The tale of a nationalist entrepreneur

This chapter commences with a story. The Bengalis had been inadequate in industrial capabilities, but were not short of nationalist spirit. The first technology entrepreneur in India, motivated by a spirit of national uplift, was Praphulla Chandra Ray, whose achievements we have seen in Chapter 4. On the western side of the country, a remarkable man with nationalist spirit, named Walchand Hirachand, deserves approbation as an inspirational doyen of India’s manufacturing sector in the period prior to the Second World War. His approach, in the first half of the twentieth century, displays the characteristics of a sense of urgency, and an unwillingness to kowtow to other countries’ interests. The latter factor was a psychological component behind India’s tipping-point in 1991.

Born in 1882, Walchand Hirachand belonged to a Gujarati family that had settled in Phaltan, in the Satara district of the Bombay presidency, in the nineteenth century. The family had dropped the surname of Doshi. Phaltan was an important center of cloth, oil, rice, and mango trades. Today, it is an important agriculture center in western Maharashtra. Walchand Hirachand’s father, Hirachand Nemichand, had to give up school and enter business at the age of 14 because his own father had suddenly died. In a decade, he had attracted the attention of Morarjee Goculdas, a textile industry pioneer of Bombay, who had started the Sholapur Spinning and Weaving Mills. By the age of 30, Hirachand Nemichand, who was an agent of several textile mills, had entered the banking sector and accumulated a fortune in bond trading.

Outside-the-box thinking

India has, seemingly and finally, embarked on her late, late industrial revolution. This has occurred more than two centuries after Britain launched hers, and a century after Japan commenced the industrialization process. She is several decades behind Japan, South Korea, and China, three other important Asian economies, in this industrializing and economic growth catch-up process. But it is better to have commenced the process now than never to have commenced it at all. In every decade, an ideal business and economic model is proclaimed and held up as exemplary. Thus, the central planning model of Soviet industrialization and the American New Deal in the 1930s, the indicative planning model of the French variety in the 1960s, the German co-determination model in the 1970s, and the Japanese kanban system of the 1980s were given approbation. South Korea’s late industrialization model was the exemplar of the 1990s, and the Chinese model of the 2000s was to be the workshop of the world. Can India’s model of a late, late industrial revolution define the contours of business and economic discourse in the 2010s and beyond?

The answer to this question depends very much on India’s entrepreneurs. In this respect, my niece Dr. Aindri Raychaudhuri, popularly known as Mikku, who is a very successful young infertility specialist in Calcutta, described an interesting entrepreneurship case to me. Now renamed Kolkata, it was once Rudyard Kipling’s “city of dreadful night.” For many now, Calcutta is the city of joy. It was then, and it still is now, one of India’s largest and most vibrant cities. It has also emerged as the medical hub for eastern India. Mikku runs one of Calcutta’s thriving in-vitro fertilization (IVF) clinics. An IVF baby is a test-tube baby, and an IVF therapy program is used for couples who have not been able to conceive naturally. In Western societies, many couples engaged in same-sex relationships or marriages also use IVF to start a family of their own, since the natural processes of human biological reproduction are denied to them. The Calcutta IVF market may be somewhat socially different from that of the West at this point.

Contemporary Indian enterprises

The entrepreneurs’ data presented in Chapter 6 suggest that a transformation is under way. Yet, behind the dynamics is the issue of whether this is simply a revival, as a set of reactions to past impoverishments, or genuine regenerations of an industrial spirit that also experiment with new businesses and functionalities so as to make the industrial transformation a genuine revolution. Specific cases and facts address this issue. I posit that the evidence suggests not just a revival but a regeneration.

