Coming soon after the 17th anniversary of the Competition Commission of India in May 2026, one wonders whether there is any soul searching within the CCI if it is truly able to create and regulate a pro-market economy. Most people I speak to feel that it is not. Hence this article. Other than attacking anti-competitive practices it also has the powers to do economic analysis and advise the right policies.
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The distortions are not accidental; they are structural and intentional. In FY25, the average Herfindahl-Hirschman Index (HHI), economic formula to assess concentration, across eight major Indian sectors such as telecom, paints, two-wheelers, aviation etc rose to 2,532, crossing into the “highly concentrated” zone for the first time in over a decade, up from 1,980 in FY15 and 2,167 in FY20.
How industrial policy shapes competitive landscape
Industrial policy often functions as a powerful gatekeeper, quietly anointing winners, shielding incumbents, and narrowing the space for new challengers to emerge.
Firstly, a high or complex taxation regime disproportionately burdens smaller firms that lack the scale and advisory capacity to optimise compliance, while large corporations are better placed to absorb or strategically minimise tax liabilities.
Secondly, import tariffs and trade restrictions, often justified as protective measures, can entrench incumbency when domestic capacity is already concentrated. If imports of intermediate inputs are restricted while domestic supply is controlled by a few firms, competitive pressure weakens and pricing power strengthens.
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Thirdly, anti-dumping duties, though framed as remedies against unfair trade, can end up insulating dominant domestic producers from global competition, especially in sectors where only a handful of firms operate. Once external pressure is reduced, existing market leaders face fewer constraints on pricing and expansion.
Fourthly, QCOs, while justified on safety and standards grounds, often impose certification, testing, and compliance requirements that are far easier for large firms to navigate than for smaller manufacturers. The fixed costs associated with meeting these standards can deter entry and accelerate exit, further concentrating supply in the hands of a few.
Further, multiple licensing regimes and layered regulatory approvals introduce procedural delays and compliance costs that operate as structural entry barriers for small players, effectively phasing out those who are not equipped to bear the associated costs.
The stainless steel story: QCOs and tariffs as capital filters
The stainless steel fasteners segment offers a telling illustration. QCOs, intended to ensure standards, require mandatory BIS certification, annual renewals, inspections and variant-wise testing. Testing alone reportedly costs Rs 20,000–25,000 per product type each year, and for MSMEs producing multiple variants, these expenses compound rapidly.
In conversations with a small player in this market in Jaipur, these compliances along with intentional import tariffs, were described not as incidental hurdles but as ongoing operational strains that directly affect viability. With limited BIS-approved laboratories and procedural delays, compliance becomes not merely a quality screen but a capital filter. Larger firms amortise costs over high volumes, while smaller players exit or hesitate to enter. When such QCOs are combined with high import tariffs on stainless steel inputs, competitive alternatives narrow further. Pricing power emerges from the way the market is structured. When new firms cannot enter easily and imports are restricted, supply becomes limited and price is bound to increase.
A few cement companies capture more than 60% of market power and a single company dominates the cotton market with 68.2% market share in India. More examples can be found in various sectors of multiple industries, not just cement or cotton.
The problem becomes even more pronounced if upstream input markets such as metals, polymers, chemicals, fibre, cotton or fasteners etc. are concentrated, as this directly affects competitive dynamics in the downstream markets such as construction, automobiles, defence, furniture and consumer durables. Such dynamic is clearly visible in what unfolded after the ASEAN-India Free Trade Agreement (FTA) liberalised tariffs on viscose staple fibre.
Although tariffs on viscose staple fibre (VSF) were reduced pursuant to FTA commitments, the intended liberalisation was substantially diluted through a succession of policy measures, including anti-dumping investigations and duties, adjustments to MFN tariffs, administrative extensions, and eventually the imposition of QCOs. This layered and rotating use of trade and regulatory instruments effectively neutralised much of the FTA’s market-opening impact. (Figure 1). The outcome feels less more like a design that preserves the incumbent’s dominance. The policy layering functioned as a protective shield, effectively locking in concentration rather than reducing it.
Competition at the core of industrial policy
Industrial policy works best when markets retain a meaningful degree of competition. This is precisely why competition policy is not a peripheral concern but an essential guardrail. Without it, well-intentioned industrial measures can harden dominance rather than stimulate dynamism.
Industrial policy can be aligned with competition safeguards through lower and more predictable tariffs where domestic capacity is insufficient, broader and MSME-accessible subsidy frameworks, periodic review and sunset clauses, incentivised and streamlined certification and systematic regulatory impact assessments. The essential principle is that industrial policy should widen participation rather than narrow it. A coherent industrial strategy clearly laying down such approach is needed. Sustainable growth emerges from competitive rivalry and open entry, not from compliance architectures that concentrate economic power.
Mehta is Secretary General, CUTS International. Amol Kulkarni and Vidhi Maharishi of CUTS contributed.