Mumbai: Given our recent political and intellectual tradition, the image of a greedy, exploitative, manipulative and somehow undeserving capitalist is etched in our minds and hence in our national discourse. In many cases this is a distortion of the truth. In the US they spoke of them derogatively as the “robber barons”. Those who speak of capitalists in these terms are confused about the role of capitalism in building an economy. They also fail to make a distinction between “market entrepreneurs” and “political entrepreneurs”.
A true “market entrepreneur” endeavours to succeed by selling a better, newer or cheaper product or service. Like Steve Jobs and closer home people like Kersanbhai Patel who introduced Nirma, a low-cost detergent that ended Hindustan Levers’ dominance of this market and slashed its bottomline, or R. Mohan of Transelektra who introduced the Good Knight mosquito repellent mat in India. At an earlier time Jamsetji Tata contemplated the ubiquitous steel sheet roofing, and Ardeshir Godrej the mass-produced steel almirah.
On the other hand we have the “political entrepreneur” who thrives by influencing government by legislation and regulation to help his business or by getting the state to subsidise or reallocate acquired property. Given the political system that prevailed in India after Independence, and even before that, when the state acquired huge powers of allocation and became the principal driver of the economy by constantly jibbing policy, most of the post-Independence entrepreneurs in India were political entrepreneurs. Influencing government became their main business and it largely continues.
An entrepreneur’s main goal is to succeed by getting rich. He or she will do whatever it takes to achieve this goal. What kind of entrepreneurs they become depends on the system they operate in. Blaming them for how they did it is to miss the point and not understand the role accumulation of wealth plays in expanding the market and the economy.
When the history of our recent times will be written the inexorable rise of Dhirajilal Hirachand Ambani (1932-2002), better known as Dhirubhai Ambani, will be one of its more memorable chapters. More than the rags to riches aspect of the Ambani saga, his rise is a true chronicle of the struggle to transform India from being a laboratory for Harold Lasky-inspired social experimentation into an economic powerhouse set to take its rightful place in the global political economy.
I first heard of Ambani in the late Sixties when my friend Martin Henry, the managing director of Madura Coats, the Indian subsidiary of the Scottish multinational, Coats Paton’s, and then a textile major predicted to me that Reliance will soon be the leader of the textile industry because it made the best fabrics at costs that were unthinkable for companies saddled with huge legacy costs and managerial deadweight. This was at a time when the marquee names of our textile business were DCM, Calico, Binny’s, Madura, Tata Textiles and Bombay Dyeing. Vimal was the Toyota of the Indian textile business. These names are now long-forgotten.
At that time to be a Bombay Dyeing model was an endorsement of good looks that set many a beauty on the road to stardom. Nusli Wadia was generally considered a business titan and his company’s advertising lionised him in Bombay’s marketing and advertising community. So while Ambani focused on making the best textiles and offering the consumer the best value for hard-earned money, Wadia tried to make good with high-class advertising. Dhirubhai Ambani’s Vimal was then nowhere on the billboards, but by the early Eighties it was the brightest corporate star in the firmament and the stock market danced to the beat of the Reliance drummer.
What happened in the textile business happened all over. Of the top 10 industrial houses in India in the early Eighties, only Tata and Aditya Birla now survive in that list. The new generation of Indian companies, many inspired by Reliance, blazed a new trail with great economies of scale and by escaping the shackles of the licence-permit Raj that, while making most existing corpora-tions profitable, did so at the cost of productivity, quality and availability. Remember Bajaj scooters and the Hindustan Ambassador?
Ambani found ways to beat the system. In a well-documented series of articles by S. Gurumurthy in an English daily we learnt as to how Reliance imported a PFY plant with twice the capacity than declared for customs and licensed capacity. The Bombay Dyeing and the English daily partnership went to town with this transgression when the real transgression was how the old firms manipulated the system to limit the capacity of business rivals to system-atically bilk the citizen consumer. When I once asked Ambani about this, and he said, “The government always says ‘no’, and I say, ‘Why not’?”
The public responded by buying more Vimal textiles and buying more Reliance shares. That seems so long ago. Do we remember how Bajaj made the same scooter for decades and made a fortune in the process? Do we remember how the lobbyists in New Delhi worked more to thwart additional capacity and competition as if it was the national enemy?
This was the system Ambani took on and expo-sed as mere hollow hypocrisy, which is why few took the exposes of Shourie and Gurumurthy seriously. The public apparently had a superior perception of what the truth actually was than those professing to be concerned with the truth.
The Narasimha Rao years saw the advent of industrial delicensing and the scrapping of the Directorate General of Technical Deve-lopment which freed Relia-nce to grow many times over. By the time the Vajpayee government came to office, Reliance’s annual profit exceeded Bombay Dyeing’s turnover. After all, there are limits to what good advertising can do for you. Even Arun Shourie was forced to comment that what India needed was a hundred Dhirubhai Ambanis.
There is no other story in India comparable with Dhirubhai Ambani’s. The only close parallel internationally would be the saga of Konosuke Matsushita who built the greatest consumer electronics business the world knows through brands like National, Pioneer and JVC. Matsushita emerged from the debris of post-war Japan and was driven by an ambition to make Japan great once again. Nothing was allowed to stand in his way. He either took over the competition or ran them to the ground.
So much so that the US today does not have a single manufacturer of consumer electronics and only a token presence in domestic appliances.
When Matsushita died, Presidents and Prime Ministers vied to be at his funeral, which was broadcast live to the world. Likewise, when Ambani died every political leader and captain of industry stood in the line with common people to pay homage to him at Seawind on Bombay’s Cuffe Parade. L.K. Advani cut short his visit to Gujarat and also stood in that line. Dhirubhai Ambani would have chuckled over that and said, “Why not?”
Dhirubhai Ambani’s 12th death anniversary is on July 6, 2014
The writer held senior positions in government and industry, and is a policy analyst studying economic and security issues.
He also specialises in the Chinese economy.
