Monopoly Power and Firm Dominance in Indian Manufacturing Sector: An Empirical Analysis

The recently legislated Competition Act of India (2002) marks a clear distinction from the erstwhile MRTP Act by shifting the focus from dominant firms to firms who are abusing their dominant positions. This shift is based on the understanding that only when large firms adopt anti-competitive practices, would it hinder competition and the largeness of the firms alone is no hassle in the operation of competitive forces in an economy. In fact, punishing a firm just for the fact that it is large would amount to punishing efficiency in some instances. The present paper is an empirical attempt to identify the presence of dominant enterprises operating in Indian manufacturing sector. It also attempts to distinguish dominant firms which are efficient in their operations from the inefficient ones. The results reveal that, among the selected industries, there are only a handful of dominant firms in Indian manufacturing sector and majority of these dominant firms are in fact cost efficient in their operations.