Indian Business Groups and Their Dominance in the Indian Economy

Business groups have played an important role in the development of the Indian economy by filling the institutional voids arising from weak markets and institutions. As these economic institutions developed, the need for business groups was expected to reduce. There does exist a reducing trend, but at the same time, average size and average sales of business group firms are increasing. This anomaly raises a question. Are all business groups losing their importance or is it only a few of them? Our results demonstrate that expectation of diminishing importance does not hold true for top group firms. We show that top group firms have been able to capture appropriate growth drivers resulting in economic dominance and concentration of economic power.