Ratan Tata the Visionary: Could he Have Done More?

Ratan Tata has been hailed as a great visionary. Under him, Tata group not only went global but its brand got some global recognition. The group has not only survived the post-1991 opening up of the economy but has grown to become the largest Indian conglomerate.

Pre-1991, the slogan was ‘Tata-Birla ki sarkar’. Birla and many other business houses of the pre-1991 era have been displaced by Adani, Ambani and Tata. Remaining at the top in a changed business environment with global competition mounting required deft handling.

The Tata group’s market capitalization topped Rs 33 lakh crore (over $400 billion) in August 2024. It was Rs.30,000 crore  in 1991 when Mr. Ratan Tata took over the leadership of Tata group from the iconic JRD Tata. This growth by a factor of 110 kept pace with the increase in the BSE index which went up from around 600 in 1991 to about 80,000 now – an increase of 133 times.

Even during Ratan Tata’s tenure, as Chairperson of the group from 1991 to 2012, the market capitalisation had increased to Rs. 5 lakh crore – a factor of 17 – according to an IIM Bangalore Report. Since Mr. Tata continued to provide leadership to the group post-2012, he should be credited for the continued expansion of the Tata group even after 2012.

In a capitalist society, Capitalists are supposed to accumulate capital and that is celebrated. Their success is judged by the amount of Capital their business has accumulated. By this yardstick, Tata was a success.

A personality eulogised in multiple ways

Ratan Tata was a successful capitalist both pre and post retirement as the head of the Tata group. Tributes have poured in from all quarters. His humbleness in spite of the riches have been acclaimed by people, whether ordinary or the who’s who of Indian elite. The philanthropic work of Tata Trusts under his leadership has been applauded. His charity work is quoted as the reason for why he is not in the rich list published by global and Indian agencies. Examples of his humaneness are cited in his relationship with his staff and the love for stray dogs.

In an environment where Indian businesses have been characterised by cronyism, illegality and unethical behaviour, the Tata group is said to be more ethical and moral than others. Its treatment of its workers is said to be better than that of most other businesses.

Ratan Tata has been eulogised in multiple ways. But, in addition to these laudable personal traits, given how large is the empire he ran, his actions had systemic consequences. These need to be assessed to understand his larger contribution to the nation to get a holistic picture of his contributions. This is necessary also because Tata was no ordinary person. This would also help evaluate the situation in the nation and the direction it is headed in.

Systemic Aspects

The larger the amount of capital accumulated, the more the societal linkages the person is likely to have built during the life time. These linkages would be with those in power – locally, nationally and even globally, depending on the scale of operations.

They would be with politicians in power and out of power, businessmen, media persons and broadly in the world of intellectuals, art and culture and entertainment. Witness the invitation list for a wedding of a child of a big businessman.

Capitalism thrives on the drive for higher profits. For this, often corners are cut, policies manipulated to derive advantages, wages squeezed, unethical advertising indulged in to not only promote their product but also promote consumerism (specially targeting children), etc. These generate negativity in society for the capitalists.

This is countered through philanthropy and charity which could be genuine but often motivated by business interests. For instance, Corporate Social Responsibility (CSR) thrust on businesses by the government often turns out to be motivated by business interests.

In the US, in the nineteenth century, Rockefeller and Ford were characterised by Galbraith as ‘robber barons’ because of the sharp practices they indulged in. They used charity to improve their image. Bill Gates, Ted Turner, etc., the present day super rich do philanthropy in a big way. This gives them additional power in society to influence policies and people. They are able to mould research in directions that are beneficial to their businesses and that promote capitalism.

Given Capitalism’s flaws the question arises, did a visionary capitalist work to promote the ideal form of capitalism or did she/he use the existing flawed form to benefit from it? Did the individual work to promote equity that would result in a more civilised society? This is not a yardstick of comparison with a socialist or a Gandhian alternative but of a humane capitalism.

Monopoly and oligopoly under capitalism are detrimental to its functioning. They lead to undue profits and make the entry of new firms difficult. They slow down adoption of new technologies which could increase efficiency.

Competition among many firms is considered to be the ideal form. That eliminates super profits and reduces disparities so as to minimize inequality. The nexus between policy makers and businessmen (cronyism) gets reduced and more rational polices get pursued.

Did Ratan Tata make efforts to promote competitive capitalism to make it more efficient? The Tata group appears to have used all the available devices to build itself up as a huge conglomerate. Even rules regarding Trusts were got changed during the NDA I rule to help Tata gain direct control of the group.

Big business influences policies so as to reduce taxation of their incomes and wealth. This puts the burden of raising resources on indirect taxes which fall proportionately more on the middle classes and the marginalised sections.

Since 2012, many of the rich in the USA have argued that they need to pay more taxes for the survival of capitalism. They repeated this call in 2018 and 2022. Given poverty in India, this should have been supported by the Indian super rich but that did not transpire.

