75 Years of Business: India Inc in Corrupt Company

An ethical history of India Inc. over the past 75 years, with the various twists and turns, ups and downs, and scandals and scams

By Alam Srinivas
  • Jawaharlal Nehru and Indira Gandhi’s regimes rocked and wrecked the trading and financing sectors
  • The FERA era imposed limits on foreign exchange and forced foreign firms to dilute non-Indian holdings to 40% or below
  • Rajiv Gandhi eased imports, reduced tariffs, and allowed foreign tie-ups in several areas like computers and automobiles
  • Narasimha Rao-Manmohan Singh combine opened the floodgates in 1991. Most controls, like MRTP and other controls, were dismantled

AS India entered the age of freedom in 1947, and as we celebrate 75 years of Independence, one cannot forget the sinking feeling that there is a vast, even gigantic, seamier side of India Inc. 

Histories, hagiographies, autobiographies, and most biographies tend to gloss over this crucial truth when they narrate the stories of businesspersons. The younger generation, the majority of the population, remembers garage-to-google tales. That is, how an individual started with Rs 50, Rs 500, Rs 5,000, or Rs 50,000 and became a multi-billionaire in dollar terms. 

Let’s reflect on what Dhananjay Ramchandra Gadgil, an acute observer, wrote about the conduct of Indian business decades ago. “The standard of social behaviour maintained by them during the war (World War II), and after, have not been high. These standards have been revealed in a variety of ways: general avoidance of controls and extensive black marketing in all directions, evasion of income tax on a large scale, hoarding and speculative operations even in times of public duress, hoodwinking and misleading official authorities and defeating public ends.” 

When the clock struck 12 at midnight on August 14, “The dominant mood was hostility towards business”, write Dwijendra Tripathi and Jyoti Jumani in their book on Indian business history. 

In this century, the sizes of corporate scandals have become unimaginable. The recent reports by the nation’s auditor, Comptroller and Auditor General (CAG), indicate the mind-numbing and heart-wrenching numbers related to the 2G and coal block allocation scams. At the height of the former controversy, a Member of Parliament innocently, sheepishly and quietly asked a friendly journalist, “How many zeroes are there in the figure of Rs 176,000 crore that was quoted by CAG as the loss to the nation due to the 2G swindle?” He was not the only one; millions of people like us couldn’t swallow the number. 

Recently, the Parliamentary Standing Committee on Finance (2020-21) criticised the existing bankruptcy and insolvency code. It stated that the laws and its implementation resulted in “disproportionately large and unsustainable ‘hair-cuts’ taken by the financial creditors over the years”. In some cases, the “low recovery rates” led to hair-cuts “as much as 95 percent”, which implied that the banks, financial institutions and other creditors accepted a mere 5 percent of their outstanding dues from the new private owners, who took over companies that went through the insolvency process. This is a huge drain on the exchequer, as most lenders are state-owned ones. 

What is clear from the above is that corporate ethics, and behaviour of the owners and senior managers, invariably stood on the shaky and unstable ground in post-Independence India. This is true of the earlier centuries too, but the nature, size and expanse of the wrongdoings catapulted to new “commanding heights” in the past 75 years. Almost every group is tainted by controversy. Some of the visionary owners ended up as greedy and immoral wolves in sheep’s clothing. Questionable and sharp practices, sometimes legal, mostly illegal, engulfed India Inc. While the business owners followed the letter of the law, they violated the spirit. 


The Nehruvian years, and the next five, under Lal Bahadur Shastri and Indira Gandhi, are known as the “socialist” or “socialistic” era. This was the period, when Indian business was shackled, and locked up in a dark dungeon. Apart from the general lack of freedom – ironically, even as the country gained it – it had barely any room to move. A combination of high tariffs and taxes, curbs on entry across sectors reserved for state-owned entities, economic planning, licensing policy, curbs on imports and emphasis on import substitution, and preferred treatment to small and medium segments implied that big business became a slave to policy-makers. 

