BS@50: Climate change of another kind in India Inc's 50-year journey

India Inc waded through a stifling 'external environment' and unbridled competition. But Big Govt refuses to go away

In the early 1970s, a little before Business Standard began to publish, Rahul Bajaj was summoned by the Monopolies and Restrictive Trade Practices Commission. The archaic commission had accused Bajaj, managing director of the two-wheeler giant that bears his family’s name, of a “crime”.

“My ‘crime’? I had produced more scooters than what was permitted under my industrial licence,” Bajaj wrote in this newspaper in 2014. The waiting period on Bajaj scooters ran into years and the company had the wherewithal to produce more. But it was not allowed to do so, regardless of the positive spinoffs higher production could have accomplished.

Thankfully, this is not one of those stories that end with a wistful “if only he had lived to see…”.

Bajaj, who died two years ago, did live to see India’s corporate sector morph into something few could have imagined while navigating the maze of licences and quotas.

At that time, the hallowed halls of Udyog Bhawan in New Delhi were where corporate czars came to kowtow. Self-important bureaucrats would whisper at parties about how Messrs So & So dropped by, hat in hand, in pursuit of some approval or the other. The Planning Commission decided the annual demand and supply of various types of steel, how much of the supply should come from public sector companies and how much from the private sector. Licences were issued if a proposal met the parameters of location, infrastructure, machinery, and specifications of steel.

That was the story with every industry segment. The Industries (Development and Regulation) Act of 1951 put controls over several industries in the hands of the central government because it was “expedient in the public interest”.

At times matters came to a head. Old-timers recall how during a Ficci luncheon in the late 1970s, industrialist G D Birla strongly questioned the IDR Act and its usefulness. The chief guest at the luncheon was George Fernandes, the firebrand labour union leader who had become the industry minister in the Janata Party government. Fernandes had recently thrown Coca-Cola and IBM out of India. IBM resumed its India business in a couple of years, but Coca-Cola came back only in the 1990s.

The disruptor

The key to business success in those days was a businessman’s ability to win the trust of ministers and bureaucrats and obtain as much leeway as possible. It was also the key to undermine competition:

Well-networked industrialists would make the bhawans rein in their rivals.

Naturally, entrenched business families held sway, even if the odd one among them would get pulled up now and then.

It took a person of uncommon acumen, such as Dhirubhai Ambani, to challenge the established order and win.

It was not easy. Ambani had to move heaven and earth with his financial innovations, marketing skills, and project execution to have his way. Most importantly, he understood that — as he said in an interview to India Today — that the most “important external envir­onment is the government of India”.

He was not the only one who understood this. But the others playing the game were generally the entrenched business elite, whose names adorned buildings and factories. Ambani, the son of a schoolteacher from a Gujarat village, gatecrashed their party.

In 1976-77, when Business Standard was taking its baby steps, Reliance’s turnover was Rs 70 crore. By the time Ambani died, in 2002, it had become the first Indian private sector company to feature in Fortune’s list of the world’s 500 largest companies.

Reliance’s journey was expedited by the changing “external environment”, with the government reducing its role in approving and running businesses. The winds of change had started blowing in the 1980s, but the economic reforms ushered in from 1991, including the new industrial policy, transformed the landscape. A plethora of licences and quotas went out of the window and companies from all over the world began to knock on India's doors. Competition came gushing, first a trickle and then a torrent.

Adapting, fading

The business elite adapted to protect their fiefs. They formed joint ventures and began to pay more attention to technology and marketing. They began to woo the consumer, whom they could earlier take for granted.

B K Modi, part of a sprawling north Indian business family, turned into a joint venture wizard. Bajaj Auto, whose scooters were an essential dowry item in most marriages, would go on to stop making scooters altogether and morph into a motorcycle giant — in spite of Rahul Bajaj’s initial misgivings about the transformation.

Those that did not — or could not — change, suffered. For many years until 1983, the size of India’s car market was stagnant at 40,000 a year, give or take. It was divided between Hindustan Motors, which made the government machinery’s favourite, Ambassador, and Premier Automobiles, which made the yuppie’s car, Padmini.

The two did not bother much with technology, safety, or features, because everything they made was sold.