Creation of a Centralised Group

Ratan Tata succeeded JRD Tata as the head of the Tata group in 1991. That was also the year that the New Economic Policies (NEP) were launched. The business environment changed dramatically. Prior to 1991, companies could be held with just a few per cent ownership of the equity of the company.

The public sector financial institutions held large chunks of the equity so without their say so, companies could not be acquired. In 1982, Swaraj Paul’s attempt to take over Escorts and DCM was thwarted. The company owners held less than 1% of the equity in their companies while the public financial institutions held more than 50%. So, without Government’s say so, no takeover was possible.

Post-1991, there was an attempt to takeover ACC, a company then in the Tata stable. Tatas moved to increase their holding in their companies to above 25%. In 1967, the Hazari Committee had pointed to the umbrella pattern of holding of companies by monopoly houses – that is, cross holding from one group-company to the other.

That led to the enactment of MRTP Act. The advantage of such a pattern of holding was to mask the ownership of the companies by monopoly houses.

Under JRD Tata, the Tata group was considerably decentralised with the likes of Russi Modi, Darbari Seth and Ajit Kerkar running big group companies relatively independently. Ratan Tata eased them out quickly and gained total control of the group.

In 2012, under his policy of retirement at 75 he handed over command to Cyrus Mistry, who apparently tried to ‘professionalise’ the management and increase accountability to the shareholders. But, that was not to the liking of Ratan Tata.

Mistry was forced out even though the Pallonji group, to which he belonged, was the largest shareholder in Tata Sons. Ratan Tata deftly maneuvered to checkmate Mistry via his control over Tata Trusts and through that the Tata Sons and the Tata group. Nusli Wadia, a close friend of Ratan Tata till then was also eased out of the Boards of Tata companies since he supported Mistry.

Clearly, right from the start when Ratan Tata took over the group, his governance was a personalised and centralized one. While this enabled him to take many initiatives, it also led to major errors of judgments by the group.

Like, the purchase of Corus at a very high price and its subsequent failure, the failed (though well-meaning) Nano project and entry into Telecom sector. There was the ULFA related case in Assam involving secret payments to it. There was the sudden stoppage of support to hundreds of NGOs doing useful social work, perhaps under government pressure.

National impact

Given the size of Tata group, their impact is national – impacting democracy and nature of politics in the country. They have an impact on the environment, promotion of R&D to meet the challenge of globalization and promotion of inclusive growth.

The monopolies and oligopolies that enabled Tata group to earn high profits adversely impacted the small and micro sectors. This has led to growing unemployment since the Tata group businesses are largely capital intensive.

For instance, Tata steel which employed 88,000 workers in 1991 to produce around 2 million tons of steel now produces 22 million of steel with an employment of less than half of the 1991 level. While this helps productivity and profits it has reduced employment. Tata salt has displaced large number of small local salt producers. Tata consumer products in general follows this pattern.

Tata group has a huge environmental impact. This is due to the nature of goods produced and the promotion of consumerism by Tata brands. They are big in luxury brands – Tanishq, Zoya, CaratLane, Titan, Taj hotels, etc. Promotion of cars as opposed to pushing for a policy of public transportation is consumerist and environmentally damaging. Diesel cars were pushed with negative consequences for the environment.

The impact of the ever expanding iron ore production on indigenous people, support to the SEZ policy which aggravated displacement, the Chilka lake episode, etc., all marginalised the marginals and undermined  inclusive development.

But, can Ratan Tata be faulted for pushing business that generate profit? If so, why technology development which can yield high profits did not become a focus.

Tata group is huge and cash rich, earning good profits but its R&D spend is meagre. It has depended mostly on imported technology. Even TCS has largely been a service provider rather than a developer of globally recognised software.

In house R&D is risky while import of technology is not; but that is a recipe for dependency. This is the ‘disadvantage of a late start’. Due to lack of technology development, India has a trade deficit of $80 billion with China in spite of the border difficulties. R&D imparts dynamism and self-reliance to the nation – something big business needs to promote.

Ratan Tata didn’t take a stand on many critical issues

Finally, democracy is the bedrock of India. Did Ratan Tata strive to strengthen it? One did not hear him take a stand on the many critical issues that have plagued the nation. During the Mumbai riots in 1993, Tata helped out, but during the Gujarat riots in 2002, there was silence. On the decline of the institutions of democracy and the deteriorating communal situation there was no public comment.

The growing use of black money in elections, the decline of standards in legislatures and parliament, the functioning of the judiciary and the attack on autonomy of educational institutions did not impel him to react. The Tata controlled Progressive Electoral Trust was ineffective in checking growing use of black money in elections and the cronyism that follows. Most of the donations from the Trust went to the ruling party, thereby further strengthening it and that led to the persistence of the above problems.

Ratan Tata no doubt had a vision for the growth of the Tata group, even if it had flaws. But when it comes to assessing his systemic or national vision, much was lacking. Under capitalism, a capitalist is to accumulate capital but the manner of doing that is important. Given Ratan Tata’s stature and the size of the Tata group, much more could have been done.