India’s Obsession of Turning Family Inc Into National Champions Must End

In 1987, a Chinese engineer named Ren Zhengfei, who was then in his early 40s, founded Huawei with about $5,000 scraped together from friends. He told collaborators that if the gamble failed, he might jump off the roof. Early on in this millennium, Elon Musk put $100mn of his fortune into SpaceX and burned through nearly all of it while trying to make a rocket. These founders risked all to fulfil their dreams. And their governments paved their path to success in myriad ways—most prominently by funding them with billions of dollars, directly or indirectly—to create national champions out of them.

India too has been trying to produce such national champions, but its efforts have yielded no global giant as yet. Some would say we took the wrong punt by betting on legacy conglomerates by awarding them an unending largesse of tariff protections, regulatory leeways, tax cuts and subsidies—even as they eschewed risk.

It’s no surprise that India’s top 5 family businesses accounted for over 60% of the top 25 family business groups' revenues in 2020, according to a new study by World Bank Economic Review. The unsaid pact was that as friendly policies bolster their scale and cash reserves rapidly, the ‘national champions’ would make ambitious bets. While the government held its end of the bargain, the giants of India Inc did not.

Earlier this year, the Economic Survey was blunt in its reprimand: the Indian corporate sector, historically risk-averse and comfortable with technology licensing or import, has failed to become the primary engine of R&D. Business spending accounts for just 41% of India's research outlay, against 77% in China and 79% in Korea. India's 10 most profitable non-financial firms, with $43bn in profits, together spent under $1bn on R&D in 2021, according to data-platform India R&D Observatory. Their capital sits instead in real estate-linked, regulated or quasi-monopolistic sectors.

The fact is India’s policymakers can’t rely on its legacy corporations to become its ‘national champions’ in frontier tech. They have to look elsewhere. The obvious alternative, and perhaps the only one available, is the young and restless brigade of entrepreneurs who seem to be attempting astonishing things.

Last month, on Independence Day, Shaurya Sinha, a Stanford graduate from Delhi, released a documentary on young start-up founders in India. Their sheer confidence is striking. These kids are dropping out of college and talking about building an Indian challenger to Boeing and Airbus. Titled 22nd Century Indians, the film captures their raw fearlessness and unfettered ambition.

Our cover story ‘2026: A Space Odyssey’ talks about how this unbridled gumption of Indian start-ups is already playing out in the spacetech sector. From just one such start-up in 2014, the number has raced past 450. Five years ago, no Indian entity other than Isro had put a satellite into orbit. Today, there is a growing fleet of privately built satellites.

But let’s not preen about ourselves yet. The kids have much bigger dreams. They want to be the first and the best at things. They want to conquer frontiers.

It is time that India’s policymakers and civil society come out of their fetish to make legacy firms national champions and stop laying out the red carpet for them time and again. Instead, let’s extend the same level of policy fuel to our start-ups and give them a chance to lift off like rocketships.

When Vikram Sarabhai used a bullock cart to move around the rocket for India’s first launch in 1963, the year our per capita income crossed $100, many of our citizens were still going to bed hungry. In a sense, they sacrificed so that the 22nd century Indian could dominate the world. We can’t let them down.