Maruti, which rolled out its first car, the 800, on December 14, 1983, spoke about scaling up its capacity to make 100,000 cars a year within five years. This shocked people, who found it too audacious.

In 2022, the Indian car market crossed 3.7 million. It has almost all the big global brands now. Hindustan Motors and Premier Auto are not among them.

Every other industry segment, too, has changed — consumer-facing as well as industrial, including the businesses of cricket and movies that became unexpectedly large.

As the game has moved from Sunil Gavaskar’s 36 not out in a team innings of 60 overs (June 1975) to 36-ball hundreds nowadays, it has spawned a multi-billion-dollar ecosystem. Speaking of movies, Jai Santoshi Maa, which for a while threatened to steal box office thunder from Sholay — both released on August 15, 1975 — is unlikely to be made today. The film industry, meantime, has become more modern, organised and corporatised, moving away from an anarchic, cash-based system of verbal commitments.

The Infy way

The 1990s not only opened up businesses to unbridled competition but also established a new breed of companies. Infosys, which had its milestone initial public offering in February 1993, was a torchbearer for the new breed. It was dominated by individual personalities, and yet not quite so.

It had seven original founders, some of whom are household names to this day. The company has spun its own lore and been instrumental, along with TCS, Wipro, and others, in putting India at the forefront of information technology services around the world. The outsourcing boom took this forward at the turn of the century, when call centres mushroomed, and now the advent of global capability centres is keeping the momentum strong.

The cult of Infosys — embodied by distributed ownership and wealth creation for a large number of people — thrived at a time traditional business families were grappling with all sorts of challenges. Some were done in by the changing business climate, some others succumbed to family feuds.

The spirit of new-age companies is now shining bright in the form of a thriving startup ecosystem, replete as it is with eager founders (yes, dropouts included) and investors. At the same time, Indians have come to run some of the world’s largest corporations.

However, as each sector took birth, it experienced its own growth pangs. Another Bajaj, Avnish, will vouch for that.

Many revolutions

Avnish Bajaj was arrested in December 2004. Six months earlier, he had sold his startup, baazee.com, an online auction site and marketplace, to American e-commerce major, eBay. At the time of his arrest, he was serving as its country manager. The previous month, on a weekend, someone had put a CD up for sale on baazee.com showing a sexual act between teenagers.

The CD was taken down within 36 hours. But a tabloid ran a story about it and the Delhi police took suo motu action. Bajaj, an American citizen, got bail after three days, once the US Embassy intervened.

Bajaj can take solace in the fact that his case led to a greater understanding of how an online marketplace works. Regulations changed.

Today, online marketplaces are all the rage, the latest among them being quick commerce players, which are throwing down the gauntlet to the big guys such as Amazon and Flipkart, forcing them to change their ways.

Underlying many of these changes is the telecom revolution. Led by Reliance Jio’s onslaught, mobile data became affordable to all. Smartphones burgeoned. On August 12, Bharti Enterprises agreed to buy 24.5 per cent equity in BT Group, a move that will make the Indian conglomerate the largest shareholder in the famed British tele-communications major. That turns the tables: During 1997-2001, BT owned 21 per cent of Bharti.

This revives memories of the overseas acquisition drive India Inc embarked on earlier this century, with the Tata Group leading the way (Tetley, Corus, JLR), and other biggies such as Aditya Birla doing their own thing.

The more things change...

India Inc has indeed come a long way. But some things remain unchanged.

N R Narayana Murthy, the leading light of Infosys, is still making news and triggering debates about things such as the number of hours one should work each week. Ratan Tata, having won a battle for control over the Tata Group, is still around, though much less active. The Ambani flag is flying high (no, we will not bring up the wedding), though another family name, Adani, is getting its own share of the limelight for all kinds of reasons.

Another element of continuity is the “external environment”. Yes, it is not what it used to be. But in recent years, the government’s presence can be felt in more ways than one.

The production-linked incentive scheme to increase manufacturing in the country has had mixed success. We now have the third iteration of the scheme to promote electric vehicles. There is a semiconductor mission going on. The government’s internship programme is raising concerns about how much say it will have in the running of companies.

And most recently, a minister made news for his remarks on the role of e-commerce.