Are the opportunities for creating great personal wealth in India going to be much fewer in the future than in the past?
That might seem a stupid question, when the bulk of the members of Business Standard’s Billionaire Club are first-generation entrepreneurs - men like Naresh Goyal and Sunil Mittal, Narayana Murthy and Subhas Chandra. It would also seem silly to draw the curtains on new billionaires when India is expected to double its per capita income every decade, and then accelerate. Surely, the story of wealth creation in India can only be beginning.
But look harder and you find that significant new wealth has been created in India in two ways: by being an early mover in a sector that has newly become available to private enterprise (telecom and aviation, for instance); or where new opportunity has been created by technology (like satellite broadcasting and software services).
Study industry structures as they have evolved, and the point becomes clear. No one expects another homegrown software giant (like TCS) to be born, all that you can hope as a new entrant is to be a niche player. Nor can you hope to displace the established players in telecom: Bharti, Hutch, Reliance... In aviation, Jet has taken leadership from Indian Airlines, and at most one or two others who have started up will make it to the big league.
Retail is still getting cranked up, but after Pantaloon and Shoppers Stop, Reliance and Trent, and perhaps Wal-Mart and one or two international giants, the market is going to look crowded. The financial sector has been an area of opportunity, but all the major segments (including newly opened up ones like insurance) are now occupied by strong players.
In the traditional industries, oligopolistic structures are now the norm. The big three in cars, for instance, account for more than 80 per cent of the market (Maruti, Hyundai and Tata); the big three in two-wheelers (Honda, Bajaj and TVS) account for over 90 per cent. Whether it is consumer softs or durables, petroleum or publishing, market shares are either getting set in soft concrete or the trend is towards consolidation (as in cement and liquor).
And almost anywhere you look, the barriers to entry are now pretty high (even in competitive segments like steel), while the existing big boys are hungry enough to leap at every opportunity they spot, even in unrelated areas of business.
Now, it is no one’s case that technological breakthroughs will cease (think internet telephony), or that there are no new sectors left to be opened up to private enterprise (all of India’s infrastructure sector waits, an obvious example being airport ownership and management), or that a developing economy will not throw up a variety of opportunities (as in entertainment). But it does seem that most of the major business sectors now have entrenched players in them. That means less opportunity for gate-crashing into the big league.
You could still hope to make it big if you get into container transport (which has just opened up, and an early mover is Rajeev Chandrashekhar), and sectors like mining (because the rules are still evolving), or textiles and construction (where no real giants exist as yet though the opportunities are substantial), or by looking at an old business in a new way (eg. no-frills flying). But the breakthrough areas are shrinking in number.
This is the sign of a more developed market. In other words, while the last 15 years have seen a flowering of enterprise because of the opening up of the Indian economy, today’s more open trading and investment system (which allows the big international players to come in) combined with the existence of a larger group of established domestic players means that new billionaire-hopefuls will have to fight much harder to make it to the big league.
That does not mean the task is impossible, but it is a safe bet that in our Billionaire Club 10 years from now, the proportion of first-generation members will have come down from what it is today.
T N Ninan is the editor and publisher of Business Standard, one of India’s leading business newspapers. An award-winning journalist and a member of various boards and professional bodies, he is a familiar figure on Indian national television as a commentator on economic issues. His weekly column, devoted to analysis of the Indian economy and business environment, now appears on FT.com every Tuesday. Visit the Business Standard website at http://www.business-standard.com