The House of Tatas

TOWARDS THE END of the Second World War, the revolutionary MN Roy accused the Tatas of deliberately subverting the war effort in order to help the Indian National Congress. “The few cases of serious interference with production,” he wrote, “were engineered by the industrialists themselves including the Tata Iron & Steel Co. Ltd…Mills and plants were closed down, and all sorts of devices adopted in order to keep the workers away.” These were, for their time, scurrilous charges and Roy was served a legal notice. The matter was settled a month after Independence when Roy issued a calculated “apology” and the Tatas did not pursue the matter further.

What could possibly link an itinerant revolutionary’s careless utterances and a respectable industrial group at a volatile political time? Everything according to historian Mircea Raianu in Tata: The Global Corporation That Built Indian Capitalism. By 1944, it was clear that the British could not hold India any longer and Independence—however conceived—was inevitable in a matter of time. A nationalist leadership was waiting in the wings. But the British were not gone, yet.

The situation posed a delicate issue for the Tatas: They were involved in the Allied war effort and the steel they produced was vital for that. “At the same time, if they distanced themselves too hastily from the cause of the imprisoned Congress leadership, they risked losing all credibility with the likely government-in-waiting. The case served as a flashpoint illuminating the messy process by which Indian big business negotiated the transition from empire to nation-state.”

Tata is an interesting history written by a historian who was given access to the company’s archives. He writes, “While remaining mindful of archival silences and erasures, my own approach has not been to counter this master narrative in the vein of an expose.”

Raianu is being modest. Anyone who reads the book will see that he desires to “interrogate” his subject. He does that in what he sketches, from the origins of the group in the 19th century to its continued existence in the 21st century as a sprawling conglomerate. The story runs like a reel against the background of modern India’s history. Along this “double reel” play, he also tackles select themes like the role of industrial houses during India’s experiment with planning, the dalliance with “trusteeship” and the complicated origins of Corporate Social Responsibility (CSR). In all this, he is critical of the group and is sympathetic to the policies, wrong or right, picked by Indian governments. Tatas come out as a group that did what was necessary for surviving and thriving. Raianu tries to be careful in avoiding judgment on the group but it always shows.

In the chapter ‘Becoming Swadeshi,’ which deals with the group in the decades before Independence, Raianu takes pains to show that Tatas were not “swadeshi” by choice given their extensive business interests across the world and that “Tata became swadeshi belatedly and contingently, not as a foregone conclusion.” This is a strange argument to make about a group that took great care not to get entangled in political events. It also says something about a narrow and overtly politicised notion of swadeshi used by the author. If, for example, the group were to restrict its operations largely to India, it is unlikely that it could have served India in any meaningful way. But the Tatas were pioneers in many ways. They were virtually alone among Indian trading groups that transitioned from a commercial enterprise to an industrial one. As the book notes many of the industrial ventures—which could not get financial backing from the London financial market—were backed by Indian princes. What could be more swadeshi than that?

The reality is that businesses don’t back empires and political parties by picking a choice between rival political formations. To use jargon used by economists, they maximise expected values by carefully considering different outcomes from different choices while being mindful of risks that are evident. Take the strike at Tata Iron & Steel Co plant. Roy accused the Tatas of “siding” with the Congress. A careful reading of the evidence presented by the author himself shows that the situation was far more ambivalent. There were workers who backed the agitation for different reasons while the company was concerned with ensuring that plant and equipment were not damaged. A revolutionary, who had nothing to lose, could pass a political judgment (it cost him nothing!) but an industrial group has to worry about its assets. The question is not about picking political sides; it is about safeguarding interests. The two fall in very different domains.

The same principle was in operation in Independent India. Raianu tries to fit the Tata story into the long-debated role of private industry in de-railing India’s capital goods strategy for growth. The basic story is simple: The Industrial Policy Resolution of 1948 reserved industrial activity almost exclusively for state-led efforts and private groups subverted this effort. In this context, the author examines the development of the steel industry where new plants in Bhilai (backed by the Soviet Union), at Rourkela (again a government effort) and expansion at TISCO in Jamshedpur were equal contenders. His story is that the Cold War intervened and the Tatas successfully managed to get a government-backed loan from the World Bank using their “American contacts.” The story was retold by the Polish economist Michal Kalecki who said that rivalry between two superpowers allowed Third World countries to get money and resources from both groups.

The same story can, however, be told from a different perspective. The Nehru government had a hopelessly ambitious plan to industrialise India that did not take into account “bottlenecks” like food and foreign exchange. The food constraint was expected to solve itself virtually on its own through the so-called community development programmes without any resource commitment from the government much like a latter-day programme of self-reliance. While the foreign exchange constraint was sought to be solved by import substitution industrialisation. In the event, the planning process collapsed like a deck of cards. In this situation, it is hard to blame an industrial house for looking after its interests. It was merely optimising and not picking a political option. To say that it, along with other peers, was complicit in the subversion of government plans is to stretch an argument.

Perhaps, the most controversial part of the book is the last one where the author accuses the Tata leadership of siding with the Emergency regime of Indira Gandhi. To be fair, the author cites letters, speeches etcetera that show this. But when he says, “Viewed in this light, the emergency fulfilled businessmen’s deepest fantasies about the proper role of the state—namely, to inoculate capitalism against the threat of democracy,” he is indulging in an intellectual fantasy of his own. If anything, capitalism has always led a precarious existence in Independent India. Governments of all hues have championed redistributive policies at the cost of businesses. It was only after 1991 that the private sector gained some breathing space from byzantine regulations.

One does not have to say that this or that industrial house is outstanding or has been a swadeshi exemplar. No nation-state can survive without building an industrial base and if it does, it is at the mercy of foreign powers or, in our age, NGOs and donors. The strange fact of Independent India’s history is that governments have been antagonistic to groups that could help it industrialise for the better of the country. Scholars are yet to explore that fully.

About The Author

Siddharth Singh

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