Home » How Tata Built India: Two Centuries of Indian Business (Transcript)

How Tata Built India: Two Centuries of Indian Business (Transcript)

Tata: the industrial conglomerate that lies at the heart of India’s success on the global business stage.

For almost two centuries, the Tata Group has pioneered multiple industries in India and remains a market leader in most of them.

You’ve probably heard of Tata Motors, their car division, but as you’ll soon find out, their reach extends far beyond that one subsidiary.

In this video, we’ll go through through three generations of Tata businessmen to see how they built one of India’s most successful companies.

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The story of Tata begins during the reign of the British Empire.

India back then was a huge exporter of cotton, but the brutal regime of the British East India Company left little room for local entrepreneurs to develop.

The poor treatment by the British eventually resulted in a rebellion against them, in 1857, which ended the power of the British East India Company and replaced it with the British Raj.

Now, compared to its ruthless predecessor, the Raj was much more focused on keeping the peace. The Raj didn’t exploit the Indian population quite as harshly and it also invested a lot of money in building India’s first railways for example.

Of course, at the end of the day, the British Raj was still an oppressive colonial power, but at least it finally gave the local population the economic opportunity to develop themselves.

Because India was an exporting country, the first Indian entrepreneurs came from exactly that sector and one of them was Jamsetji Tata. He was the son of an exporter in Mumbai and he graduated in 1858, exactly the perfect time to take advantage of the economic reforms of the British Raj.

Because his father’s export business was growing, in 1859 Jamsetji went to Hong Kong to develop a subsidiary there and upon seeing the sheer scale of British commerce there, he realized that the Tata export business had truly global potential.

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Over the course of the next decade he would travel to Japan, China and Great Britain, establishing a network of distribution for his father’s business. He’d eventually create his own exporting company in 1868 and using the money he made, he started building textile mills of his own, effectively creating a vertically-integrated business.

From the very start, Jamsetji’s philosophy was find the best practices used across the world and to bring them back to India.

In his textile mills he enacted policies that were virtually unknown to most of India, like offering sickness benefits and pensions to his employees.

But Jamsetji wasn’t content with just the textile industry: he saw the wonders the Industrial Revolution had created in Europe and he wanted to recreate them back home.

He began working on a steel production plant in 1901, modeled after the ones he had seen in Germany. Even more ambitious was his hydroelectric project, inspired by his visit to the Niagara Falls power plant in 1903.

Jamsetji realized the incredible power of tourism and so he also created a chain of hotels, starting with the Taj Mahal Palace Hotel, which even today is one of the most recognizable buildings in Mumbai.

Jamsetji was truly a man dedicated to business and to helping people through it: he valued education to the point where he donated land and buildings towards the creation of the Indian Institute of Science, the eminent university of India.

He would not, however, live to see most of his projects realized, because he died while on a business trip in Germany in 1904, leaving the already sizable Tata company to his two sons.

Together they consolidated their ownership into a single holding company, which in turn is owned by the charitable trusts they created for future generations.

Jamsetji’s sons fulfilled many of their father’s ambitions: they oversaw the creation of India’s first steel works in 1907, India’s first cement plant in 1912 and the first indigenous insurance company in 1919.

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By the time the leadership mantle passed onto the next generation in 1938, Tata Sons was comprised of 14 different companies. This time, however, instead of it going to one of Jamsetji’s grandsons, leadership instead went into the hands of a distant cousin with a very interesting background Jehangir Tata, better known as JRD, had been in the company since 1925, but he had been raised in France and was a close friend to the man who made the first flight across the English Channel.

In other words, JRD was a passionate aviator and in 1929 he obtained India’s first pilot license, so unsurprisingly his first big project at Tata was to develop an airline. In 1932 he created the Tata Air Service, which originally only carried mail, but then in 1938 started doing passenger flights as well, even helping out the British in the Second World War.

Now, you’d imagine India’s independence in 1947 would’ve been beneficial to the Tatas, but in reality the socialist policies of the newly-created government were at odds with private business. India’s first prime minister saw just how successful JRD had been with his airline and in 1953 he unilaterally decided to nationalize it.

He kept JRD as the airline’s chairman until 1977 and as you can imagine, the company only went downhill from there, drowning in ever-increasing debt.

Of course, JRD would not let politics get in the way of business and so he did his best to grow Tata while avoiding the wrath of the socialists. He created Tata Motors in 1945, originally with the idea of building locomotives, but in 1954 he branched out into commercial vehicles through a partnership with the German car company Daimler.

Over the course of his 52 years of leadership, JRD expanded the Tata Group from 14 companies to 95, but to do that he had dramatically lowered the ownership Tata Sons had in each one in order to appease the socialists.

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In 1969 the Indian government introduced the Monopolies and Restrictive Trade Practices Act, which was essentially targeted at Tata even though they were very far from a monopoly by western standards.

But as JRD expanded the group and lowered its ownership in the individual subsidiaries, he started losing control. Some of his companies just weren’t performing and the man he sent to fix them was this guy: Ratan Tata. He is one of Jamsetji’s great-grandchildren and he joined the Tata Group in 1962.

His first major project came in 1971 and it was pretty difficult: Ratan was given charge of a struggling Tata company known as NELCO, which in the 1950s was India’s biggest producer of radios, but just twenty years later it had fallen to a 3% market share.

Ratan’s focus was on technology and the future, so instead of trying to salvage the radio, he instead funded the development of new products like satellite communications, which restored NELCO in the 1980s and made Ratan the apparent successor of JRD.

Ratan claimed leadership of the Tata Group in 1991, right as a wave of economic liberalization swept across India. The socialists lost power and India finally joined the global capital market, but this presented a big threat to Tata.

Up until now it had operated in a very protected economy, which was suddenly open to competition from foreign companies.

Worse yet, JRD had let Tata become extremely decentralized, so it would be very slow to adapt to new competitors. Ratan had no choice but to re-establish ownership over all the Tata subsidiaries and that didn’t come cheap.

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