Quotes of the Day

Tata group chairman Ratan Tata, 68, is regularly portrayed as the most powerful corporate chief in India. In a rare interview, he spoke to TIME's South Asia bureau chief Alex Perry about business, philanthropy and what really makes him happy.

TIME: Would it be fair to say that under your leadership, Tata has gone through two stages: one of consolidation and streamlining, and now one of rapid expansion?
Tata: I think that's reasonably correct. The first phase was increasing our stake in our companies. We had an 8% stake in Tata Steel and a 14% stake in Tata Motor, and I raised the issue of whether we really had the right to manage those companies with that kind of shareholding. So we increased our stake, to raise it at least to the threshold of 26%. [So it was a time of] consolidating, [forging] a common brand and creating a proper framework, while trying to keep the companies as autonomous as possible. And then making demands of them, in terms of market presence and branding. And then, after having done that, we went through three years of economic downturn in the country. That let our critics say that it was change for the sake of change. But it came around again.

So now the second phase would be one of looking at expansion. Of course, the economic conditions [are right]. So it's expansion, organically and inorganically, by acquisitions and the expansion of geographies, to include an international presence.

But you're not trying to conquer the world. You're being choosy about where you expand. What's the guiding theme there?
We could take the view that we wanted to expand by bolstering the top line, by simply adding numbers in every conceivable place. That would be rather foolhardy. What we have done is look for the acquisition of companies that fill a product gap or have a strategic connection with what we do, wherever that company might be. And secondly, in terms of geography, we look at countries where we can make a meaningful statement. So we have picked countries like South Africa where we believe we can have a presence and participate in industrial development. We picked Bangladesh for the same kind of reason. And we've been looking at neighboring countries, also places like South Africa, where we feel we can play a role in the development of the country, where we can bring something to that country. Our hope in each of the countries is to create an enterprise that looks like a local company, but that happens to be owned by a company here in India.

Why is that?
It reflects our values since we were set up over 100 odd years ago. It is something which is very much part of our DNA, in the sense that social responsibility and a sensitivity to the community is very much a part of our corporate existence. This gives us an opportunity to make that contribution, and at the same time, to be recognized in that country as a contributor rather than somebody who's just there for business or exploitation.

This philosophy goes against what might be considered the consensus in business, at its extreme the Gordon Gecko philosophy.
It takes all kinds of people to make the world happen.

Presumably you also see some good business sense in this?
Oh sure. We are not there for charitable reasons. We don't expect to lose money in any of our territories. If we did not think there was a business opportunity, we would not enter these countries.

Does that attitude set Tata apart? Are you alone in that?
If I go back 10 years, we used to keep getting asked: why we were doing certain things, why we were operating on the value system that we had, when it seemed like baggage and it was holding us back? Why weren't we seeing management of the environment as a means to an end? We were in some ways scoffed at by various people at that time. I remember when we were unable to get permission to form an airline with Singapore Airlines—we were thwarted by particular people, through three governments. People would say, 'Look, if it's really important to you, and there's a price to pay, you pay it.' But we didn't. More recently, if you look at the corporate downfalls that have taken place, it's been a vindication of our position that we wouldn't do that.

So on a similar basis, social responsibility was also something that several of my international friends said was baggage we were carrying, and that [money] really belonged to the shareholders and this really wasn't the smartest thing to do. My view of that has been that certainly in a country like ours, we have to be sensitive to the disparities that we are creating apart from the improvement in the quality of life we hope to bring. We need to be sensitive to that. Is it baggage? Yes, that money belongs to the shareholders. So how does it benefit the shareholders? I would say that some of the benefit that's somewhat intangible is the fact that this leads to an environment that has been harmonious for our employees—we have a greater history of harmony, of co-existence with our employees. We are much more trusted and accepted by the communities around us. So when you start to set up an enterprise that is in an area that hasn't been industrialized, by and large we are seen as people who are sensitive to what they are doing in the community, be it the environment, be it resettlement, be it in fact incorporation of the communities around us and participating in the operations of the company. In a developing country, we have to be holistically driven rather than just look at our business.

How much of that is personal conviction and how much from the historical ethos of the company?
I share that conviction, it's not forced on me. But it's very much part of the group's philosophy.

Where does Tata's philosophy come from?
It all started with the founder Jamsetji Tata, who was really driven by developing India, and the patriotism that existed at that time. Everything he did was either to make India self-sufficient or to give India the capability that he felt it did not have. So he gave India its first steel plant, its first hydro-electric plant or first textile mill and so on. All of which eventually proved to be nation-building projects. That very issue in later years came back to haunt us, because in Mr. Nehru's time of socialism, we were in the same businesses that the socialistic government wanted to be in. So we could never expand. We were lucky not have more of our companies nationalized. In fact, it's not inconceivable that we could have gone through the early 1950s having all our major companies—steel, power etc—taken away from us, as did happen with the airline and happened with our insurance company. We could have been left with very little compensation. So for almost 20 years, Tata was very restricted in its expansion of its core businesses. And then of course big business was considered bad, so we had to dismantle ourselves in order to conform. Until the 1980s, when the restrictions were removed and they started to change their view on the size and scale of business in the private sector.

