market share distribution.
Encouraging Start-ups: Providing financial and technical support to new entrants across sectors to stimulate innovation and competition.
Promoting ‘Make in India’: Expanding the scope of the ‘Make in India’ initiative to include high-tech industries like pharmaceuticals and EVs.
Incentivizing Exports: Supporting SMEs through export incentives and helping them integrate into global value chains.
Reducing the average HHI across key sectors over the next decade should be a priority to distribute the benefits of economic growth equitably.
A Balanced Market Structure for a Global Superpower
India’s journey to becoming a global economic superpower hinges on achieving a balanced market structure. By promoting healthy competition, reducing market concentration, and supporting domestic production, the country can:
Drive Innovation: A competitive market fosters innovation, improving the quality and diversity of products and services.
Enhance Consumer Welfare: Consumers benefit from lower prices, better quality, and greater choices in a competitive market.
Strengthen Economic Resilience: Reducing dependency on imports and building robust domestic industries enhances economic stability.
Conclusion
India stands at a critical juncture in its economic journey. The challenges posed by market concentration and corporate dominance require immediate attention to ensure inclusive growth. By implementing policies that encourage competition and support domestic production, India can create an equitable economic environment that benefits businesses, consumers, and the nation as a whole.
As the world’s fifth-largest economy, India has the potential to set an example for sustainable and inclusive growth. A mantra of healthy competition and robust domestic production can guide this vision, ensuring that the country’s economic progress uplifts every section of society and cements its place as a global economic leader.
