Family Businesses in India Essay

1785 Words Mar 19th, 2012 8 Pages
Introduction The Indian economy and the importance of family-owned groups

The Economy of India is the ninth largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP)[1]. The country is one of the G-20 major economies and a member of BRICS. The country's per capita GDP (PPP) was $3,408 (IMF, 129th in the world) in 2010, making it a lower-middle income economy[2].

As a result of the financial crisis of 2007–2010, coupled with a poor monsoon, India's gross domestic product (GDP) growth rate significantly slowed to 6.7% in 2008–09, but subsequently recovered to 7.4% in 2009–10, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period[3]. India’s current account deficit surged to
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In the post-liberalized India Inc., as reported by Business World (2007), 17 out of the 30 companies listed in the benchmark Bombay Stock Exchange (BSE) Sensitive Index (Sensex) are family owned. Thus, it is the business family that remains the most powerful and enduring entity in corporate India from its very inception[7].

A study conducted back in 2003, confirmed this notion. “Businessmen the world over may be handing over the reins to professionals, but for Indian entrepreneurs, retaining control over the business and passing it on to the next generation is still the driving passion. This is a key finding of a new global study on family businesses by consultancy firm Grant Thornton. The study says that as many as 46 per cent of Indian businessmen feel that their successor should come from within the family. In comparison, only 22 per cent of North Americans and 24 per cent of Europeans subscribe to this view”[8].

It has been observed that :
- Just 13% of the Family business survive until 3rd generation & only 4% go beyond third generation
- One third of family business families disintegrate because of generational conflict[9].

Therefore for the oldest such as Aditya Birla, Tata and Bajaj, which stretch back over three or more generations, their longevity is impressive. Second-generation firms include Reliance Industries, India’s biggest private firm, run by Mukesh Ambani, who split from his brother Anil in 2005, and whose

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