It's
fashionable, in the post-liberalisation era, to rubbish Nehru's
brand of socialism and blame India's first Prime Minister for all
the woes that plague Indian industry-inefficiency, disguised, and
sometimes even undisguised, unemployment, lack of productivity,
uncompetitiveness, disdain for quality. Rather than touting the
free-market buzzword, Nehru's priorities were clearly social development:
to provide Indians with the basic facilities they lacked, without
any foreign help, even as he sought to build India into a democracy
to reckon with.
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Videocon's Venugopal Dhoot: the licence raj
didn't stop him |
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Manu Chhabria: acquired whatever came his way |
As far as nation-building goes, Nehru didn't
do a bad job. But the biggest mistake successive governments made
was in failing to recognise that the first pm's socialist baggage
couldn't be carried forever. Result? Even as other Asian tigers
surged ahead in that period, India's economy got stuck in a time
warp.
One of the most regressive legacies of the
socialistic regime was the licence raj and the ''command and control''
economy of the seventies and eighties, which in essence killed entrepreneurship
and seriously maimed the consumer. ''If the industry wanted to go
left, the government went right,'' says Pankaj Munjal, Executive
Director, Majestic Auto. Projects took years, sometimes even a decade,
to get cleared.
As Anil Ambani, Managing Director, Reliance
Industries, points out, the decisions on the industry one wanted
to enter, the equipment and technology one needed, plant location,
and its capacity were all taken either in Udyog Bhavan, Shastri
Bhavan, and North Block. As a result, after returning from Wharton
in 1982, Ambani realised that more than half of his time was being
spent in flying to New Delhi (which incidentally was one reason
for Indian Airlines doing well those days; the other reason of course
was the lack of competition).
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Reliance's Dhirubhai Ambani: darling of the
stockmarket |
The poor consumer, meantime, waited and waited-for
his phone connection, for his Bajaj Chetak and for his Ambassador,
or Premier Padmini car. Industry was faced with two choices: Either
adapt to the system, or take your business some place else. The
latter is exactly what Aditya Vikram Birla did by setting up textile
mills and palm oil factories in Egypt, Thailand, Malaysia and Indonesia.
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Nirma's Karsanbhai Patel: the first David |
Back home, the licence raj nurtured a new breed
of businessmen-who understood the system, picked out the loopholes
and duly exploited them. That's the time when the likes of Manu
Chhabria, R.P. Goenka, Dhirubhai Ambani, Karsanbhai Patel, and Venugopal
Dhoot began building their empires, either by grabbing whichever
licences that came up on offer or by grabbing whichever business
that was up for sale. The first tentative signs of reform came in
1984, when the steel and pharma sectors were opened up, prompting
families like the Jindals, the Guptas of Lloyds, the Mittals of
the Ispat group, the Mehtas of Torrent and the Singhs of Ranbaxy
to throw their hat into the ring.
The opportunism that the eighties called for
are best illustrated in the rise of the Reliance group. Its founder,
Dhirubhai Ambani, didn't go to a business school; in fact, he didn't
go beyond matriculation and started working in 1953 at a Shell refinery
in Aden, taking home all of Rs 300 a month. By 1977, when Reliance
went public, he had become Dalal Street's darling. Over the eighties
and the nineties, the Ambanis evolved into an integrated textiles
giant, with huge capacities in every product line on the value chain.
The Ambanis love to stress that much of their growth came in the
post-liberalisation period, but the foundation was laid in the licence
raj regime.
-Swati Prasad
Reform's Children: Family
Businesses That Thrived In The 1990s And Early 2000s
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Dr Reddy's Anji Reddy: making research pay |
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Sterlite's Anil Agarwal: large non-ferrous ambitions |
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Wipro's Azim Premji: from edible oil to software |
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Apollo's Prathap Reddy': healthcare pioneer |
If ever there was
a good time to step on the gas for Indian business, it was doubtless
post-1991, when the first draughts of economic liberalisation breezed
across the country's industrial landscape. After decades of fettered
activity, in which pernickety governments decided which business
companies should venture into, industry finally got its chance to
grow the way it wanted to once the licence raj was formally throttled
by Manmohan Singh & Co.
There was little choice: The country's foreign
currency assets were down to less than a billion dollars, and the
economy was stagnating. Scrapping of the licence raj was only one
part of the reforms package. The others were opening up the economy
to foreign participants, and to imports.
The latter bit might have not been the best
of news for many family-run groups, but the scrapping of the industrial
licensing system was incentive enough to push the growth button-by
moving away from their forefathers' traditional enterprise into
sunrise areas, by aggressively putting up mega capacities in core
sector industries, and by hitting the acquisition trail. Indeed,
post-1991, a host of new names got added to the corporate glossary.
Some of these companies may have taken shape pre-1991 but much of
the growth impetus came only in the past decade. The brothers Agarwal,
Anil and Navin, set a blistering pace in the copper and aluminum
industry with greenfield capacities and acquisitions. Dr Prathap
Reddy along with his daughter Preetha Reddy transformed the Apollo
group into India's largest healthcare services provider in the private
sector. The Adani brothers (Gautam, Rajesh and Vasant), after creating
India's largest trading house, have earmarked all of Rs 20,000 crore
for forays into power, gas distribution, refining and an industrial
park.
Subhash Chandra, after flagging off a pioneering
business in laminated tubes in the eighties, burst into the limelight
by beaming India's first satellite channel into Indian homes. The
pharma giants took global strides in this period, too. In Hyderabad
Dr Anji Reddy, after setting up his company in the eighties, started
Dr Reddy's Research Foundation, realising that the discovery and
development of new chemical entities was vital for long-term survival.
The three-way split in the Bhai Mohan Singh family in 1993 was bitter,
but probably the best thing to have happened for Ranbaxy, allowing
it to focus sharply on pharmaceuticals. Ajay Piramal took a different
route by embarking on string of acquisitions in a bid to build a
pharma powerhouse.
Indeed, the nineties provided many business
families that were in danger of losing their way a new lease of
life. The Rais of the Usha group-actually founded way back in 1946
-sniffed opportunity in steel, telecom and information technology,
Azim Premji re-invented his father's cooking oil business into a
software services giant and B. Ramalinga Raju moved away from the
family business of cotton spinning and construction by propelling
Satyam Computers on to the global stage in 1992 by being the first
to invest in a high-capacity satellite link. We can't leave out
Kumar Mangalam Birla's exploits, who after taking over in traumatic
and rather dramatic circumstances in his late twenties, is today
fuelling growth at the AV Birla group via selective acquisitions
and forays in the services sector.
Along with the enthusiasm and aggression that
liberalisation brought came plenty of pain. For many business families,
their mega-ambitions weren't in sync with their funding abilities.
As a result, many-a mega-project spun viciously out of control:
the Ruias, the Jindals, and the Mittals took some hard knocks in
their bid to put up integrated steel plants, the Rais are realising
that the it party can't go on and on-Information Technology, the
company that propelled the Rais into the Forbes list of the 300
richest people in the world, is floundering today, with profits
dipping by 49 per cent last year and by 99.5 per cent in this year's
first quarter.
-Brian Carvalho
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