JP Morgan economist warns rising industry concentration is hurting investment in India

Jahangir Aziz, co-head of macroeconomic research at JP Morgan, has said that the increasing concentration of industry in India is a key factor behind the persistent weakness in private corporate investment. In an interview with The Indian Express, Aziz noted that the share of private corporate investment in GDP has remained stuck at around 10-11% for over a decade, despite various ad-hoc explanations such as the banking crisis, GST implementation, and the COVID-19 pandemic.

Aziz pointed out that over the last 15 years, while India's GDP has doubled, the top five leaders in most sectors have remained unchanged, indicating a lack of churn and competition. 'How can an economy more than double without any churn from the leadership of any sector?' he asked, highlighting that new entrants are often conglomerates rather than small firms growing big.

He argued that the war in West Asia is not the defining issue for global capital flows, as other factors like trade uncertainty and AI-driven capital expenditure are more influential. While the US has seen massive inflows into AI-related stocks, Europe and Asia have experienced rising precautionary savings and dampened consumption and investment due to heightened uncertainty.

In India, the weak domestic demand and lack of investment are systemic, requiring a deeper examination beyond temporary shocks. Aziz stressed that the rising concentration in industries is a 'casualty' for investment, as it stifles competition and innovation.