Daybreak - India's "family" problem

Episode Date: May 25, 2026

From airports to cricket broadcasts, India's family conglomerates keep turning up everywhere. According to the 2024 Barclays-Hurun report, one family's wealth alone equals nearly one-tenth of everything India produces in a year. India is running a version of the economic playbook that South Korea and Indonesia once ran — protect your conglomerates and let them do the building.South Korea came through it, at enormous political and economic cost. Indonesia's economy contracted by 13% in a single year.India is somewhere earlier in that story. In this episode of Daybreak, host Snigdha Sharma asks which ending we are heading toward.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Why does Indian business look like the way it does? Dvigendritri Patti spent over two decades at IAM Ahmedabad trying to figure this one question. And his answer, published as the Oxford History of Indian Business, traced it back to centuries. He says that the joint family system gave Indian merchants something that no other institution could. A way to hold capital and risk together within a circle that outside. iders could never enter. Think, collected capital, and their own trusted networks, which in turn gave them the ability to spread their bets across industries when any single one failed.

The Berlars, the Tatar's, most family conglomerates that we know in India, built their empires on exactly this logic. And it goes back right to the Mughal era. Last week, I was going through my own episode archives of Daybreak, and I noticed that I had done three episodes in a row, without realizing that they were all basically about the same thing. Monoplies. One was on FIFA's broadcast right negotiations

that ended with the world's biggest sporting body having nowhere to go in a country of a billion and a half people. Then there was the one about how rival Bollywood Studios are selling significant stakes just to stay in the same conversation as Gio Studios. The third was how telecom companies are watching their most valuable infrastructure assets. said become irrelevant since the day Adani bought the airport buildings that they run through.

In fact, the 24 Baclays-Hurin report put a number to this. One family's accumulated wealth equaled one-tenth of everything that India produces in a euro. No prizes for guessing which family. Now, something like this happened in South Korea. Samsung, for example, contributed 13% to the country's GDP. in 2024. But it took millions of people in the streets and a president going to prison to even begin asking whether the bargain had gone too far. In India, we are much earlier in that arc, which is why I think it is worth looking at whether the countries that ran this model before us

have anything useful to tell us. Some of them grew through it, one of them didn't survive it. Welcome to Daybreak, a business podcast from the Ken. I'm your host Nick Da Sharma and I don't chase the news cycle. Instead, every day of the week, my colleague Rachel Vargheese and I will come to you with one business story that's worth understanding and worth your time. Today is Tuesday, the 26th of May. In 1961, Park Chung-I took power in South Korea through a military coup. But there was one big immediate problem that he was faced with

that military strength alone could not fix. South Korea was, by almost every measure, one of the poorest countries in Asia. So his solution was to pick up a handful of family-run firms and funnel them state capital with one condition attached, hit the export targets, or lose everything that the state had given them. All the most famous South Korean companies that you know from Samsung and Hyundai to LG grew into what they,

are because a dictator with a development plan decided that they would and made sure that they had no choice but to deliver. And it worked in a way that still leaves economists scratching their heads. South Korea went from a per capita income below Ghana's in 1960s to one of the wealthiest economies in Asia within a single generation. Princeton political scientist Atul Koli spent his entire career studying why. His conclusion was this was because Korea's state directed its conglomerates. Basically, the government set the targets and the rewards followed only when the Chibbles or the family-run businesses delivered.

The state held the leash and it was very clear that it was willing to use it. The numbers that this model eventually produced are worth sitting with. By 2018, Chabels held 70s. 7% of Korea's market capital and employed only 12% of its workers. So the companies that owned the most of the economy employed only a fraction of the people in it. In other words, the economy had grown enormously, but the people inside that growth as workers rather than shareholders were getting a shrinking share of it. Indonesia actually ran the same model under Soharato across roughly the same decades.

Same logic, pick your conglomerates, protect them and let them do the building. The big difference, though, was that Indonesia never imposed the kind of discipline that South Korea did. There were no export targets, no performance benchmarks, and no credible threat that the state would withdraw support if the conglomerate underperformed. Naturally, these family businesses became over leveraged. They borrowed far beyond what their underlying businesses could support because they knew that the state would not let them find. So when the Asian financial crisis arrived in 1997, that assumption turned out to be wrong. The Indonesian economy contracted by 13% in a single year. Arguably, the worst collapse in Asia in an economy that had been one of the region's fastest

growing just months before. Ordinary Indonesians saw their savings wiped out as jobs vanished and food prices became unaffordable. This is the difference that Koli's framework makes legible. When conglomerates grow politically untouchable, the state loses its capacity to hold them accountable like in Indonesia. South Korea just about noticed it before it was too late. You see, the bargain was never really about whether to have powerful conglomerates in the first place. Every major Asian economy made that choice. The real question is what the state is. state demands in return, and whether it retains the institutional strength to keep demanding it.