Parliamentary Standing Committee on Finance (2020-21) criticised the existing bankruptcy and insolvency code. It stated that the laws and its implementation resulted in “disproportionately large and unsustainable ‘hair-cuts’ taken by the financial creditors over the years”

According to Tripathi and Jumani, the government decided what a company could produce, how much it could produce, where it could produce, at what price it could sell, and how it could distribute its products. It was the responsibility of the Public Sector Units (PSUs) to dominate the “commanding heights of the Indian economy”. Gurcharan Das, a former senior corporate executive, feels that the “Fabian-socialist policies” of Jawaharlal Nehru and Indira Gandhi “oversaw India’s darkest economic decades”. Swaminathan Aiyar, a journalist-columnist, calls the decades before the reforms in the 1990s as those of “benevolent zookeepers”. 

Critics and historians offer various reasons to explain this scenario. The Leftists argue that the business situation was created due to the “monopoly power of big business”, “tycoon capitalism”, capitalists’ “sufficient influence on the politics”, and “anxieties about exploitative trade and finance, reinforced by scandals”. The Rightists claim that India, and Indians, were entrepreneurial, which is why they dominated global trade earlier before the advent of western powers. Politicians and policy-makers were at fault. 

However, as Tripathi and Jumani state, “Independence for India opened a whole new vista of opportunities that would affect Indian business in the long run.” One of the reasons was that the high import tariffs, whose effective rates were as high as 300-400%, offered protection to businesses. Business leaders wanted protection and had demanded it from the colonial era. They felt that high tariffs and import substitution would open the vast Indian markets for their goods. 

For example, as Tirthankar Roy writes in his book on Indian business history, DCM Shri Ram became a “big name in sewing machines and fans with the Usha brand”. In the former segment, it outplayed foreign brands like Singer and Puff due to an effective import duty of 274%. In fans, the rate was a higher 329%. He adds that consumer brands such as Godrej typewriters, Bajaj scooters, and Ambassador cars survived only because of the “unbounded generosity of the state, which did everything in its power to drive out the foreign competition”. 

While consumers were unhappy with the lack of choices, there were bizarre ways in which they, albeit the rich and elite, gained. The state-owned MMTC (Minerals and Metals Trading Corporation) exclusively imported and exported goods that the government wished to control. One of the imported items was global car models that foreign diplomats wanted. The state earned tariffs of 200-300%. The diplomats had their dazzle and stature. When they left, MMTC bought the second-hand cars, 1-3 years old and in great condition, at scrap value. It sold the cars to rich Indians at huge premiums, which were higher than the original prices. 

Protectionism, however, had its roots in the British Raj, as the colonial regime followed a practice of discriminate protection. It meant low tariffs for imports from Britain and the colonial empire. But the Indian producers could negotiate higher tariffs for goods from other countries, especially Japan, on a case-by-case basis. Since the 1920s, the period of the Great (global) Depression, local businesses, politicians and economists clamoured for indiscriminate protection across goods. The decibel levels shot up after the Congress Party became a part of provincial governments. 

Congress Party attacked the policy of selective safety. “The conditions for the grant of protection… are difficult for the fulfilment,” claimed its committee on tariff protection in 1935. Once the Arthur Balfour Committee concluded that “structural inefficiency” existed in British industry, the attacks intensified. In a book on tariffs, B N Adarkar wrote, “To expect India to subsidise this (British) inefficiency, and that too at the expense of her own industrial development is so selfish a procedure that only political power can make it feasible.” The Cambridge-returned VKRV Rao wanted the “tariff wall to be raised so high as needed for Indian concerns to survive”. 

India Inc wanted higher import duties. The Bombay Plan (1944), written by leading Indian businesspersons, talked about import curbs and import substitution. The huge benefits of these measures were visible in the pharmaceuticals sector. Roy argues that such policies, along with the process, and not a product, patent laws enabled Indians to first “establish as bulk drug importers, obtain recipes through connections for best-selling global drugs, and re-engineer them with help from the Indian Institute of Chemical Technology (Hyderabad)”. 