With Tata in such a dominant position, you've almost become brand India—Tata is India and India is Tata. Do you think you will affect the way people think of Indian business? Do you think you're bringing something new to our ideas of globalization and development?
I don't know. I just feel that that you can be very hard-nosed and very tight on what you want to do in a country and you can end up being branded as being a tremendous exploiter. What applies to India, and to the developing world, may or may not apply to other places. My feeling is it would, by the way. I often ask myself: 'Why does business usually carry with it a connotation of being bad, and self-serving and selfish?' And I think all businesses have that kind of tag on them, of one sort or another, probably including ourselves. Because we are always bad—it's almost like cutting down a tree. You're converting something from its natural form to something forced, in the form of the business enterprise. But in a manner of speaking, I think what we do is taking us away from the extreme of that image and simply giving us a deserved reputation of being sensitive to what we do. And above all being fair to the communities around which we work.

The counterpoint would be: have we deprived our shareholders in any way? And there I think we need to measure ourselves against our competitors. I think we measure up pretty well. I don't think some of them can truly say we have delivered a lower performance to our shareholders. I think at one time we were, but it wasn't because of this, it was because we weren't driving ourselves hard enough in a protected environment.

At times there, you almost sound like a reluctant businessman. Which is quite odd, given how successful you are.
I think the two don't necessarily contradict. There are many enterprises elsewhere in the world that also spend a fair amount of their resources on energy, dealing with the communities around them, working for the uplift of their under-privileged. At the same time, there are many companies that do not. For a number of years, many companies were applauded on how sharp they were on what they returned to their shareholders. Some of those companies don't exist today. They skated too close to the edge. Others have operated that way successfully, not bothered with communities, but have not been exploitative. This kind of sensitivity can work in different ways. The company can hire people based on the ethnic model in that town. I think there are various shades of gray to this whole question.

But for you the sensitivity is key.
Yes, it is. And in some ways, the degree of satisfaction that you get from having made a contribution and seeing a quality-of-life change, some little area of change, exceeds the happiness when your company has grown. Because you've got a team of people, and that's what they're there to do and they do it well. The other is something that most people don't expect you to do. There is adrenaline in that. Would I feel proud if the company did exceedingly well in terms of growth and profits? Yes, I would. Would I feel proud if a tsunami hit the Chennai coast and 60 people from our group volunteered to help? I would feel much prouder of those people, and of the fact that our company could do that. I feel proud every time we have a calamity, because almost spontaneously, our workforce will contribute a day's wages to such a cause. We do not have to force them. It happens quite spontaneously. It's those kinds of moments that make you feel that you're different. That's a very exhilarating feeling.

Let's talk about India. The interest is phenomenal suddenly. I can't tell you how busy I am.
You're here at a very exciting time.

Is this a gold rush? Is this hype?
Ten years ago, there was a runaway enthusiasm. We'd just come out of the opening up of the economy and people were just growing because you'd taken out their fetters. People were making expansion plans. And then agriculture declined rather rapidly. Today, my view is that the 8% growth is a sustainable figure. Because if you look at the substance of that—assuming that we continue to spend money on infrastructure, and assuming that we can have the level of foreign direct investment that we expect—I believe we can sustain at least 8% for a period of time. The risk areas would be: political uncertainty, perhaps not there today. An upheaval of sorts. We have to recognize we have a coalition government. I think that would cause the economy to stumble. I think that if there was a slow-down or stoppage on infrastructure spending, which is giving jobs to tens of thousands of people and has a multiplier effect, then we will again falter. Another factor could be if agricultural output declined—although we're less dependent on that than before.

It's not a gold rush—it's sustainable. We should be concerned that the aspirations of everybody do not exceed [what we can deliver]. For instance, if we don't have power, it will be very difficult, and today we are woefully behind on power. If we don't modernize our ports and our airports. If those are addressed on a war basis, these will be factors that impede the kind of growth people are expecting. But it's doable and sustainable level of growth that's being talked about.

If you look at ourselves and you look at China, one big difference you see is that we have been very cautious and timid in our planning. China has been very bold. And I think India should also be bold. It must look at the future. Stop dealing with small increments, where you're out of date before you finish. It must look big, and look out. This is the time that we should really go forward. If we have had 3 million tourists, we should not be satisfied with 3.5 million. We should ask ourselves: if Singapore can have 8 million, why shouldn't we have 20? Why we should not plan an infrastructure to take in 20 million tourists?

