Are the Big 5 to blame?

While India's consumer price (CPI) inflation rate fell slightly to 6.44% in February from 6.52% in January, CNBC, "At 6.2% core CPI inflation, which leaves out the more volatile food and fuel components, was unchanged in December and January. Rounded to one decimal place, core inflation has been above 6% for 21 consecutive months, which is the upper tolerance limit of the Reserve Bank of India." HT. It was 6.10% in February 2023. IIFL. "India's biggest conglomerates, which wield enormous pricing power in the retail, resources and telecommunications sectors are contributing to elevated inflation and should be broken up." ET. "The 'Big 5' consisting of Reliance Group, Tata Group, Aditya Birla Group, Adani Group and Bharti Telecom have grown at the expense of smaller local firms, said Viral Acharya who was Reserve Bank of India's deputy governor between 2017 and 2019. At the same time, the government's 'sky high' tariffs have shielded these conglomerates from competition by foreign firms." "Part of Acharya's reasoning was that Indian consumers could not fully benefit from input price declines as the Big 5 companies control manufacturing of metals, coke, refined petroleum products as well as retail trade and communications." "India has moved to an economic model where a few 'national champions' - effectively large private oligo-polistic conglomerates - control significant parts of the economy," agrees Prof Nouriel Roubini. And "India is moving toward more protectionist import-substitution and domestic production subsidization (with nationalistic overtones), both of which insulate domestic industries and conglomerates from global competition." This policy is "stifling innovation and effectively killing early stage startups and domestic entrants in key industries." However, Madan Sabnavis, chief economist at the Bank of Baroda, said that even in "airlines - where most of these conglomerates do not have a presence - prices have been consistently high. He adds that the sectors that feed into core inflation at the consumer level - recreation, education, health, household goods, consumer care - do not have the presence of the big five either." BBC. We don't know what role taxes have to play in keeping prices high. "No Industrial policy tool is as heated and scorned by free trade economists as tariffs. Yet, both the UK and US were heavy users of tariffs to protect their infant industries when they were underdeveloped," wrote Diva Jain. At the same time, "In recent months, India has embarked on a signing spree and operationalized free trade agreements (FTAs) with the UAE and Australia. An FTA with UK is in advanced stages of negotiation," wrote Diva Jain. "But, "while individual FTAs have a limited effect on export competitiveness (as in our case), a strategic 'noodle bowl' of FTAs could enable a country to create trade flows and climb higher on the value chain." Will the big five survive open competition? Will they allow it?