Beyond Sanyal's Sensationism: Why Institutional Continuity Matters in India’s Industrial Growth

In recent months, a rehashed view has been gaining currency in Indian economic discourse—most prominently articulated by popular economist Sanjeev Sanyal—that a healthy economy requires continuous corporate churn. According to this argument, each generation of large firms should be replaced by a new generation; today’s largest companies should not remain so a decade later. In the Indian context, legacy conglomerates are portrayed as self-preserving, inward-looking, and insufficiently innovative, while new firms are cast as the rightful agents of dynamism.

At first glance, this thesis is academically elegant. On closer inspection, it is economically misleading and strategically obstructive.

The Wrong Question: Startup vs Legacy

The most fundamental flaw in the “continuous churn” narrative is that it asks the wrong question. From a policy perspective, it should not matter whether a firm originates as a startup, a family conglomerate, a public-sector enterprise, or a cooperative. What matters is whether the firm has matured institutionally.

A mature firm is one that:

attracts capital from diverse, non-captive sources,

graduates to public markets and accepts scrutiny,

builds governance structures beyond founder control,

and scales operations with accountability.

Economic progress lies in this process of institutional maturation, not in the symbolic replacement of one set of large firms by another.

The Lazy Claim That Legacy Firms Do Not Innovate

The assertion that Indian legacy companies are not innovating reflects intellectual laziness rather than empirical rigor. It survives only because innovation is narrowly defined as digital, consumer-facing, and software-heavy.

In reality, most innovation and capacity expansion in India’s core sectors—steel, cement, aluminium, oil and gas, coal, mining, power, ports, airports, conventional automobiles—are being driven by Indian legacy industrial conglomerates ('incumbents'). Here, innovation does not announce itself through apps or platforms; it manifests as:

higher throughput per asset,

lower cost per tonne,

energy efficiency gains,

logistics optimisation,

materials substitution,

and process automation at scale.

These forms of innovation directly determine national competitiveness. Dismissing them because they lack narrative glamour is not serious economics.

Capacity Expansion Is Not Optional—It Is Foundational

An excessive fixation on innovation alone obscures another macroeconomically critical variable: capacity expansion.

For a country of India’s scale, national affordability, supply security, employment creation, and trade balance depend on absolute capacity. Innovation without capacity keeps prices high, access limited, and import dependence intact.

It is, therefore, significant that many Indian legacy industrial conglomerates have recently announced unprecedented capacity expansions — measured not in marginal percentages but in multiples. Simple, conglomerate-wise searches at the Economic Times or BusinessLine would give a good picture. Such investments involve long gestation periods, irreversible capital commitments, and substantial execution risk. They cannot be replicated in laboratories or incubators.

In several sectors, innovation is important but insufficient. One cannot build a 10 MMTPA steel, cement, or aluminium plant through intellectual novelty alone.

Critique Must Be Conditional, Not Categorical

None of these implies that legacy firms should be immune from criticism. Where incumbents fail to move up the value chain or neglect backward integration—as India’s IT services industry arguably have—they should be called out. But such critique must be sector-specific and conditional, not generalized into a blanket indictment of all large, established firms.

A healthy economy is one where there is space for:

startups that explore and experiment,

incumbents that scale and stabilise,

government-owned firms that anchor strategic supply,

cooperatives that address distributional gaps,

and new-age conglomerates that emerge organically.

In other words, economic vitality comes from coexistence and competition, not from forced succession — and this precisely should be the prescription for the Indian economy. 

The Deeper Problem With the Churn Narrative

The idea of continuous churn borrows intuitions from venture capital cycles and consumer tech markets, where capital is modular, assets are fungible, and failure is relatively cheap. These assumptions do not hold in infrastructure-heavy, capital-deep sectors that define India’s development trajectory.

In such sectors, institutional memory, balance-sheet strength, and execution capability are productive assets, not dead weight. Treating continuity as a pathology rather than a resource, risks discouraging precisely the kind of long-term capital formation India needs at this stage.

Conclusion: Scale With Accountability, Not Symbolic Disruption

Criticising legacy conglomerates and family scions may sound well in seminar rooms and podcast studios, but building and scaling heavy industries, infrastructure, and logistics chains is not a theoretical exercise. It demands capital, patience, and risk-bearing capacity that few possess.

India does not need an economy obsessed with corporate churn for its own sake. It needs one that rewards innovation alongside capacity; continuity alongside accountability; and scale alongside competition.

The real policy conversation should therefore shift away from who replaces whom — and toward how firms innovate, expand, mature, and serve the Indian economy and society at scale.