The one lakh [100,000 rupees, or just over $2,000] car has generated a lot of interest. Where are you with that?
It'll be on the market probably in the first quarter of 2008. I feel very comfortable that we will achieve the targets we set. In other words, we will have a one lakh car. We will have a four-door, four to five seat car, with a rear engine. At present, there is nothing in it that seems a big question mark. What we hope to do is release the car differently. What we want to do is produce all the high-volume parts ourselves. And maybe produce 50% of the total number of cars ourselves. The other 50% with very low cost, low break-even assembly facilities, which we would franchise out to give young entrepreneurs who would assemble the cars and create a business for themselves. We would train the people. We would provide quality assurance. And in so doing we would generate a handful of young entrepreneurs, who would in turn employ a few hundred people and totally change the communities around which they operate. These could also be service points for the cars. We're thinking out of the box ... producing cars and selling cars and providing ancilliary services.

How many do you think you're going to sell?
Let me give you some facts. Today, India consumes about a million cars a year, of which 60% is at the lower end. Four lakh [$8,500] or below. And India consumes 6 million two- and three-wheelers. I assume that we will be close to two million cars in a few years, and eight to nine million two and three wheelers. We would be right in the middle of that. We would create a new market. So it would seem to me, that in a mature state, we should be able to sell close to a million cars a year.

What's interesting about this is how different a view this all takes of Indian consumerism and the Indian middle class. There's a lot of talk about there being 300 million middle-class Indians. You're saying they're very different, poorer, actually, than what Americans or Europeans understand middle class to be.
Everyone is catering to the top of the pyramid. The 300 million may be different from elsewhere in terms of purchasing power parity, but it's still very sizeable, and the car is attempting to address that market. Another area we have launched this year is the no-frills hotels. These provide a hotel room that meets all basic requirements—air conditioning, heat and electricity, direct dialing, attached bathrooms—and they'll be 1,000 rupees [$20] instead of 15,000 [$325]. So far one exists, in Bangalore, and this year we will have 10 more. The plan is to have 100. There is an enormous demand for that kind of accommodation, which is not being met. We will have copy cats. Our goal will be to keep ahead by providing greater and greater value.

The challenge we've given to all our companies is to address a different segment of the market than what we're addressing now. Pare your margins. Today people are being venal in terms of what they are offering. So can you break that barrier, and provide good, affordable housing, for instance? It's something I've often felt we could do more effectively. Everyone would hate you for it. The other builders would want to kill you.

Well, let me ask you about that. Tata's business philosophy does go against the practices of many other businesses. Do you have many friends?
[Laughs]. Not very many. Socially I do, but I often differ with them on business platforms. I've been an advocate of bring tariff barriers down—that doesn't make me very popular. I'm in favor of taking away the embargoes on retail and real estate to foreign investors to allow major foreign companies to come in—again, that does not make me tremendously popular. Nobody's tried to kill me. [Laughs]. But there are differences between my position and those of my counterparts.

How long are you planning to do this?
The board has given me until I'm 75. Whether I stay that entire period or not.... I reduced the 75 to 70 and then the board put it back. All it does is give me a little more leeway to put a successor in place.

Is there an active search?
There is not an active search. There is a sort of submarine search. One would like to take someone from the group, but I don't think we're confined to that.

If you're considering retiring, how do you spend your free time? I noticed a lot of yacht brochures in your waiting room.
Are there?

Yes.
They're not mine.

But what are your interests outside business?
Right now, there are not very many. On the weekends I can get away, I have a small beach house. I used to play golf, but I haven't played for many years. I'm an architect by training and having the chance to do more design work is something I would have liked.

Is it that you get the most satisfaction from the non-business part of your business?
It gives me a great deal of satisfaction. There are certainly moments when something you do in the company is tremendously exciting, and achieving it gives you a great deal of satisfaction. Being able to succeed in producing the one lakh car would give me a great deal of satisfaction. Designing and producing the first Indian car, as we did with the Indica, gave me tremendous satisfaction. But what you're able to do outside the normal realm of business is tremendously fulfilling.

In some ways, you were born into this. Do you ever think about another life?
It happened by accident, in the sense that I may not have come back from the U.S. And so I could have had another life. If I look at my plan, when I was 23 or 24, at that point in time, it looked like a very pleasant life. I expect I would have been an architect. I don't know what else I could have done. And if it had remained that way, I think I would have been very happy. I came back because my grandmother was ill and I was very close to her.

And you started working for the company.
I went through eight years of questioning where I was going in the company. I think my real breakthrough came in the 1970s when there was a loss-making electronics company that no one wanted to run and I had nothing to do, and I offered to step into the fire. And as crazy as it sounds, that was the turning point. For a whole host of things. I took a risky job, was able to make something happen there and that led to other things.

Where do you go when you want to get away from everything?
As I said, I just go out to this little deserted beach house. It seldom had power, so I had to put in a small generator. It's quiet and away from everywhere. There is a town and there are neighbors, but I go quietly on my own. I walk the beach and I read and I think about what I should do.

I have a passion for cars. I like them, but it's not to show off in—I drive them periodically and then go back into the garage. I don't flaunt them. I've never had the desire to own a yacht. I find it a little too conspicuous. I can't see I wouldn't enjoy living that kind of life, because I never have.

To some people in your position, that's the whole point.
It's not really.

• Alex Perry
• TIME talks to Indian industrialist Ratan Tata