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Counterpoint | Ratan Tata: Then and Now

Throughout the 21st century, the Tatas have beaten every doom-laden prediction and silenced every critic, writes Vir Sanghvi.

india Updated: Mar 11, 2008 18:23 IST

Nobody disputes that, during his lifetime, JRD Tata was the most respected — and probably the most admired — businessman in India. On Thursday, as I watched the TV coverage of Ratan Tata unveiling the Tata Nano in New Delhi, I was struck by a sudden thought: Ratan has finally inherited JRD’s title. He is clearly the most respected and admired businessman in India today.

And then, I thought back to that phase, 10 years ago, when the Tatas struggled to reinvent themselves in the post-JRD era. I thought of how Ratan was perceived then: awkward, untalented, unworthy of the job, out of his depth and full of vindictive anger against many of the satraps of the JRD regime.

It was a time of change. New groups were springing up out of nowhere. The certainties of the old protectionist economy and the license-permit-quota raj had collapsed. Reliance had made the transition from being seen as a parvenu to being regarded as an industrial behemoth. The Infosys legend, personified by Narayan Murthy’s personal simplicity and marked by the world-class skills of his high-tech partners, had just begun.

At Tata headquarters, however, the crises mounted: record losses at Tata Motors, the much-derided plan to launch the Indica, criminal charges over Tata Tea’s alleged links with Assam militants, allegations of foolishness in the sale of Tata Oil Mills’ assets, a plan to launch a domestic airline with Singapore Airlines that was comprehensively scuttled and more. And many of us wondered if we were watching India’s greatest industrial group diminish before our very eyes.

The house that JRD had built was crumbling. Poor, shy, inept Ratan seemed unable to cope.

And yet, a mere decade later, here was the same Ratan being feted by the world’s media as the man who reinvented, if not the wheel, then certainly the motorcar. A man who did what no global carmaker believed was possible: to build a car that looked this good and drove so well for so low a price. And here was a new Ratan, his legendary shyness temporarily in remission, as he joked about calling the car the ‘Pachauri’ (after the environmentalist who chose to attack the Nano as a pollution threat, a charge that the Nano has easily beaten) or even the ‘Mamata’ (after the nutcase) or ‘Despite Mamata’.

The following day, the Nano managed the impossible: there was not one negative review of note and the raves kept coming. To the chagrin of his rivals, Ratan even kept to the price commitment. Though input costs had gone up, he said, the Tata’s would still price the basic Nano at a lakh because “a promise is a promise”.

The triumph of the Nano was merely the crowning glory in a series of successes. Throughout the 21st century, the Tatas have beaten every doom-laden prediction and silenced every critic. Tata Motors came back from losses of over Rs 600 crore to make huge profits on the back of the Indica, the all-Indian car that had been Ratan’s dream, and — to his detractors — the vanity project that would sink the company. Infosys had fulfilled its early promise but even then Tata Consultancy Services (TCS), a company that had been little noticed in the 1990s, had grown to dominate the Indian IT sector, its size dwarfing Infosys. Tata Steel had defied Rusi Mody’s predictions, had been whittled down to a slim and lean company, and had even gone ahead and bought Corus, a global giant, after a bidding war during which Ratan had shown nerves of steel. And even as Ratan was unveiling the world’s cheapest car, the Tatas were on the verge of clinching the purchase of Jaguar, one of the world’s great luxury cars.

How had so many people, who should have known better, got Ratan so wrong? Business pundits will tell you — in the kind of detail that I will never be able to master — just how the Tatas turned themselves around. I’m sure they are right. But remember, most of these pundits were the same guys who wrote Ratan off to begin with, a decade or so ago.

I have a few theories of my own — based on the interviews I have done with this otherwise reclusive man — on the remarkable rise of Ratan Tata.

Ratan realised India was changing much before the other big houses did. He recognised that the old feudal, paternalistic structure that had worked so well in the JRD era, where the old man was the emperor and the companies were run by viceroys, would not work in the new India. He professionalised the Tatas, democratised the management, abandoned the feudalism (remember Rusi Mody’s massive birthday tamashas in Jamshedpur?) and made the group adopt a low-key, matter-of-fact, get-things-done style that had no room for satraps and stars.
He saw the wisdom of embracing the future. Hence, the focus on TCS. And hence the determination to go global: we talk about Corus, the Pierre, Tetley etc, but the big successes are only the tip of the iceberg. Years ago, Ratan told me that he was determined to use Indian managerial ability and Tata capital to globalise the group. In 2000, this seemed overly ambitious and grandiose. But he has grabbed the opportunities for globalisation like no other Indian industrialist has.
At the same time, he put his faith in young India. The team behind the Nano is young — the top guy is 35 — and overwhelmingly Indian. So it was with the Indica, a truly Indian car. One of the dichotomies of Ratan’s personality is that while he can be shy and reticent in social situations, he is warm, outgoing and able to motivate teams at work.
He told the government to go to hell. No group has faced more unfair governmental harassment than the Tatas — right from the Tata Tea case where they were framed by the Assam government to the telecom tangle where they were bullied by an arrogant Dayanidhi Maran. Not once did Ratan agree to pay a bribe. He wouldn’t even go and complain to Manmohan Singh (who has immense respect for him). Instead, he stood his ground. If in the process, he lost a project, he lived with the loss but maintained his principles. So it has been with Mamata Banerjee’s foolish Singur campaign: he will never buckle under it or try and buy her off.
He let his heart guide him. Early in his career, when Nani Palkhivala persuaded the Tatas to liquidate the Central India Mill even though it could have been turned around with an infusion of just Rs 50 lakh, an angry and disgusted Ratan gave his own annual Tata salary bonus to the officers of the company. “They were perfectly blameless people who had now lost their jobs through no fault of theirs because of a bad corporate decision. They had homes to run and children to educate,” he remembered in an interview to me in 2005.

It was his heart that told him to build the Nano. He would see families of four on a single scooter. The father would keep his son in front and the mother would hold on to her baby. He wondered why it was not possible to give such families a car where they could be safe and comfortable for the same price. Plus, they would keep their dignity.

There are many reasons for building a car. But this, I think, is the best one of all.

And finally, I think, India caught up with the Tatas. Over the last decade the middle class came of age, tired of the crony capitalism of the old bania class, was inspired by engineering success stories like Infosys and began to wonder why it wasn’t possible for everyone to do business honestly.

The Tatas had gone through good times and bad times. But they had always given nearly all of their profits to charity. They had consistently refused to break the law and encourage corruption. Older generations of businessmen thought they were silly and shortsighted to do so considering that everybody else played the game.

But now India has changed. We finally have a strong and vocal middle class that prizes honesty above all else and that has contempt for the sleazy politicians and the crony capitalists of old.

When we see Ratan Tata refusing to pay bribes, refusing to lick politicians’ boots and refusing to bend the rules — and still taking the Tatas from strength to strength, still buying the world’s best companies, and still reinventing the rules of the car industry — well then, we know that there is a better way.

It’s possible to be honest and principled. And still beat the rest of the world.

That’s the strength of the new India.