India Doesn’t Just Need Start-ups, It Needs Scale-ups That Become Global Giants
A statistic doing the rounds is that, at the current rate of profit growth, the taxes paid by Samsung and SK Hynix will be around $430 billion over the next three years, almost equal to half of South Korea’s national debt. Back home, amid the doom and gloom, two news items sparked hopes for India’s ability to build globally competitive giants. In early April, it was reported that Amul had become India’s first FMCG firm to hit a turnover of Rs 1 trillion. Then came news that Reliance Industries Limited had become the first Indian company to cross $10 billion in profits. These are milestones, but they are also signposts pointing to a larger challenge.
India had 35 companies with a turnover of over Rs 1 trillion in FY25. However, only one has crossed $10 billion in profits, a watershed moment for the Indian corporate sector. The United States and China boast of dozens of such firms, and Japan has multiple companies consistently above this threshold. The gap is not just a matter of national pride; it is a matter of economic competitiveness. Large, profitable firms drive productivity, innovation, and global influence. India has built large companies, but not enough that are globally dominant, innovation-led, and embedded in the highest-margin segments of the world economy.
A few questions come to the fore. How important is it to have large firms with big profit pools? Does this divergence between topline and bottom line in terms of scale point to any structural issue? Is there an issue of “economic populism” or anti-big-business sentiment that views profits negatively? The history of economic development suggests large, well-governed companies have been among the most reliable engines of productivity and innovation, creating the economies of scale necessary to compete on the global stage and raise living standards.
Let us start with productivity. Large firms spread fixed costs, such as those of research and development, compliance, and digital infrastructure, across vast output, driving down unit costs and raising efficiency. Innovation, too, is often scale-dependent. Breakthroughs require patient capital, tolerance for failure, and multi-disciplinary talent—attributes concentrated in large enterprises. The US technology sector illustrates this vividly. Global competitiveness follows from this capacity to invest and integrate. Large firms build brands, control distribution, and orchestrate cross-border supply chains. They shape standards and capture value in global markets. They are significant direct employers, and their larger contribution is often indirect: dense suppliers, service providers, and downstream distribution channels. They also contribute to high wages.
As for the structural issue, India’s corporate story should not be viewed only through the lens of scale via revenues. By that measure, India has made real progress. Reliance Industries has grown to become the largest private sector company in the country, with a market capitalisation exceeding that of many global giants. But scale via revenues is not the same as scale via profits. Revenue can be a function of low-margin, high-volume businesses. Profit is a function of pricing power, intellectual property, and global competitiveness.
India has built large companies, but not enough that are globally dominant, innovation-led, and embedded in the highest-margin segments of the world economy. In the US, the “Magnificent Seven”—Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla—dominate global technology markets. They command high margins because they own the platforms, the patents, and the ecosystems. India has no equivalent.
Global revenue exposure remains limited outside a narrow band of sectors, notably IT services, pharmaceuticals, and to an extent auto and oil products. Even here, the model is largely export-oriented services, assembly, or re-exports rather than ownership of products, platforms, or patents. In contrast, the world’s most valuable companies, from Apple to Toyota, derive their value from global market share, cross-border supply chains, and pricing power built on brand and intellectual property. India’s IT services firms are globally competitive, but they operate on a services model, not a product model. They are paid for their labour, not for their intellectual property.
Second, India’s corporate profit pool is still unusually concentrated in finance and commodities. Financials and commodity majors account for a disproportionate share of aggregate profits, with profit after tax contribution at 41 per cent and 19 per cent respectively. This is not unique to India, but the skew is more pronounced. These sectors are capital-intensive and often cyclical, with returns shaped by global price movements or credit cycles rather than sustained innovation. In advanced economies, a larger share of profits accrues to technology, pharmaceuticals, and advanced manufacturing, sectors where firms command durable margins through intellectual property and network effects.
Third, India’s presence in high-margin, innovation-driven sectors remains negligible. There are few domestic equivalents of frontier firms like NVIDIA that dominate critical nodes of the global technology stack. India’s digital economy has produced successful platforms, but most are domestically focused and operate in intensely competitive, low-margin environments. Global rents in software, semiconductors, and advanced industries continue to accrue to firms headquartered elsewhere.
This divergence is not simply a matter of top-down policies or corporate strategy; it also reflects fundamental conditions. India’s R&D spending, at sub-1 per cent of GDP, lags far behind that of peers. Access to patient risk capital, particularly for deep-tech ventures, remains constrained. Regulatory uncertainty and fragmented factor markets raise the cost of scaling across states and sectors. And while India has integrated into global trade, it is yet to fully embed itself in the most lucrative segments of global value chains.
India’s development journey is entering a new phase amid a fast-changing global backdrop. The next leap—jobs creation at scale and flow of investments—will not come from incremental growth but from creating many profitable firms. Hopefully, we have travelled some distance from the Economic Survey 2017-18—which observed that the country had shifted “from crony socialism to stigmatised capitalism”—so that profit isn’t a dirty word and businesses are not perpetually viewed with suspicion that hinders reforms and erodes investment sentiment.
To power India’s transition to a high-income economy, we need dozens more such domestic champions with the scale, ambition, and execution depth that earn more than $10 billion in profits. The Korean examples above or the US Magnificent 7 are cases in point. India doesn’t just need start-ups, it needs “scale-ups” that become global giants with large profit pools. The real question that needs answering by policymakers and corporates is: Are we optimising for scale (only via revenues) or global competitiveness (profits plus pricing power)?
Questions and Answers
Q1: What milestones did Amul and Reliance Industries achieve recently, and why are they significant?
A1: Amul became India’s first FMCG firm to hit a turnover of Rs 1 trillion, and Reliance Industries became the first Indian company to cross $10 billion in profits. They are significant as markers of India’s corporate progress, but they also highlight the gap between India and economies like the US and China, which have dozens of such firms.
Q2: What is the key structural issue with India’s corporate profit pool?
A2: India’s corporate profit pool is unusually concentrated in finance (41 per cent of aggregate profits) and commodities (19 per cent). These sectors are capital-intensive and cyclical, with returns shaped by global price movements rather than sustained innovation. In advanced economies, profits are driven by technology, pharmaceuticals, and advanced manufacturing.
Q3: What are the fundamental constraints preventing India from developing globally dominant, innovation-led firms?
A3: The constraints include: India’s R&D spending at sub-1 per cent of GDP (lagging behind peers), constrained access to patient risk capital for deep-tech ventures, regulatory uncertainty, fragmented factor markets that raise the cost of scaling across states, and limited integration into the most lucrative segments of global value chains.
Q4: What does the article mean by the distinction between “scale-ups” and “start-ups”?
A4: Start-ups are new ventures that may or may not grow into large firms. Scale-ups are companies that have successfully grown from start-ups to become globally dominant, innovation-led firms with large profit pools. The article argues that India needs more scale-ups that become global giants, not just more start-ups.
Q5: What is the “real question” the article says policymakers and corporates need to answer?
A5: The real question is: “Are we optimising for scale (only via revenues) or global competitiveness (profits plus pricing power)?” The article argues that India’s current focus on revenue growth has not translated into the kind of global dominance seen in countries like South Korea and the US, where companies command high margins through intellectual property and brand power.