The Nehruvian years, and the next five, under Lal Bahadur Shastri and Indira Gandhi, are known as the “socialist” or “socialistic” era. This was the period, when Indian business was shackled, and locked up in a dark dungeon

The licensing regime made it difficult to get permissions to expand, diversify, or set up firms. Yet, the big business gained immensely from it. Despite the stiff requirements, big business “diversified from textile, sugar and trade to cement, banking, machines, construction and real estate”, writes Roy. It was weighed, write Tripathi and Jumani, in its favour. As the business owners were “better informed and organised, they could jump the queue and pre-empt orders”. It was an easy way to corner licences, and prevent the entry of newcomers. 

Large houses submitted multiple applications to “corner future capacity” and become “dominant” in specific areas. The Birla family, contends Roy, did this successfully and, by 1970, “held close to 60 unimplemented licences”. Given the widespread corruption within the bureaucracy and political system, ad-hoc policies became the norm. One could “buy” favours. The bureaucrats, feel Tripathi and Jumani, “had a field day obliging applicants, deserving and undeserving, in exchange for illegal gratifications”. This resulted in the transformation from the British Raj to Licence-Permit-Quota Raj. 

Although the policies maintained that only existing car-makers would get the permission for foreign tie-ups, Tata’s TELCO was allowed to get one to manufacture trucks. The same was true for Ashok Leyland. According to Roy, “With Nehru’s encouragement, Raghunandan Saran, a freedom fighter from Punjab and the British Leyland Motors jointly started Ashok Leyland in 1954. Before the negotiation ended, Saran died in an air crash. With government oversight and Leyland management, the firm continued.” 

Nehru set up huge state-owned Financial Institutions (FIs), such as IFCI, IDBI and ICICI, to finance the public and private sectors. But private players reaped the benefits. In a period of immature stock markets and private banks with minimal capital, FIs proved to be a boon for businesspersons. They got huge loans to further growth ambitions, if they could manage licences, which they did without difficulties in many cases. 

Laws protected the business structures. The practice of managing agencies started during colonial times, and a managing agent could run dozens of companies with minimal shareholdings. Initially, the aim was to attract professional managers. However, in the case of business families, it became a route to control companies, with minimal investments. The Companies Act of 1956, gave a “fresh lease of life” to the managing agencies, despite the growing criticism against them. 

While the Act reduced the number of companies under a managing agent to 10, there were no restrictions on the agent to be Secretary or Treasurer in more firms. These posts, write Tripathi and Jumani, “effectively made them managing agents”, as they came with great decision-making powers. Thus, “existing business groups were left with their business empires intact”. The managing agency system, as per the Act, was only abolished in 1970. 

A combination of high tariffs and taxes, curbs on entry across sectors reserved for state-owned entities, economic planning, licensing policy, curbs on imports and emphasis on import substitution, and preferred treatment to small and medium segments implied that big business became a slave to policy-makers 

Paradoxically, the socialist policies gave unexpected and unprecedented benefits to India Inc to acquire companies owned by Britishers. Groups like Bangur, Dalmia-Sahu Jain, and Singhania expanded furiously through acquisitions. Ramkrishna Dalmia gobbled up Andrew Yule’s firms, Begg Dunlop through stock market raids, and Bennett Coleman using his insurance firm’s cash reserves. More Marwari families, apart from rare ones like the Birla clan, entered the industry post-1947. Four of them were among the top 10 business houses in 1965. They used war-time (World War II) speculative profits to “raid and buy British companies”, and were enthused by tax laws that protected the shareholders.

According to Roy, most first-generation owners, who purchased British assets, “turned the companies bankrupt due to asset-stripping, change in management style” due to induction of family members and relatives, and inexperience. Consider the rise, rise, and fall of Haridas Mundhra, who came from nowhere and became the owner of Richardson and Cruddas, Turner Morrison, British India Corporation, and Jessop and Co. The RBI report on the LIC-Mundhra scandal stated  that he had “virtually no education”, and built a “formidable empire” within a few years through high-profile takeovers in the 1950s. 

