Discovering the impact of Conglomerates in Nation building
BY BHAVYA SINGH/ OCTOBER 7, 2023
A key role was played by the legacy corporations to bring India out of the state of economic backwardness after independence and pioneer its economic journey. However, is the private sector playing the same role in the present day as well?
ndia's 77th year of independence is far better from the deteriorated state of the economy on the eve of independence, yet it has a long way to go. Governmental policies and the public sector have contributed widely to bring the country out of the absolute state of poverty and backwardness right after independence. But, there is a small section of the private sector which operated even before the country got freedom, and this small section served and contributed to nation building as pioneers in increasing employment and growth. Even when the handicraft industry was constantly degrading at the hands of the British who initiated the systematic de-industrialization of India, these companies strove through. A large number of them are still operating in the modern day markets.
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Large companies and conglomerates which began during the British rule and still continue to flourish in the market with an impressive market share serve as an example of not just business brilliance but also an intent of social upliftment. There are many such companies which can be enumerated, their overview and analysis gives clear indication of their intricate role in nation building and economic revival.
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One such company is the Tata group, still one of the most respected and competitive conglomerates in the world. They are the nation’s oldest business family who pioneered numerous industries and still remain a market leader in most of them. The legacy of Tata began with Nusserwanji Tata, when he first decided to get into the cotton trade business in Mumbai in the early 1800s, which soon became successful. The business was then taken up by his son Jamshetji Tata, who incorporated it in 1868. He founded the oldest textile mill in the nation in the heart of Nagpur in 1877, and also opened the Taj Hotel in Mumbai, the first five-star hotel in the nation. Long before the ‘Swadeshi movement’ in India started in 1905, he gave one of his mills the name Svadeshi mills in the late 1800s.
Jamshetji Tata envisioned the freedom and development of the country by first laying down principles of empathy and honesty in business, at a time when both these words were scarcely used for Indians.
Jamshetji Tata envisioned the freedom and development of the country by first laying down principles of empathy and honesty in business, at a time when both these words were scarcely used for Indians. With great care and vision, he introduced a general provident fund, medical insurance and team building exercises for his employees in the cotton mill factory. He rose to prominence as one of India's richest people as a result of the success of his cotton manufacturing company. That however did not stop him. As a result of his extensive research and study in the western coast, Jamsetji realised the importance of setting up industries in India catering to steel, power and textiles. And so, he began to research and study various lands across the country to set up a steel factory. Apart from that, he also envisioned the first Hydroelectric Power Plant and the first world class educational institution in India (presently, the Indian Institute of Science). He was dedicated to his business because he knew the importance of it in India's economy. He is also known to be the biggest philanthropist of the world, as according to TOI, he donated USD 102 billion (in current terms) to philanthropy for health and education.
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​Jamshetji left a lasting legacy after him, and his successor Dorabji Tata completed his dream to establish a steel factory in India. Due to their impeccable quality and work ethic, Tata Steel flourished during World War 1. By 1914, Tata already established 14 companies and diversified their business. After Dorabji Tata, his successor JRD Tata took India to new heights, launching Tata Airlines (currently known as Air India). In 1971, Ratan Tata became the chairman of Tata Group, which was by then already operating more than 100 companies. Under his stewardship, Tata expanded widely, acquiring Tetley, Jaguar and Land Rover, which was one of the most important and strategic decisions made by them.
Pictured: Illustration by unknown via Pinterest
The history of Tatas and their contributions to the economy can make up for several other articles on its own, however, it is important here to note how the company leveraged even under British rule while still silently building a backbone for India.
The history of Tatas and their contributions to the economy can make up for several other articles on its own, however, it is important here to note how the company leveraged even under British rule while still silently building a backbone for India. The British were never interested in steel manufacturing, as it was costly and time consuming. So they conveniently liberalised the sector and Tata Steel became their sole supplier during the World War. Tata leveraged on the urgent requirements for iron and steel of the Britishers due to the war. They could have revolted, but the British could have easily seized their steel plant. Instead, Tata decided to cooperate with the British with their textile and steel plants and also build a strong foundation for India, on which the country relied upon after independence.
