Not all of India Inc is shining. Big companies are getting bigger, while smaller ones find their sales and profits diminishing.
The level of concentration in Indian industry has increased dramatically in the last decade. Liberalisation has benefited the bigger companies far more than the smaller ones.
India Shining: Complete Coverage
The top 100 companies by sales have collectively improved their share of the net profits of the top 1,000 companies, from 62.48 per cent in 1993-94 to 87.03 per cent in the first nine months of 2003-04.
In sharp contrast, the share of the next 100 companies (ranked 101 to 200 in the top 1,000 sample) fell from 13.2 per cent in 1993-94 to 5.61 per cent in the first nine months of 2003-04.
Further, while the bottom 200 companies, ranked 801 to 1,000, accounted for 3.06 per cent of the net profits of the top 1,000 companies in 1993-94, they cumulatively made losses in the first nine months of 2003-04. Part of this is because the bigger companies were able to take better advantage of lower interest rates.
But the picture is no different when it comes to top line growth. The top 100 companies accounted for 74.46 per cent of the sales of the top 1,000 companies in India Inc in the first nine months of 2003-04, compared with 60.20 per cent in 1993-1994.
Contrast this with the bottom 500 companies, whose share stood at a mere 4.99 per cent of the sales of the top 1,000 companies in the first nine months of 2003-04, compared with 11.22 per cent a decade ago.
However, India Inc's top 1,000 has changed substantially in the past decade, with new companies joining and old ones dropping out. But the picture does not change when a common sample of 500 firms is taken for both 1993-94 and 2003-04.
The top 100 of these 500 firms increased their share of net profit from 74.92 per cent in 1993-94 to 94.38 per cent in the first nine months of 2003-04.
Similarly, they increased their share of sales from 74.50 per cent to 83.20 per cent. In contrast, the bottom 200 firms saw their share of net profit drop from 6.35 per cent to a net loss and sales from 7.48 per cent to 3.54 per cent.
More importantly, the bottom 200 companies have seen their net profits turn into net losses over the period. Clearly, while the bigger companies have grown exponentially in the last decade, the smaller ones have their backs to the wall.
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