Mundhra’s past was shady and shadowy. The Chagla Committee, which investigated the controversial affair, said that he was a “flamboyant personality” and “financial adventurer”, who was “suspected to be a law-breaker and possessed a doubtful financial reputation, and whose antecedents were of a most questionable character”. Most of these assets went bankrupt after a scam surfaced that the state-owned LIC bought shares in Mundhra’s companies at inflated prices to help him wriggle out of the financial mess. The decision, stated by the Chagla Committee, involved Finance Minister TT Krishnamachari (popularly known as TTK), Finance Secretary H M Patel, and RBI Governor HVR Iyengar. LIC merely followed the “orders” from the top. 

The LIC-Mundhra scandal was seen as the mother of all scandals that happened in 1958. It was exposed by Member of Parliament Feroz Gandhi ( Indira Gandhi’s husband), involving LIC’s investment of Rs 1.25 crore (now approx 9000 crores) in six companies set up by Haridas Mundhra. TTK resigned as a result of the affair, and Mundhra was jailed.

Ramkrishna Dalmia was caught up in a muddle of his own. He was involved in tax evasion, as well as shady business practices, which were investigated by a state-appointed commission in 1962. He was convicted and imprisoned, and the Dalmia-Sahu Jain Group’s fortunes turned southwards in the following decades. The only towering remain of the group today is Bennett Coleman, which owns the Times of India newspaper and a slew of TV channels, but which remained with the Jain family after it split with Dalmia in 1952. 


There is no doubt that Jawaharlal Nehru had a socialist approach, and his tone changed after a visit to China in December 1954. He declared that the Indian picture that he had in mind was a “socialistic” one. The Second Five-Year Plan and the 1956 industrial policy endorsed this tinted view. In 1957, the Congress election manifesto said that the party’s “ultimate goal” was to establish a “socialist society”. Mark the change in one word – socialistic by Nehru and socialist by Congress. 

At the same time, the country’s first Prime Minister balanced socialist interests with capitalist ones. In a Parliament speech, he said, “I have no shadow of a doubt that if we say ‘lop off the private sector’, we cannot replace it. We haven’t got the resources to replace it, and the result would be that our productive apparatus will suffer.” He added, “Therefore, you must not only permit the private sector, but I say, encourage it in its own field.” Despite pressures, he refrained from nationalisation. During his time, the Imperial Bank of India (State Bank of India), and the life insurance business came under state control.

Although Nehru was a huge fan of the public sector, and the state-owned units numbered 67 during his reign, the figure shot up by another 131 between 1970 and 1984

His daughter, Indira Gandhi, faced different political pressures, especially after the Congress’ electoral drubbing in 1967. Her insecurity sky-rocketed when a powerful section within the party, the ‘Syndicate’ backed by powerful leaders and business houses, initiated covert efforts to replace her. Since she worked closely with her father, she was aware of the strength of the business owners, who wielded considerable, if controlled, influence on policies. One of the major reasons for the exit of British firms was this fear of owners’ sway over Congress leaders. 

Roy maintains, “Big business contributed money and leadership to the nationalist movement.” This was known to British owners, as Indian capitalists wanted the elimination of foreign capital and even the acquisition of foreign-owned assets. Way back in 1942, British directors told Herbert Mathews, a journalist for the US-based New York Times, they were “greatly worried about the fact that the big Indian firms like the Birla Brothers… finance the All-India Congress… the Congress will have a debt to pay to them… and that the payment will result in the elimination of British business interests”. In his piece, Mathews wrote that Ghanshyam Das Birla wants the country to “use India’s sterling credits… to acquire the British holdings”. 

Under political stress due to the ‘Syndicate’, and to woo the Left parties to support her fledgling regime, Indira Gandhi nationalised banks, except for a few foreign ones, in 1969. Subsequently, after a state-appointed committee report concluded that monopolistic structures existed in several areas and big business had grown dramatically during the 1950s and 1960s, she curbed it through the Monopolistic and Restrictive Trade Practices Act (MRTP) in 1969. This Act was designed to ensure that the economic system’s operation did not result in the concentration of economic power in the hands of a few.  It stated that firms with more than a stipulated asset base had to register with the MRTP Commission and seek permission to expand and diversify. 