The older large business houses of India, such as Bangur, Birla, Goenka, Kilachand, Mafatlal, Modi, Sarabhai, and Shriram, are no longer dominant, if they exist at all. One of the largest Indian business groups, Martin Burn, has become extinct, falling prey to Bengalis’ inabilities to be businessmen. In the place of the old names, new names have emerged. A listing of these businesses and names has been made by journalist Harish Damodaran. Among these new businesses, three companies assert Indian-owned firms’ emergence as serious world-stage players. These are: Arcelor-Mittal in steel, Videocon in consumer electronics and white goods, and Bharti Cellular with its Airtel brand in wireless communications.

Heat and light

India’s late, late industrial revolution demands many transformations, some of which are under way. The numerous institutional transitions that have occurred are just the first step. Many more are required. One’s own predilections lead to the discussion of just a few structural transitions considered critical. This chapter deals with some of the issues and discusses how a few necessary, but by no means sufficient, transformations ought to be wrought as India proceeds to reindustrialize herself. Each item demands a separate book-length treatment. Each topic is massive. Thus, what is discussed in the section, on that topic, only scratches the surface of an important issue in a shallow way.

This first section deals with the energy imperative, since that is vital in industrialization, for mass manufacturing and in enhancing general welfare. Thereafter, other important contingencies are discussed. There is no particular order among them. All are equally important and necessary contingencies. Yet, no item is sufficient in itself. The second section highlights possible changes in industrial structure occurring because of entrepreneurial actions. The third section deals with how fragmented industry segments may consolidate. The fourth section deals with the information technology sector, while the fifth section sums up the major issues of the book by discussing new age manufacturing. Finally, there is a summary of the various themes in the book.

Entrepreneurship in the nineteenth century

In 1976, in an obscure corner of the Rajabagan dockyard of the Central Inland Water Transport Corporation, in the southern reaches of the Hugli, the river that flows through Calcutta, a huge pile of rusting junk metal was discovered. On closer inspection, it turned out to be a steam engine. It was one of the first steam engines to come to India, and it might even have been the first. It had belonged to the India General Steam Navigation Company. Prior to that, it had belonged to the Calcutta Steam Tug Association. The identity of that scrap metal’s original corporate owners is not important. The identity of the companies’ ultimate owner is. The owner of the companies was Carr, Tagore and Company, a firm founded by Dwarkanath Tagore.

Dwarkanath Tagore, known as the Prince, has gone down in history as the grandfather of two extremely illustrious grandchildren. The older of the two, Satyendranath Tagore, was the first Indian to join the ICS in 1863. A younger grandchild, Rabindranath Tagore, was India’s first Nobel laureate, winning the literature prize in 1913. Dwarkanath Tagore, however, deserves approbation as the father of modern entrepreneurship in India, in the form that we know it. His firm, dating back to the 1820s, Carr, Tagore and Company, was what we today classify as a holding company for a conglomerate of businesses. It had interests in many activities, and particularly in shipping. Dwarkanath Tagore voyaged to Britain in his own ship. Carr, Tagore and Company had also formed the Bengal Tea Association, which was the first Indian enterprise to start tea cultivation.

Late industrialization and its consequences

What was happening elsewhere in Asia? What lessons may India glean from her Asian sisters’ industrialization experiences? These are important questions, relating to the phenomenon of late industrialization in Asia, as India proceeds on her own industrialization trajectory. Industrialization results from a complex collection of cumulative forces acting on each other in transforming an economy from an agrarian and rural character to an urban and industrial character. A key feature of the process of industrialization is the changing composition of output and employment, away from land and agricultural pursuits. The term industrial revolution refers to a series of major quantitative shifts in the trajectories of industrialization based on harnessing the fruits of certain fundamental innovations. The late industrializing countries may not have innovated themselves, at least initially. At a later stage, they may well have created new innovations that might help engender another industrial revolution.

