In late April, as hospitals in India were overwhelmed by sick patients and critical oxygen shortages, the corporate flagship of the country’s richest man spent £57m on a historic English golf club famously featured in James Bond films.
The awkward timing of the acquisition of Stoke Park in Buckinghamshire, one of several overseas deals in recent years by Mukesh Ambani’s Reliance Industries, is a stark symbol of the surging fortunes of India Inc at a time when the country faced its biggest crisis in decades.
A brutal second wave of Covid-19 infections in recent months caused untold human suffering and extracted a heavy economic price. Yet the upward march of the country’s largest companies continued despite the upheaval.
This divergence in fortunes of large and small companies, financial markets and economies is a global trend. The recent bullish mood among India’s corporate titans, stockbrokers and investors, however, has appeared particularly incongruous given the collective trauma of recent months.
Listed companies have reported record profits in the quarter ended March, according to the Centre for Monitoring Indian Economy. The National Stock Exchange’s Nifty 50 index, which tracks the 50 largest companies, surged to record highs this month while Indian billionaires such as industrialist Gautam Adani have shot up global wealth rankings.
Meanwhile, India faced a horrific Covid crisis. The latest wave was not as hard on India’s economy as last year, when a nationwide lockdown brought much activity to a halt. But at its May peak, the country reported more than 400,000 infections and 4,000 deaths a day, both figures believed to be vast undercounts.
Corporate India mobilised considerable resources to shore up teetering health systems. Ambani’s Reliance, for example, built makeshift treatment centres and donated large quantities of medical oxygen.
But the scars are worrying, with India’s recovery from a historic recession last year set back. As political scientist Pratap Bhanu Mehta wrote in the Indian Express this month, the country is for the first time in a generation “staring at the prospect of slower growth, rising poverty and a shrinking middle class”.
Many of India’s largest companies nonetheless find themselves in sweet spots. Foreign investors are pouring money into Indian equities.
“If [stock markets] were reflecting the reality of the median Indian . . . they’d be much more subdued,” said Devesh Kapur of Johns Hopkins’ School of Advanced International Studies. Nonetheless, “it’s saying something about people’s confidence in the future”.
Indian banks were protected from a surge in bad loans by emergency government relief measures. IT service groups such as Infosys are in demand as multinational clients shift to remote, cloud-based working. Industrial groups including steelmaker JSW are riding the global surge in commodity prices.
They are also the beneficiaries of deeper trends at home. Investors have rewarded those behind critical infrastructure such as ports or telecom cables, including Reliance and the Adani Group, with unparalleled riches in a manner evocative of America’s Gilded Age.
The consolidation of what had been India’s fragmented economy, a process that predated the pandemic, has only accelerated as big business proved better placed to move online and muscle aside smaller competitors. Many have also ruthlessly controlled costs, including by laying off workers.
“Industry consolidation is likely to continue with the dominant companies in each subsector gaining market share,” said Farida Khambata, co-founder of emerging market investor Cartica Management. “Given the benefits of scale and pricing power, these companies are likely to see serious earnings growth.”
India’s top 20 profit generators now account for 90 per cent of corporate profits, according to investment firm Marcellus, up from 14 per cent three decades ago.
Infections are now receding fast and investors can hope that India’s so-far sluggish vaccination campaign will make enough progress to limit the destruction of future waves, allowing the country to return to growth this year.
Yet the way in which the onslaught of cases widened the gulf in people’s fortunes has worrying implications for India’s already stark inequality. It also raises uncomfortable questions about how sustainable India Inc’s growth trajectory can be if it leaves so many in the country behind.