Bank nationalisation, like the setting up of FIs during Nehru’s regime, bolstered the growth of India Inc. Owners had new avenues to get credit. Since the banks were politicised and run by their masters in North Block and South Block, the two seats of central power in New Delhi, arms could be twisted through ministers and bureaucrats. More importantly, politicians and their families could access banks to set up new businesses. 

Nowhere was the case of political cronyism more visible than at Indira Gandhi’s residence. Her younger son, Sanjay had no experience in the car sector, apart from a short-term apprenticeship with the UK-based Rolls Royce in the 1960s. However, in 1970, he was one of the two applicants to be allowed to make a small indigenous car. Chief Ministers, banks, and businesspersons fell over each other to help Sanjay Gandhi. A Chief Minister granted land, banks offered loans, and the business community subscribed to the shares of Sanjay’s company. A mother and her son, and the son of God, came together in the Maruti venture. Despite the love of a mother, and blessings from God, it failed. 

Roy contends that big firms continued to grow as the MRTP Act was “applied in a discretionary manner, permissions were traded for financial and political considerations”, and businesses learnt to play by the new rules. A former head of the MRTP Commission told Roy, “The monopolistic character of the industrial system was artificially created by the licensing system itself,” what was meant to impede and stall the growth of the big business, only reduced its speed.

Possibly, the worst part of liberalisation was the regular malpractices in the stock market. In the late 1980s, a bull run flattened, and deepened, as small investors were left without their shirts

Even before the MRTP Act kicked in, there were curbs on businesses during the Nehruvian era. Tata’s TISCO, which benefited due to overproduction during World War II, suffered later, thanks to lack of modernization and maintenance. It survived because of a state-driven loan that helped it to double capacity by 1958. Despite aviation being reserved for PSUs, Tata was allowed to launch Air India International as a joint state-private venture, but it was nationalised five years later. The Group lost the life insurance business, and Tata Chemicals was denied a fertiliser licence. 

Given Indira Gandhi’s anger against large firms, the Tata Group’s sanctions for TISCO modernization, and expansions in TELCO, ACC and power plants were not forthcoming. During the brief Janata Party regime, which came to power in 1977, Industry Minister George Fernandes who, at one time wanted to nationalise TISCO but eventually backed off, gave permissions for them. Fernandes claimed that the change of heart was because a Tata executive confided that the Tata Group “was not in the business of buying favours, even if it meant a setback to their (business) interests”. 

Another narrative of how the MRTP Act proved ineffective can be told through the stupendous and inexplicable rise and rise of Dhirubhai Ambani. Tripathi and Jumani write that despite his vision, innovation, world-class plants, and ability to raise huge sums in the stock markets, Dhirubhai got “investment plans approved without proper clearances” from the ministries and departments”, managed “favourable licences for imports of polyester yarn” that he required, and received “special tariff privileges during the last leg of Indira’s regime” (when she came back to power after the Janata Party experiment). Banks allowed him to raise foreign loans to buy imported machinery, given the import curbs. 

The FERA era, which began in 1973, imposed limits on foreign exchange and forced foreign firms to dilute non-Indian holdings to 40% or below. What we remember about the Foreign Exchange Regulation Act (FERA) is that Fernandes used it to throw out Coca-Cola and IBM. What we don’t know is that a number of multinationals survived during Indira Gandhi’s tenures, and the Janata Party’s reign. FERA, in the words of Roy, was not “draconian” – firms were given time to dilute stakes, and could negotiate non-dilution based on parameters like national interest. 

Hindustan Lever, now Unilever India, continued with 51% holding, as it told the government that it would export 10% of production, and move into technology areas. Both exports and technology were reasons for non-dilution. The company achieved the export target by shipping shoes, clothes and seafood, which it did not produce, and procured from third parties. The technology ventures included backward integration, like the manufacture of Chemical Lab used in soaps and detergents, which contributed two-thirds of its turnover. 

Siemens, another foreign-owned entity, managed the system because of its partnership with the state-owned BHEL. This helped the company politically. It is another matter that after the FERA anxieties eased off in the 1980s, Siemens and BHEL clashed to bag lucrative contracts. BHEL’s management and trade unions maintained that Siemens was favoured at the expense of the PSU. Siemens denied the charges. It was a partnership that turned sour within a few years. 

