'US and China churn top firms, India still...': Sanjeev Sanyal says it lacks 'creative destruction'

India needs to embrace “creative destruction” if it wants to become a true global economic power, economist and Prime Minister’s Economic Advisory Council member Sanjeev Sanyal has said.

In his latest column for The New Indian Express, Sanyal highlighted India’s resistance to churn in its corporate landscape compared to the US and China. “My column on why India needs to embrace creative destruction in its bid to become a global economic power. If one compares the top ten companies by market cap in the US in 2005 and 2025, there is only 1/10 in common – Microsoft. For China, it is 3/10. In contrast India has 7/10 in common and even the ‘new’ additions are old companies like LIC,” Sanyal posted on X.

He wrote that while churn in business is often disruptive, it is vital for long-term economic competitiveness. “Both natural and economic ecosystems have one thing in common — they evolve through a process of ‘creative destruction’. The inefficient are weeded out over time and replaced by those that are more competent.”

In India, however, seven of the top ten companies by market cap in 2025 were the same as those in 2005 — Reliance, TCS, Infosys, SBI, Bharti Airtel, HUL and ICICI Bank. Among the remaining, LIC is a long-standing public sector firm only recently listed. The other two—HDFC and Bajaj Finance—are not considered new-generation companies either.

Sanyal contrasted this with the US and China. “Only one company — Microsoft — managed to stay in the top 10 by market capitalisation” in the US. New entrants included Meta, Alphabet, Amazon and Tesla. In China, old giants like PetroChina and Sinopec gave way to Tencent, Alibaba, BYD and others.

He noted that most top-performing US companies today—like Alphabet (1998), Meta (2004), and Amazon (1994)—were born after 1990. In India, only Bharti Airtel (1995) fits that category. Others like SBI (1921), LIC (1956), and TCS (1968) reflect a legacy-dominated market.

While acknowledging the emergence of firms like OYO and Zomato, and reforms such as the Insolvency and Bankruptcy Code (IBC), Sanyal argued that India still falls short of the churn expected of an innovation-driven economy. He attributed this partly to a social mindset that views failure as a moral flaw. “Insolvency is often seen as a moral failure rather than a business failure,” he wrote.

He called for regulatory changes that allow risk-taking and faster resolution of failed ventures. “Regulations are so focused on so-called ‘investor protection’ that they do not allow for the risk-taking that generates cutting-edge innovation.”

Sanyal also criticised policies that shield incumbents from competition, stating, “Industry associations rarely demand economic reforms and mostly demand protection. Their goal is not global competitiveness or efficiency, but the building of a moat.”

He noted that the central government has begun trimming outdated institutions, citing the removal of defunct agencies and obsolete regulations. But for the private sector, more structural and cultural changes are needed. “To sum up, India needs to celebrate creative destruction in the economy. The central philosophical idea has existed in India for millenniums in the form of Shiva and Kali. We now need to incorporate it into our policy-making, and cultural attitudes towards risk-taking, failure and renewal,” he concluded.