Pictured: Illustration by unknown via Pinterest
In the same context, the Birla group is also one of the oldest business families. GD Birla was adamant on setting up jute mills in India in the 1920s. He then further went on to establish sugar mills and paper mills in the 1930s and dived into the automobile industry in the 1940s with Hindustan Motors. However, unlike Jamsetji Tata, he met with resistance and racial discrimination from the British and Scottish companies. This led him to expand his business interest and he became one of the most important members of the freedom struggle. He was a close confidant of Mahatma Gandhi and Jamsetji Tata and led India towards its independence along with them.
Apart from the companies set up by these progressive Indians, several companies were set up by non-Indians which proved to be extremely beneficial for the country. For example, ITC Ltd, then known as the Imperial Tobacco Company was established in 1910 as a British subsidiary. However, India slowly increased its shareholding in the company and by 1974, it came to be known as the Indian Tobacco Company. Other companies like Larsen and Tourbo (established in 1946) and Mahindra and Mahindra (established in 1945) were incorporated just before India got independence. As the freedom struggle of India was slowly moving towards its success, these companies benefited from their first mover advantage in their respective industries and a newly independent market of the country.
Other companies operating since pre-independence include Parle, BASF, ACC, Cipla, Bajaj, TVS etc. It is important to recognize their contribution to bring out the economy from an almost irrecoverable state, and their business perseverance to be able to still compete in the market.
Soon after the country got independence, India operated in a mixed economy model with a major focus on the public sector. In 1953, the government nationalised all airlines through the Air Corporations Act and in 1969, the government also nationalised major commercial banks and passed the Monopolies and restrictive trade practices act to curb monopolies and promote competition. The protectionist policies of the government had their own pros and cons but slowly turned into a failure as economic growth deteriorated. Therefore, in 1991 the New Economic Policy was adopted where the government focused on the integration and autonomy of the private sector. It is important to note that the conglomerates in the country operating since before independence have survived major economic turbulences and have managed to use them to their advantage, at the same time save themselves from the effect of dire economic conditions at times. Some of these conglomerates have a history of more than 200 years.
At many levels, it was because of these companies that India never witnessed an absolute collapse of its economy.
Keeping the economy and the market alive by increasing income, employment and demand during British rule was one of the main contributions of these companies. At many levels, it was because of these companies that India never witnessed an absolute collapse of its economy. Their overview gives a clear indication of their intricate role in nation building and economic revival. However, such an affluence could also prove to be harmful for the economy under a different situation. As it can be seen in the case of many companies like the Adani Group, Reliance ADA Group, Nestle India, etc.
Taking the Adani group as an example, Adani has worked closely with the government and has entered into numerous newly privatised sectors. Currently, Adani holds 7 big airports, 13 ports, supply of electricity through Adani Electricity and is leading numerous other ambitious projects of the government including solar Power and self reliant weaponry. Loaded with debt by state owned companies and other sources, the entire economic ambitions of the country lie on the stakes of Adani’s success. A number of other large firms are gaining more and more market share in their respective industries and their stake in the economy is increasing as the government is rapidly privatising different sectors.
Pictured: Illustration by unknown via Pinterest
This is the dual effect of rapid privatisation on an economy. Therefore, the intricate balance between the public and the private sector changes with different economic situations. Where in the pre-independence period, large corporations of India helped in economic revival, in the present situation they can affect the economy negatively due to their large market shares. Hence, it is important for the government to promote market competition in every privatised sector.
Keywords
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Economic Backwardness, Conglomerates, Independent Market , Economic Revival, Mixed Economy, Monopolies and Restrictive Trade Practices Act, Intricate Role of Companies, Rapid Privatisation , Large Market Share, Dual Effect on Economy, Promote Market Competition
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References
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Svadeshi before Swadeshi. Tata.
https://www.tata.com/newsroom/heritage/tata-svadeshi-before-independence
Sharma Mihir. (2023, January 27). What really worries Indians about Adani’s empire. The Economic Times.
Jamsetji Tata. Tata.
https://www.tata.com/about-us/tata-group-our-heritage/tata-titans/jamsetji-tata
Tyagi Rachna. (2018, October 14). Tata group history is also the history of the Indian industry. The Week.
(2013, June 14). An insane interlude in history. Business Standard.
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