One of the narratives spun by recent researchers, like Roy, is that Jawaharlal Nehru and Indira Gandhi’s regimes rocked and wrecked the trading and financing sectors, which formed the origins of the larger business houses. This, they say, is reflected in the decline in exports, and expansive domestic controls on the distribution of most goods, like sugar, cement and paper, which were put under the Essential Commodities Act, 1955. Another example is that among the large taxpayers, 50% claimed to be traders in the 1920s, and the figure dwindled to 9-10% in the 2000s.

However, facts indicate that the rise of many newer groups after Independence lay in trading and financing. In the 1960s, Dhirubhai used a government scheme that allowed imports of nylon, which sold at huge premiums, against exports of rayon. He made a killing. 

Even more enticing were the profits he made in the 1970s. In 1971, another scheme allowed imports of polyester yarn against exports of art silk. Dhirubhai made art silk, and needed polyester yarn, whose imports allowed him to make high-quality goods, and sell to domestic users at huge premiums. 

Four Munjal brothers, the founders of the Hero Group, came from Pakistan before independence and traded in bicycle parts in the 1940s before they got the licence to make the cycle. Eicher was a trading agency for the German Eicher tractors before it got into the manufacture of tractors. Bhai Mohan Singh loaned money to Ranbaxy, a distributor of medicines, acquired it when it went bankrupt in 1954 and embarked on a controversial journey to global fame and shame. Vittal Mallya was a stockbroker in Calcutta and used the knowledge to acquire United Breweries.

The restraints on distribution and prices helped the new traders to make pots of money. Black marketing was rampant, as it was during the two World War years, and premiums were high. The black economy thrived, as companies avoided excise duties and other taxes, and sold surreptitiously, and traders flourished. Unless one takes a deep dive into the black economy from the 1950s to the 1990s, it is difficult to chalk out the history of Indian business. Most companies made illegal windfall profits, and used the money, not only to buy personal assets like properties, but to acquire firms, and start new ones. 

No story can be complete without failures. Among the biggest sufferers were foreign firms, which left the country, or sold out to Indians. Martin Burn, Bird Heilgers, and Andrew Yule are three examples. Roy feels that a combination of “hostile (government) policies, management failures and loss of assets due to takeovers” led to their fall. By the end of the 1950s, Bird was the third-largest group. But, as Tripathi and Jumani document, a “custom enquiry into the affairs of the company in 1964” led to substantial penalties. It “broke the old camel’s back, and the Benthall family, which held the controlling interest, decided to withdraw from the scene altogether.” In an innovative plan, the family sold the shares to employees and company executives, but it flopped. The government took it over in 1976. 

Walchand Group lost Hindustan Aircraft, which was taken over by the colonial rulers during World War II due to fears of Japanese invasion and control over the sensitive business. Another aviation venture, Air Services of India, was nationalised. A messy battle with the widow and son of a business partner forced the Group to sell its holdings in Scindia Shipping. The rise of the South-based Seshasayee Group was due to the managing agency contracts with several state-owned companies. The scenario changed abruptly when the Companies Act stipulated that no state concern could be under a managing agent. 

The story of the Indra Singh Group, which was ranked 18 among the top houses in 1958, is fascinating. It started with Indian Steel and Wire Products in Jamshedpur, ostensibly because TISCO wanted steel users to be based near its plant in the same city. The group acquired coal mines in princely states in Central India and traded in coal and related products. The coal nationalisation by Indira Gandhi finished it off. It vanished. A few groups, like the A V Birla faction of the Birla clan, ventured abroad. The Birla started their overseas journey when they set up plants in Egypt and Nigeria, Aditya Vikram Birla took this initial forays further and started a dozen companies in Indonesia, Malaysia, Thailand and the Philippines between 1971 and 1981. 

No tale of Indian business before the reforms, which trickled down from the 1980s and became a storm in 1991, is complete without a discussion on PSUs. Although Nehru was a huge fan of the public sector, and the state-owned units numbered 67 during his reign, the figure shot up by another 131 between 1970 and 1984. The state entered consumer goods areas such as drugs, hotels and food processing, even as we have seen earlier, digested sick, ailing and bankrupt units in the private sector, only to save the jobs of the workers. 

