The Dominance of Family Businesses in India
In India, family businesses play a pivotal role in the economy, with the ten most valuable groups worth nearly $900 billion according to Hurun India. A recent report by The Economist reveals that the total value of the 100 largest family business groups in India reaches $1.4 trillion, with first-generation firms accounting for only a fifth of this value. Remarkably, about 90% of listed companies in India are controlled by family firms, a stark contrast to the situation in the West where family ownership is less prevalent among major corporations.
The influence of family businesses in India has profound implications, particularly in how they navigate corporate leadership and succession. High-profile disputes, such as the one between Mukesh Ambani and his brother over Reliance Industries, highlight the challenges these firms face. Such disputes often lead to the fragmentation of business empires, reshaping the landscape of Indian commerce. Foreign companies, like Disney, have recognized that collaborating with well-connected families is crucial for success in the Indian market.
The Changing Landscape of Indian Family Businesses
Historically, Indian governments implemented laws post-independence to curb the dominance of a few families in the economy. However, the regulatory environment has paradoxically favored large family businesses, allowing them to thrive amid a backdrop of weak institutions. These firms excel in attracting capital, negotiating labor relations, and influencing government policies, bolstered by the absence of an inheritance tax since 1985. This lack of tax has facilitated the continuity of family control across generations.
Despite this entrenched dominance, signs of change are emerging within the Indian business landscape. For instance, Reliance Industries is poised for a leadership transition, with Manoj Modi expected to take over after Mukesh Ambani's departure. Furthermore, the Tata Group has seen a dwindling presence of family members in its leadership, with the last family member, Ratan Tata, stepping down in 2012. Similar transitions have occurred in other family-run businesses, such as Mahindra Group and Marico, where leadership has shifted to non-family executives. While the growing dynamism of the Indian economy may gradually dilute the grip of family businesses, this transformation is anticipated to be a slow process, as exemplified by Gautam Adani's commitment to family succession in the Adani Group.
