New Delhi: Liberalization caught India’s business families much like a deer in the headlights of an onrushing car. Mostly, it left them confused and wary of what it would mean to their fortunes. After all, the licence-permit raj that the reforms of 1991 sought to dismantle had been put in place with these same businessmen in mind. The politicians of the socialist era needed the moneybags of corporate India. Elections then, as much as now, were won with hard cash and the promise of largesse later. Torn between the urge to preserve and protect on one hand and exploit the many new opportunities on the other, many wavered, fatally in some cases. The Bangurs, Singhanias, Thapars, Modis and Mafatlals, such an integral part of the who’s who of Indian business in the 50 years since independence, have all but disappeared from similar rankings today.

The best among them, however, seized the moment, first looking inwards to see what had held them back. What they saw was a cornucopia of legacy issues—vast bloated workforces, rows upon rows of inefficient middle managers, business portfolios that seem to have been assembled in the lost-and-found section of a children’s school and a general fear of the forces of globalization. The companies were mostly led by men (almost always men) who had no other qualification for the job except their family connections.

Ratan Tata (left) took over as chairman of the Tata group in 1991, succeeding the legendary J.R.D. Tata (centre) and proceeded to yank the group companies into the modern era. Photo: Getty Images
Ratan Tata (left) took over as chairman of the Tata group in 1991, succeeding the legendary J.R.D. Tata (centre) and proceeded to yank the group companies into the modern era. Photo: Getty Images

The Tatas under new chief Ratan Tata (who in a great bit of coincidence became chairman of the group in 1991) showed how to do it. Satraps such as Russi Mody and Darbari Seth were swiftly replaced and the companies they had run as personal fiefdoms were hauled, often kicking and screaming, into the modern era. The Birla group led by Aditya Birla worked on its strengths in commodities and showed how to make successful ventures abroad by setting up plants in South-East Asia and Egypt. Aditya Birla’s untimely death in 1995 brought his son Kumar Mangalam Birla into the leadership position at the young age of 28 and he too embraced the tenets of a competitive modern economy. The best example was the Reliance group, which straddled both eras equally successfully. Set up in 1966 by Dhirubhai Ambani, the company began as a manufacturer of textiles, but driven by his adrenalin and audacity it grew rapidly, and by 1991 was already the largest producer of polyster yarn in the country. But post-1991, it grew wings and was soon exploiting emerging opportunities in those sectors of the economy that the government opened up to the private sector. Today, with interests in energy, petrochemicals, textiles, natural resources, retail and telecommunications, it is a $62.2 billion behemoth under the stewardship of Mukesh Ambani.

In 1991, Mukesh Ambani was 34 years old, and Anand Mahindra, chairman of the Mahindra group, 36. Young inheritors like them went on to become the global face of the new India and in turn drew the attention of the world to the country’s potential as a market for products and a sourcing base for managerial talent.

The Reliance group, founded by Dhirubhai Ambani (centre), successfully straddled both the pre- and post-reforms era. Also seen are Mukesh Ambani (right) and Anil Ambani.
The Reliance group, founded by Dhirubhai Ambani (centre), successfully straddled both the pre- and post-reforms era. Also seen are Mukesh Ambani (right) and Anil Ambani.

The big winners, of course, were what can now be dubbed “the children of liberalization"; businesses that were born, grew and scaled up thanks to all the opportunities thrown up in the course of the next two decades as the reforms of 1991 picked up pace. But interestingly, the reforms actually ended up restoring the primacy of Indian business families in the economy of the country.

Till the 1960s, when the government took a markedly socialist stand on economic development, family-owned businesses were robust. They were the principal engines of growth and were among the best-in-class businesses across the world. Tata Airlines, for instance, was among the top 10 airlines in the world. But government policies, particularly through the turbulence of the 1960s and ’70s, brought the Indian business family to its knees by penalizing both growth and profits. By dismantling the discretionary controls that impeded innovation and entrepreneurship, the reforms allowed the best-run family businesses to reclaim their rightful place in the country’s business space. Today, 80% of Indian businesses are either entrepreneur-driven or family-owned-and-managed.

The spectacular success of Bharti Airtel has made Sunil Mittal the poster boy of the new India that emerged after the reforms of 1991. Photo: Pradeep Gaur/Mint
The spectacular success of Bharti Airtel has made Sunil Mittal the poster boy of the new India that emerged after the reforms of 1991. Photo: Pradeep Gaur/Mint

It was strange, therefore, that the initial reaction to the reforms from some of the large, established business groups was that of disapproval. A “Bombay club" came up, opposing in particular the decision to open up sectors to multinationals. The fear was that with their might and muscle as well as the lower cost of capital, large multinational corporations (MNCs) would kill domestic players who would take some time learning to cope with competition after years of functioning in a cosseted environment.

That’s where the first-generation Indian businesses scored. With no baggage of the past and no legacy businesses to drag them down, entrepreneurs such as Uday Kotak, Sunil Mittal and Subhash Chandra seized the moment, displaying audacity and chutzpah, which allowed them to compete and in many cases win battles against much mightier Indian and foreign competitors.

Uday Kotak, who ushered in the new age of professionals-turning-entrepreneurs, chose the financial services business to make his mark. Photo: Abhijit Bhatlekar/Mint
Uday Kotak, who ushered in the new age of professionals-turning-entrepreneurs, chose the financial services business to make his mark. Photo: Abhijit Bhatlekar/Mint

Mittal, for instance, started off as a David lined up against a dozen Goliaths from India and abroad. Today, Bharti Airtel Ltd is India’s largest telecom company, having seen off competition from storied Indian companies and MNCs.

The reforms of 1991 and the gradual opening up of the economy didn’t as much as offer the more adventurous of Indian business families the opportunities for growth as they removed the artificial shackles that had held back their predecessors. Now, however, a new and vastly different set of challenges face these same families: leadership issues in an era of far more stringent corporate governance standards and shareholder activism, the pressures of increasingly globalized businesses where the headwinds are both unpredictable and uncontrollable, the need to take cognizance of environmental and social factors, a vastly more complex workforce and, of course, the ever present political uncertainties magnified by the fractured polity and increasing federalism.

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