The checks on cotton mills ruined the sector. They were taken over by the state-owned National Textile Corporation Limited (NTC), whose portfolio shot up from 16 in 1968 to 103 four years later. In 1974, these units were nationalised through an Act and, as Roy puts it, thus began a “relentless drain on taxpayers’ money to protect the jobs of nearly 2,00,000 employees in factories that had fallen behind in technology, marketing, and even the motivation to get well”. Politically-backed trade unions resorted to strikes in cotton, jute and engineering sectors in the 1970s and 1980s. But the worst strike was by cotton mill workers in Bombay, who were led by Datta Samant, operating outside the politically-affiliated unions. It lasted for 18 months, ruined the lives of 200,000 workers, and allowed the mill owners to close down units, and sell the land at lucrative profits.


Although most think that reforms began in 1991 because of the Narasimha Rao-Manmohan Singh combination, historians feel that India embarked on the liberalisation path in the 1980s. After Rajiv Gandhi became the Prime Minister in 1984, he eased imports, reduced tariffs, and allowed foreign tie-ups in several areas like computers and automobiles. In auto, his mother, Indira, revived her younger son’s Maruti venture, after Sanjay’s death in 1981, through a financial and technology partnership with Japan’s Suzuki Motors. But the number of Indian-foreign joint firms accelerated later. 

A joke within the journalistic community, whenever hacks went to press conferences to announce the launch of joint ventures, was that if a Japanese talks to an Indian, the former is exploring the possibility to ink a new partnership. But the Rao-Singh combine opened the floodgates in 1991. Most controls, like MRTP and other controls, were dismantled. Reforms enabled business houses to go abroad in a bigger way. The business prisoners were set free from their dungeons, and allowed to move freely, not just in India, but also overseas. 

Politically-backed trade unions resorted to strikes in cotton, jute and engineering sectors in the 1970s and 1980s. But the worst strike was by cotton mill workers in Bombay, who were led by Datta Samant, operating outside the politically-affiliated unions. It lasted for 18 months and ruined the lives of 200,000 workers

Two sectors highlight the different approaches taken to garner markets abroad. They are information technology (software) and pharmaceutical. In both, India emerged as a global leader, but the stories are both exciting and unsavoury. In the case of software, Indians initially emerged as the global suppliers of engineers, given their science and maths acumen. Thousands of engineers winged their way to the United States, saw green in their eyes, and worked at foreign clients’ sites. However, the US H-1B visa, aimed to woo specialists from India and other nations, was abused in the 1990s. American agencies found irregularities, which included low wages, impoundment of employees’ passports by employers, and bad living conditions in the US. 

Renowned firms like Infosys and Wipro paid fines in America to settle cases out of the courts. The technology crash at the turn of this century meant that thousands of Indians lost jobs, or were benched (not given work, and paid a proportion of salaries). As outsourcing picked up, the dark underbelly of the software remained but was unexposed. Evidence shows that recruiters across Indian cities hire for software firms and control payrolls, and offer less-than-promised wages to contractual employees. They present higher figures to firms and browbeat the employees to accept lower sums. The recruiters pocket the difference. 

Once India accepted product patents, as opposed to process one, local pharma firms used research to get into off-patent drugs and sell them in global markets. The trick was to get clearances abroad earlier, which allowed them exclusive distribution for such medicines for a specific period. The market was huge, and so were profits, due to low costs and wages in India. But several firms, notably Ranbaxy, presented false efficacy figures and documents to regulators, especially in the US. They were saddled with penalties, fines, and strict measures. 

Despite reforms, the state’s discretionary powers in the grant of licences continued, as new sectors such as oil exploration, telecom and coal, hitherto reserved for PSUs, were opened up for the private sector. There were allegations in the oil and gas sector that firms were favoured. In some cases, sensitive and secret data on highly-potential oil and gas fields, which was not available to the bidders and were with PSUs, were given to select bidders. The state’s formula to calculate its share of profits was lopsided, and allowed private partners to gold plate costs, and walk away with windfall earnings. 