Which brings us to India. And to a question that is harder to answer than it might appear, which version of this bargain is India actually running? More on this in the next segment. In 2023, Viral Acharya, the former deputy governor of the Reserve Bank of India, published a paper through the Brookings Institution that caused quite a furor. and I'm sure some of you remember. Many opids were written about it. In the paper, Acharya stated that India's big five conglomerates

held 10% of all non-financial assets in the country in 1991. And by 2021, it was up to 18%. Meanwhile, the companies just below them, the next five business groups, saw their shares halved in the same period. The middle tier of Indian business had started discered. appearing. And this is where the Indian case becomes unique. South Korea's Chabels were built to export. They had to prove themselves in an open global market against

foreign rivals. India's Big Five have mostly been shielded from that test through tariff walls and preferential domestic policies. But the logic for shielding them does make some sense. If India does not build firms at scale, the likes of Amazon, Alibaba and Tencent will occupy that space instead. In policy circles, you'll hear people often give the example of the European Union. The EU never built its own platform giants, which is why European tech is now mostly absent at the global level. And here is why we need to understand and acknowledge the difference between a conglomerate that grows through competition. and one that grows because of a protective regulatory environment. Acharya's data suggests that India is getting more of the second kind.

He is very explicit about what drove this growth. He says it's mainly because of preferential project allocation and regulatory agencies turning a blind eye to predatory pricing, not organic competitive superiority. Now, here is where it gets even more intriguing. The same conglomerate can embody both versions of this story. For example, when Reliance launched geo, data prices collapsed and hundreds of millions of Indians got affordable internet for the first time.

It was democratizing the internet. And this is a form using scale to deliver something that the market had failed to provide for a decade. But GeoStar controlling sports rights so completely that FIFA had nowhere else to go is the other version of the story. Essentially, scale being used to make competition structurally impossible rather than actually winning it. This gap between the two versions is exactly what Acharya is pointing at when he talks about the ability to exert extraordinary pricing power and capture economic rents. Nuriel Rubini, the economist who predicted the 2008 financial crisis,

named the political dimension of this. These conglomerates, he wrote, have been able to capture policymaking to benefit themselves. Interestingly, I also recently did an episode on Adani's very own think tank. You'll find a link in the show notes. Now, Rubini at the Economic Times Global Business Summit, the same month, described the downstream consequence of this. This degree of oligopoly will eventually hamper competition, kill new entrants and startups and drag down India's total factor productivity growth.

But we as consumers rarely see this in the moment. UPI works, Geostar streams the IPL. The convenience is very genuine, which is precisely how the lock-in deepens without anyone actually choosing it. Which brings us back to Koli's framework. Korea's state held the leash over its conglomerates. Acharya's paper documents exactly the condition. that make that kind of disciplined harder to sustain in a country like India.

The big five family-run businesses have grown through preferential project allocations and regulatory agencies that have looked the other way here. Their political relationships deepen with every new sector that they enter. And here is where the Indonesian example makes sense. The conglomerates there looked functional in 1995. The economy was actually growing around them. But the debt that had accumulated quietly and the political protection they had made it impossible for a correction to happen. So by the time that the crisis arrived, there was nothing left with which to respond.

In India, Archariah had argued that conglomerates have taken on excess debt to fund expansion with an implicit, too big to fail perception protecting them from market discipline. But we are at a much earlier stage of the arc. The numbers still look all right and the costs have not yet arrived in a form visible enough to demand a reckoning. But let us go back to Dvajendra Tripati's observation, that India's family conglomerate model goes back centuries and that it has outlasted empires and that it is a structural feature of how Indian capital organizes itself. So can we do what Korea did to its shables?

Discipline them and extract something that, serves more than just the families at the top. To be fair, South Korea managed it, yes, but barely and at an enormous political cost and because of strong independent institutions. Do we in India even have the institutional architecture to try? Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of a subscriber-only offerings and a full

subscription offers daily, long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted and produced by my colleague, Snitha Sharma, and edited by Rajiv Sien.