October 2007 | Philip Chacko

Free but fettered

Engineering business success, seeding corporate governance principles and displaying fortitude in the face of regressive economics — the Tata group showed there was life before liberalisation

Any evaluation of the Tata group’s participation in India’s economic growth in the years from independence to the dawn of liberalisation will inevitably be influenced by the political and ideological milieu that existed during the period. It was a time when the socialist philosophy ruled, when capitalism and its creations — private industry most prominent among them — were seen as necessary evils, to be tolerated but never trusted. As the country’s preeminent business house, the Tata group was certainly affected by the dogma of those years, but that did not prevent it from playing a substantial part in India’s economic and industrial development, slow and painful as it may have been.

JRD Tata was the face of the Tata Group from 1938 right upto his demise in 1993

The Tata group of the era leading up to liberalisation was, in many ways, inseparable from the person who helmed it. JRD Tata was not just the face of the group, he was its heart and soul, a charismatic leader who could guide and inspire, a visionary industrialist who surmounted an economic environment full of fetters, and a progressive and compassionate commoner who became an icon of modern India. JRD’s commitment to the cause of the country and its people went way beyond business. This was reflected in the Tata group’s support, during his chairmanship, to projects and institutions that continue to enhance and support India’s scientific and social infrastructure, its cultural traditions and its sporting ambitions.

It was in the arena of business, though, that the Tatas and JRD had their biggest contribution to make. Three major Tata companies gained critical mass around the time that India got its independence: Tata Motors, Tata Airlines — the forerunner to Air India — and Tata Chemicals. Other big group entities, among them Tata Steel, Tata Power and Indian Hotels, already were important players in their industry space. All of these enterprises could have grown faster, and pulled in greater profits for themselves and the country, in a sunnier economic climate, but that is not to say their role in newly liberated India’s trade and industry was minimal.

Air India — nationalised by the government of Jawaharlal Nehru in 1953, a move that JRD came out vocally against — provided India a high-quality presence in a fledgling business segment.

Tata Motors, which started as a manufacturer of locomotives, laid the foundations for an indigenous automobile industry, and the seeds for what would one day be the first truly Indian car. Tata Chemicals would go on to overcome tribulations of various kinds to emerge as India’s largest soda ash manufacturer, while Tata Steel and Tata Power consolidated their position as vital infrastructure players in industries where it was imperative for sovereign India to find a firm footing, and quickly so.

Tata Power plant at Trombay, Mumbai

It could have been so much better for the Tatas and others in private industry to have a helpful government and progressive policies on their side, but that was not to be. A slew of restrictive measures, designed specifically to control, regulate and stifle free enterprise and entrepreneurs, quickly laid the ground for what came to be known as the permit raj. JRD saw the folly of such a regressive approach and never lost an opportunity to say as much. The Tata group Chairman was a passionate advocate of economic liberalisation long years before it turned from heresy to flavour of the times. Making matters worse for the Tatas, in particular, was the corruption that started seeping into the system. JRD had his hands full steering the group in this intimidating setting.

“Looking back, 1947 to 1991 seem to be the lost years,” says Jamshed J Irani, the former managing director of Tata Steel. “But one has to appreciate that it was a different age.We believed we could do everything ourselves. I think, like much else in India, we started something good and then continued down that road for way too long. We should have realised earlier that it was not getting us anywhere; we woke up when we had to sell our gold in 1991. If only we had changed course in 1971 instead, we could have had a chance to be where China is today.”

The seventies, far from being a harbinger for change, saw the orthodoxies of socialism get further entrenched. “Everything required a clearance from the government,” recalls Irani. “We were told what to make and how much of it to make. Actually, there was one occasion when we were fined for producing more than what our licence allowed us to.” SA Sabavala, who represented the Tatas in New Delhi during the time, has even more vexing memories. “The shutters were coming down one by one on the corporate sector,” he says. “The Tatas were private, the Tatas were big. As far as the government was concerned, it was a sin to be big. It was the most difficult, the most challenging period of my 30-odd years in corporate life.”

JRD never gave up trying to convince whoever in the higher echelons would listen that there was a better way to get to the common goal of an improved India. “He was relentless in articulating an open-door policy in economic matters, in his pursuit of excellence, in trying to get the government to better the overall quality of life of the people,” says Sabavala. “He came to Delhi again and again for interminable meetings at all levels. I remember one such with Prime Minister Indira Gandhi. We were, as usual, warmly received. JRD unrolled his notes and started. After about 10 minutes I noticed the prime minister busy scribbling. JRD continued with his monologue — and she with her scribbles. Suddenly JRD turned to me and, in a loudish whisper, said, ‘She isn’t listening; she’s doodling.’ The prime minister protested with a laugh, ‘No, no, Jeh [JRD’s pet name], I’m listening.’”

JRD with colleagues at Air India (earlier known as Tata Air Lines)

What hurt JRD more than his words going unheard and his views being discarded was the erosion of ethics in public life. “He had this messianic zeal about propounding that what comes from the people must go back to the people many times over,” says Sabavala. “He understood that for the Tatas to make quicker progress in Delhi, the system would have to be bent. He was content not to do so; for him progress at that price was not worthwhile. Some of his colleagues and others in industry thought otherwise. He did whatever he could to restrain them, not always successfully.”

The corporate governance principles that today set the Tatas apart owe much to the values that JRD inherited — and carried forth — from the founders of the group, upstanding men such as Jamsetji Tata and his sons. Under his watch, the Tata Trusts expanded their social development endeavours many times over, reaching India’s poorest corners and many of its most deprived people. JRD himself became a pillar of civil society, espousing the national interest and advancing India’s scientific and economic capabilities as best he could. Most importantly, he made a credo of ethics in business.

“JRD inspired people; he became corporate India’s No.1 citizen,” says Irani. “Everyone looked up to him; he was a difficult person to turn down.” That didn’t mean JRD and the Tatas got their way. There was more than a fair share of rejection, but the group learned to persevere in the face of bureaucratic obstacles and political grandstanding. Its entrepreneurial achievements in information technology — an industry it pioneered in India through the creation of Tata Consultancy Services (TCS) — are testament to its power of persuasion and persistence as much as to its business vision and ambition. India’s software success could not have unfolded as it did without such sterling effort.

JRD with president S Radhakrishnan (left)

“The Tata group has always been part of creating change,” says S Ramadorai, the managing director of TCS. “When you are in an environment where everything is regulated, where countless hours are spent filling applications for licences, convincing recalcitrant policymakers is a phenomenal challenge. We accepted that as a starting condition and we went out and continuously proved our credentials by delivering what was expected, in letter and spirit. That gave us the ammunition to seek changes in policies.” The group certainly needed all the weapons it could get its hands on to cope with the tide it had to swim against in the post-independence years.

To say that India benefited in the 1947-91 phase from having the Tatas as its leading business and industrial group would not be off the mark. It would, however, not have been advisable to present this equation to the legend who steered the group during these years. “JRD had, without a doubt, the country in mind more than the group he headed,” says Ashok Ganguly, the former chairman of Hinduatan Lever. “He wouldn’t have hesitated for a moment while saying that without India we are nothing, that our industries and everything else are incidental. JRD was a true-blue Tata.”