The telecom sector proved to be controversial for the past three decades. Since mobile licences were doled out to private firms in the early 1990s, allegations abounded, and most claims were settled in courts. The government used every trick to help specific bidders. Technical and financial criteria were twisted and massaged, even manipulated, to suit favourable firms. HFCL, which won several bids in the second round, and had to pay large amounts to the government, was allowed to wiggle out by changes in policies. Finally, the 2G scandal proved how the discretionary powers were blatantly abused to allow specific companies to grab spectrum. 

In the coal block allocation scam, when fields were given to businesses for captive use, like power plants, there was political interference. Politicians secretly lobbied for allocations. Rules were regularly tweaked, and the loss to the exchequer due to coal block allocations, as calculated by CAG, was higher than the figure in the 2G controversy. Finally, the government decided that it would publicly auction the coal blocks, as well as the telecom spectrum. 

Corporate scandals defined the age of liberalisation and globalisation. The Satyam Computer case was weird. A renowned software entrepreneur, who was respected worldwide, was found to cook the company’s books to show higher revenues and profits. In an Enron-like manner, losses or lower profits were hidden to shore up stock valuations. Money was syphoned off from the software concern to buy land for other ventures. It was only when things went wacky, and out of hand, did the owner willingly and publicly reveal his shenanigans. 

Once the insolvency and bankruptcy code kicked in, more revelations sprung out, as skeletons tumbled out of India Inc.’s cupboards. Apart from taking money out of companies, promoters ran them down to bankruptcies. Companies were saddled with huge debts that they couldn’t pay and were sold off to new owners. But, as mentioned earlier, this led to contentious issues. Many firms died natural deaths due to mismanagement, owners’ greed, and strategic blunders. Reforms did not make the private sector more efficient. 

Possibly, the worst part of liberalisation was the regular malpractices in the stock market. In the late 1980s, a bull run flattened, and deepened, as small investors were left without their shirts. Then came the Harshad Mehta episode in 1992, when the Bombay Stock Exchange index jumped almost four times within a year. This was followed by more scams in the late 1990s, at the turn of the century when technology stocks plummeted, and in this century. The part-sale of the government’s holdings in PSUs, and their listings in the stock exchanges, led to the hullabaloo. 

During the initial stages, there were charges that the PSU stocks were sold at deliberately-low prices. Later, cash-rich PSUs were asked to either bail out state-run units or invest in each other. This was a way to shore up government revenues at the expense of the PSUs, which were owned by the state. It was a case of robbing Peter to pay Paul, who wanted to show better financial figures and raise money to fund the various welfare schemes. This impacted the cash-rich firms, whose stock valuations dropped in a free fall over the past decade. 

When some PSUs were sold, lock, stock, and barrel, it was said that the state did so for a song. The private buyers reaped the benefits. Family silver, it was maintained, was sold as junk. This was especially true of the state-owned hotels, which were purchased for peanuts, and made huge profits after the sales. The value of the real estate, and innate costs of the building permissions that they possessed, were not taken into account, either deliberately or through oversight. In recent times, Air India, which had domestic and global routes, and a fleet of aircraft, fetched a few thousand crores of rupees. 

Clearly, the history of Indian business in the post-Independence era is full of dastardly and seedy issues. It is not, as the Rightists believe, a case of systemic corruption when businesses were yoked. It is not, as the Leftists would have us believe, a case of monopolists, who usurped political and economic powers and decimated the nation during the first four decades. Businesses gained, and businesses lost. There was corruption, and companies were hurt. But the owners learnt to adjust, adapt, and profit. In the end, India Inc. used shameful, dishonourable and reprehensible means post-reforms, even as they innovated, took calculated risks, and emerged as visionaries. 

Alam Srinivas

Alam Srinivas is a business journalist with almost four decades of experience and has written for the Times of India, bbc.com, India Today, Outlook, and San Jose Mercury News. He is working on a new book on the benefits and pitfalls of the Indian Bankruptcy Code.

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