Save Us From Our Champions

India is on a path to overtake Japan and Germany to become the third largest economy in the world in the next year or two. Greater size means greater global heft. However, there’s one aspect in which we clearly underperform not just these economies but much smaller ones. India does not have one company that is known across the world for its products — no Nintendo, Sony, or Toyota, no Mercedes, Porsche, or SAP. Why do so few of the products our national champions create dominate internationally?Our large domestic market, for example in passenger cars, gives us a base on which to innovate. High tariffs keep imports out. Yet, Indian car exports are modest, focused on niche markets in Latin America, West Asia and Africa, where the durability and affordability of Indian models are prized. Not one car model has been sold in large quantities in the developed world. In contrast, China produces some of the leading passenger EVs, dominating every aspect of the supply chain, including autonomous driving systems and fast-charging long-range battery packs. A similar story plays out in services. The run-up to Y2K gave our software industry scale, yet where is the Indian TikTok, DeepSeek, ChatGPT, or even Fortnite? Yes, we have domestic versions of some of these, but they have no global footprint because they are largely imitative products. Young Indian entrepreneurs want to take on the world and beat it, but it’s early days still for them. Instead, our economic system is dominated by national champions who are giants domestically but minnows internationally. When govt complains about tepid domestic corporate investment the retort from industry is that domestic demand is weak. Why then aren’t our large corporations looking to dominate international markets, much as many East Asian firms have been doing for decades? The answer obviously has many strands. In the worst days of the licence permit raj, our industrialists chafed from the inability to expand at will, but enjoyed the lack of competition and govt cronyism. Recently, some aspects of those unfortunate times have re-emerged. Are foreign imports proving tough competition for our large players? Place a tariff on them, no matter how many Indian firms use imports as inputs. Are foreign direct investors like Walmart challenging our domestic champions? Place regulatory restrictions on them (equally, change regulations in favour of domestic players) and initiate anti-trust investigations to handicap foreign players’ ability to compete. Did our large firms get into trouble through aggressive bidding for govt contracts? Change the terms of the contract to protect “vital national assets”. I (and others) have termed this “riskless capitalism”, and since our national champions benefit from it only domestically, foreign markets are unattractive. Other implications follow. As the domestic market grows larger, the problem gets worse since our large players can make yet more money from their inward focus. Also, why innovate when steady imitation is enough to keep domestic consumers satisfied? And why produce for foreign markets unless govt offers substantial subsidies — PLI anyone?Our generic pharmaceutical manufacturers, while internationally focused, have not made the transition to developing original drug formulations. Similarly, our software giants have few recognisable global products, let alone leading the thrust into AI. The reason is we do too little frontier research at our top universities, and the avenues to commercialising that research are weak. What’s to be done? Rather than mollycoddling our large firms in every way possible, we must subject them to more domestic competition by reducing import tariffs, encouraging more FDI, and limiting the monopolisation of key sectors by domestic business houses. Rather than seeing the ongoing negotiations with US on tariffs and other competitive barriers as a problem, let us see it as an opportunity to force domestic businesses to up their game. Independent elements of the press, both at national and state levels, can also help by highlighting instances of govt-corporate cronyism. Competition will encourage corporations to seek out domestic research that helps them build state-of-the-art products. Govt also needs to aid innovation by increasing funding to our best universities, reducing bureaucratic hurdles to accessing and using funding, even while demanding more high-quality research from its faculty. The Anusandhan National Research Foundation is a step in the right direction, but its resources need to be multiplied manifold. Also, given the increasingly hostile environment to both immigrants and top universities in the industrial world, govt, partnering with domestic businesses and universities, has a golden opportunity to attract some of our talented diaspora home to help expand innovation in key thrust areas. What if we don’t become an innovative nation? National wealth is increasingly composed of royalties and rents associated with intellectual property. If we are to grow rich as a nation before we grow old, we must increase GDP growth by innovating more. Also, for the foreseeable future, the combined military weight of India’s hostile neighbours will far outweigh India’s own military assets. As Ukraine demonstrates, to deter adventurism we will need better, smarter equipment and tactics. If we are to defend ourselves in an increasingly hostile world where national boundaries have little meaning, we have to innovate more. Ultimately, we cannot be content with becoming the third largest economy in the world. We must become one of the most innovative countries by increasing competition and enlisting the capabilities of our large population. As a collateral benefit, our firms will become household names globally.The writer is a professor at University of Chicago