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 ** In most capitalist economies as the economy

grows monopolies and concentration of wealth occur & get stronger.  ** In India also this has occurredalbeit more severely.  IN PRE-INDEPENDENT INDIA: thanks to the Managing Agency System
 POST INDEPENDENCE: it only continued and

even now continues

What is Economic Concentration?

 Economic position which enables a concern

to command control over production, or market or employment in respect of any product or service.  May be through: considerable share of total production or Control over raw materials and other inputs, or  Exclusive ownership of know-how (Patents)  Or Power to influence supply or price etc.

 As per MRTP ACT:



Concentration may manifest in the following forms: a) Considerable share of productive capacity: --if a concern (by itself or with interconnected) controls 25% (33% originally) of total installed capacity, and assets not less than Rs3cr (Rs1cr earlier) = Dominant Undertaking. b) Control over Market: --controls not less than 25% of total supply or distribution = Dominant Undertaking.( by itself or with interconnected)

 c) Large Assets: Assets of Rs.20cr or more.

(Large Houses)  d) Considerable share of employment:

MAHALANOBIS Committee: 1964

 Found that concentration had increased

quite significantly between 1951 1958.


the share of 20 large groups was as high as 38% in the total paid up capital of the entire private sector. big and medium industrial units were the main beneficiaries of bank credit.



 A 5 member commission under the chairmanship of

K.C. Das Gupta was appointed in April 1964 and their report came in October,1965. ( whole time agency to enquire into and keep constant watch on M&RTPs)

 Findings:  2 main kinds of concentration: productwise and country-wise.

So also a third type: product cum country-wise concentration

Product-wise (Industry-wise) Concentration

 Production and distribution of a commodity or

service is controlled by a comparatively limited number of concerns, which are, in turn, controlled by a single family or a few families.

= if share of top 3 producers is 75% or more  Medium = 60% to 75%  Low = 50% to 60%  Nil = less than 50%.

Country-wise Concentration
 Where a large number of concerns engaged

in production or distribution of different commodities are in the controlling hands of one individual, or family, or business group.
 How identified:  In terms of business groups and business

houses accounting for 50% or more of total production of an item.

 There was substantial concentration both industry-wise     


and country-wise --Product-wise: -- examined 1298 products and found that: there was high concentration in 86.7% of the products examined. detailed study of 100 selected commodities: in 65 productshigh concentration( infant milk food, fluorescent lamps, soaps, matches, typewriters, foot wears, talcum powder, ) 10 products - medium(biscuits, fans, radio, cement) 8 low(Woollen fabrics, pencils) 17 - nil ( tea, coffee, sanitary-wares)

 Country-wise concentration:  where 50% or more of equity was held by a

person or his relatives.

examined 2259 companies. Of this 1609 (71%) belonged to 83 groups Of this, 75 business houses (8 being excluded having assets below Rs 5 cr.) accounted for 47% of total assets of non-govt. corporate sector and 44% of paid up capital (during 1963-64).

 1.Growth of joint stock companies and technological     

advances: also economies of scale 2.Inter-connections:--intercorporate investments interlocking of directors also M&As 3. Managing Agency system: 4. Controls by Govt: IL system 5. Inherent opportunities: only the big houses had the resources. 6. Assistance from FIs & banks: preference to large houses

 MIC felt(majority) concentration had fostered economic        

development in Indiaespecially managerial skill. So also evil effects: a. Exploitation of consumers Lack of competition b. large firms block entry of new and small firms c. economic disparities widen d. tempt to corrupt the political & adm.system e. misdirection of investment f. destroy small units g.

Recommendations ( Remedies)
 a) Non-Legislative measures:  1. permanent body for vigilance and taking action      

(MRTPC) 2. Streamlining Industrial Licensing 3. Import licensing 4. countervailing action by PSEs 5. consumer co-operatives: for distribution 6. restrain political parties 7. remove corruption

Legislative Measures
 MIC prepared a model legislation: the monopolies and

restrictive trade practices bill

 --keeping in mind the following 2 principles:  ** ensure highest production possible  ** ensure this with least damage to the public at large.  FOUND: on the basis of field studies made by it 

--m.and r.t.p.s were widely prevalent in India.


horizontal fixation of prices, exclusive dealing, resale price maintenance, price discrimination, tie-up arrangements.

 So also, blocking entry, full line forcing,

boycott, output restrictions, hoarding.

MRTP ACT,1969.




The liberalizations introduced in the 80s and 90s only further increased expansion of large houses. --the aggregate assets of 78 large industrial houses(as on 31-3-1990) were as high as Rs.49,254 cr; of this the share of top 20 houses came to 68.9%.

 large house= co./ house with assets of Rs.100cr or more, incl. all inter connected.  -- 4 Indian cos make it to Fortune 500 (July 13th, 2004): IOC, BPC, HPC, and Reliance.


 --positive role  --the restriction on big houses had adverse

effects.  Retarded competition, decelerated industrial growth, affected exports

 -- Birlas not allowed to expand in India: went to other

countries in ASEAN. They set up a viscose staple fibre plant in Thailand and exported fibre to India.

 they are too small when compared to

international giants.
--turnover of largest pvt sector co in India was only 2% of our GNP, whereas some of the MNCs have turnover > than the GNP of many countries. -- the largest pvt sector units are small even in comparison with some of our large public sector units

 -- minimum economic capacities  --widespread shareholding pattern  -- public sector monopoly is also bad.