Forty years ago, the combined value on the stock market of the listed companies belonging to the 30 largest business “houses” was Rs 6,200 crore. Gross domestic product (GDP) at the time was 28 times bigger (Rs 1.75 lakh crore). Most of the companies were in “primary” manufacturing: jute, tea, cement, sugar, steel fabrication, textiles. There has been dramatic change since then. The combined value of companies listed on the National Stock Exchange today is about 15 per cent more than GDP, which last year was Rs 197 trillion.
Strangely, the power of the “big monopoly” houses (seen from today’s perspective as having been tiny) was a hot political issue back then. Whereas today wealth creation through these companies is celebrated because many more retail investors have been brought in through the stock market and mutual funds; the business media have more of a voice; and there is only muted talk of the political control exercised by leading businessmen.
This legitimisation of capitalism (and, it seems, of crony capitalism too) has occurred in slow stages. There was first a turning away from state capitalism. The last major bouts of nationalisation were in the early 1980s — banks, Bombay’s textile mills and Calcutta’s engineering units — and delivered poor results. The decades of the 1980s and 1990s were a period of endless business controversy, even shaking up national politics, but Ambani, and subsequently Adani, has emerged unscathed. They and others like them seem to get their way with the government, and criticism seems futile. Meanwhile, there was reform: Delicensing, new sectors allowed to private enterprise, and foreign investment.
There was churn within the private sector. Many who could not cope with the change disappeared or became irrelevant — like the Mafatlals, Khaitans, Thapars, Modis and Sarabhais. In their place came the new stars from the worlds of finance and technology services, pharmaceuticals and auto. The stock market today reflects the results of these trends.
Of the 50 stocks in the Nifty 50 index, 11 are of companies in financial services, six in the auto sector, five in IT services and four in pharmaceuticals, while seven from the public sector are in energy. Outside of auto, manufacturing finds poor representation. And few conglomerate business houses remain; the Nifty has space for Tata (four companies), Birla (2), Ambani (1) and Adani (1). This is a world away from what existed in 1981.