The McKinsey Quarterly: What's next for Tata Group: An interview with its chairman
The McKinsey Quarterly: What's next for Tata Group: An interview with its chairman
The Quarterly: Why would India win in the knowledge area?
Ratan Tata: India has people with skills. And it has people with considerable intellectual capabilities who have been leaving India because the opportunities were not there. We have to create these opportunities. So if you are asking, why should this happen if all things remain as they are, the answer is that it won't. But if we can hold onto our best people in India, if we can attract our best people back, if we can create a sense of opportunity and reward, then I think India could be a very different place.
Indians coming back to India really go through a cultural shock. They give up a lot in terms of the quality of life, the education of their children, the availability of medical facilities. This will also have an impact when we want to hire people who are not Indians, as we will have to do in a world without boundaries. Even if we start only with pockets of the country and make those pockets less of a cultural shock, the benefits will spread. In some ways, this is what China did with the economic zones.
The Quarterly: You serve as chairman of the government's investment commission. Why do you think many foreign companies are reluctant to set up shop in India?
Ratan Tata: In some areas, rules and laws are more investor friendly in India than they are in some other countries, and in some areas they are less so. Most investors today cite caps on foreign investments as a deterrent. But there are sectors where even 100 percent is permitted, and you don't see people rushing in there. India has an impeccable record of repatriation of profits, so it's not that either. But a new investor looking at India does run up against different ministries, with each one seeming to have a different angle on the investment and throwing up roadblocks. So companies don't really come in as they do in China or Singapore, where they get clearance and are free to start their operations quickly. And once investors are in India, they quite often find that one bureaucrat interprets the law differently from another bureaucrat. All of us in India live with this. You can have an excise official in Maharashtra who takes a different view of the duty structure than an excise person in Bihar does. You'll go to court and fight that, but you're used to it. But a US, European, or Japanese company finds this terribly debilitating and gets all upset about it.
So I think a number of things, including red tape and corruption, deter investors from coming to India, which is a market with a middle class of 250 million people. It is a terrific opportunity for growth because you have the larger part of the pyramid rising in prosperity.
The Quarterly: What about Tata Group's impact on India's economic development and consumers?
Ratan Tata: What I feel most proud of is that we have been able to grow without compromising any of the values or ethical standards that we consider important. And I am not harping on this hypocritically. It was a major decision to uphold these values and ethics in an environment that is deteriorating around you. If we had compromised them, we could have done much better, grown much faster, and perhaps been regarded as much more successful in the pure business sense. But we would have lost the one differentiation that this group has against others in the country. We would have been just another venal business house.
The Quarterly: Will Tata's social values endure after you leave?
Ratan Tata: I would hope so. I think it is wrong for a company in India to operate in exactly the same way, without any additional responsibilities, as if it were operating in the United States, let's say. And even in the United States, I think if you had an enlightened corporation that went into the Deep South, you would see more of a sense of social responsibility, of doing more for the community, than the company might accept in New York City or Boston. Because it is inevitable that you need to be a good corporate citizen in that kind of environment. And companies that are not good corporate citizens—those that don't hold to standards and that allow the environment and the community to suffer—are really criminals in today's world.
The Quarterly: Why would India win in the knowledge area?
Ratan Tata: India has people with skills. And it has people with considerable intellectual capabilities who have been leaving India because the opportunities were not there. We have to create these opportunities. So if you are asking, why should this happen if all things remain as they are, the answer is that it won't. But if we can hold onto our best people in India, if we can attract our best people back, if we can create a sense of opportunity and reward, then I think India could be a very different place.
Indians coming back to India really go through a cultural shock. They give up a lot in terms of the quality of life, the education of their children, the availability of medical facilities. This will also have an impact when we want to hire people who are not Indians, as we will have to do in a world without boundaries. Even if we start only with pockets of the country and make those pockets less of a cultural shock, the benefits will spread. In some ways, this is what China did with the economic zones.
The Quarterly: You serve as chairman of the government's investment commission. Why do you think many foreign companies are reluctant to set up shop in India?
Ratan Tata: In some areas, rules and laws are more investor friendly in India than they are in some other countries, and in some areas they are less so. Most investors today cite caps on foreign investments as a deterrent. But there are sectors where even 100 percent is permitted, and you don't see people rushing in there. India has an impeccable record of repatriation of profits, so it's not that either. But a new investor looking at India does run up against different ministries, with each one seeming to have a different angle on the investment and throwing up roadblocks. So companies don't really come in as they do in China or Singapore, where they get clearance and are free to start their operations quickly. And once investors are in India, they quite often find that one bureaucrat interprets the law differently from another bureaucrat. All of us in India live with this. You can have an excise official in Maharashtra who takes a different view of the duty structure than an excise person in Bihar does. You'll go to court and fight that, but you're used to it. But a US, European, or Japanese company finds this terribly debilitating and gets all upset about it.
So I think a number of things, including red tape and corruption, deter investors from coming to India, which is a market with a middle class of 250 million people. It is a terrific opportunity for growth because you have the larger part of the pyramid rising in prosperity.
The Quarterly: What about Tata Group's impact on India's economic development and consumers?
Ratan Tata: What I feel most proud of is that we have been able to grow without compromising any of the values or ethical standards that we consider important. And I am not harping on this hypocritically. It was a major decision to uphold these values and ethics in an environment that is deteriorating around you. If we had compromised them, we could have done much better, grown much faster, and perhaps been regarded as much more successful in the pure business sense. But we would have lost the one differentiation that this group has against others in the country. We would have been just another venal business house.
The Quarterly: Will Tata's social values endure after you leave?
Ratan Tata: I would hope so. I think it is wrong for a company in India to operate in exactly the same way, without any additional responsibilities, as if it were operating in the United States, let's say. And even in the United States, I think if you had an enlightened corporation that went into the Deep South, you would see more of a sense of social responsibility, of doing more for the community, than the company might accept in New York City or Boston. Because it is inevitable that you need to be a good corporate citizen in that kind of environment. And companies that are not good corporate citizens—those that don't hold to standards and that allow the environment and the community to suffer—are really criminals in today's world.
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