Does late industrialization pay? A clear indication of whether it does or not comes from the evaluation of two sets of data. The late Angus Maddison, in a later work, documented the incomes of different countries stretching back to the year ad 0. The resulting aggregate statistics, of the total gross domestic product generated by each country, are of useful value in understanding where India was placed in the global rankings and where she is placed now, and in comparing her economic performance to that of other countries. The data are in Table A6. Based on these data, I developed two charts comparing, first, India to Japan, and, second, India to the United States. I commence my analysis by comparing Indian and Japanese economic performance from ad 0 to 1998, as computed in 1990 US$ values. The year 1998 was the last one for which the data were computed. These data are plotted on figure 5.1.

Commerce and industry in ancient India

This history of India’s entrepreneurial activity goes back to the dawn of civilization. India has been a commercialized country for over 4,500 years. Unlike in the United States, in which there was no industrialization at all prior to the eighteenth century, India had been an industrialized country thousands of years ago as well. Then there was a hiatus and only in the last 150 years or so has India resumed the path of industrialization. The story of the evolution of Indian enterprise is fascinating, since the time-paths of this particular process reflect the ebbs and flows of generic human civilization in one land mass.

In the 1870s, when Major General Alexander Cunningham, the Archaeological Surveyor to the Government of India, published details of the first Harappan seal, which had been discovered at an ancient site in Harappa in what is now the Pakistan part of Punjab, the world become aware of what might potentially be India’s past. Not until the early 1920s, when archeologists Daya Ram Sahni and Madho Sarup Vats discovered the city of Harappa, and Rakhal Das Banerjee discovered the city of Mohenjo Daro in Sind, both on the banks of the Indus, were the secret of India’s past civilization finally revealed. The then Director General of the Archaeological Survey of India, John Marshall, stated that: “India … must henceforth be recognized … as one of the most important areas where civilizing processes were initiated and developed.”

The Maharaj and the saffron

I met my first payroll when I was 19 years old. There was a convention, in thehostel in Bombay for commerce, law, and science students that I stayed in as anundergraduate student, that a final-year commerce student or a postgraduate lawor science student would become the Mess Secretary for each of the four messesthat provided meals to residents. In my final year, it was not a case of mevolunteering to become the Mess Secretary. It was a case of when on parade theentire line stepping back and leaving me stranded ahead. Thus, I, as anon-vegetarian Bengali, found myself the Mess Secretary of a Gujarati vegetarianmess. The Gujarati messes had a person of Gujarati origin designated as theMaharaj. He was the chief chef, the business manager and the major-domo. As theoperations boss, he had hired a number of Maharashtrian helpers. These weresupernumerary peasants, from the Konkan region of Maharashtra, whose familyplots could not sustain their existence. They came to Bombay searching for work.Thus, in the course of my Mess Secretary tenure, I entertained several requestsfor an extra day off because a person had to go home to Konkan to lend a hand inharvesting the crops. But, it is not these sons of the Konkan soil that thestory is about.

Origins

Economic history includes three groups of events called revolutions. In the eighteenth century, the first industrial revolution occurred. At the end of the nineteenth and beginning of the twentieth century, the introduction of electric power and the internal combustion engine led to a second industrial revolution. Advances in computing, electronics, data storage, and communications networks have led to an information and knowledge revolution. The impact of each revolution has been massive. In many cases, aftershocks continue centuries later. Modern societies have emerged because of the systematic application of scientific knowledge for productive uses. The late Nobel laureate Simon Kuznets had remarked that “The epochal innovation that distinguishes the modern economic epoch is the extended application of science to problems of economic production.”

The industrial revolution commences with world leadership in productivity and technology for the past six centuries, initially provided by the region that is the north of Italy and the Flanders region of Belgium. These regions, where the renaissance generally took place after the Middle Ages, played the leading role in the global economy from 1400 to 1600. Then the Netherlands led from 1600 to 1820. After 1820, there were two global technology leaders. The United Kingdom had the highest levels of economic attainment, from 1820 to 1890. Thereafter, the United States took over. In the twentieth century, the leader set the stage for others. It was accepted that the United States was the twentieth-century leader.