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The Rediff Business Special/B K Karanjia

Three-fold effort that made Godrej a corporate giant

Part 1: Giant who gave Godrej its global presence

Sohrab made up his mind that if he was to remain in industry, he might as well be as good an industrialist as involvement, example and study could make him. Over the years, Pirojsha had impressed upon him that given the nature of the Indian economy, their efforts should have a three-fold purpose.

• Firstly, they should see that customers were always satisfied so that they would buy more and more goods. This in turn would lead to more goods being produced and the government would get more money by way of taxation.

• Secondly, they should work in such a way that they made profits to be able to pay taxes, among other things.

• Thirdly, the people who worked for them should get adequate wages along with various benefits. He believed that the fundamental reason for their organisation's existence was the satisfaction of consumer needs. In the process of fulfilling consumer needs, the organisation would make profits which are a logical outcome of customer satisfaction. Profits could not, however, be independent of product quality and consumer satisfaction. Customer service, as a corporate philosophy, was therefore ingrained in Sohrab at a very young age.

Struggle againt import of raw materials

The Godrej association with steel as a basic raw material being such a long one, a great disappointment of Sohrab was that even so many years after Independence, they were forced to import steel, besides other materials, and that too at a time when foreign exchange reserves were dwindling. One of the shortcomings of the mixed economy was that not only steel, but aluminum, cement and power were not in the hands of the private sector, so that if the public sector was not properly run, the country's economy suffered. In 1979-80, for example, additional production worth at least three to four thousand crore rupees (Rs 30-40 billion) could have been achieved, if there were no bottlenecks of coal, power and transport. Lack of proper infrastructure was a further impediment to progress.

In the Indian economy, fissiparous tendencies resulted in groups of people being played against one another. There was no attempt by industry at cooperation or co-ordination. Sohrab, like other enlightened industrialists, was not against the public sector provided it was run well and co-ordinate with the private sector.

The public-sector-private-sector conundrum

The private sector actually was publicly financed to a large extent, and the so-called public sector was actually a State sector. The terms 'public' and 'private' were therefore not quite appropriate. 'There is nothing so private about the private sector,' Sohrab argued. 'It is for the benefit of the community, and the so-called public sector which is supposed to benefit the public, is actually controlled by the State and does not benefit the public to the extent it is expected to.' He laid particular stress on the publicly financed sector because eighty per cent of the revenue realised by the government was derived from this sector. 'Why should we keep quiet about this?' he asked.

The concept of a mixed economy laid down by Jawaharlal Nehru was not, according to several industrialists, impartially implemented. They were not making a case for the private sector being better. Rather they were only pointing out that it had in practice shown that it could deliver the goods because some sort of personal incentive and a keener spirit of competition were involved.

Indian industrialists were called upon to place before them the example of Japan; particularly the aspect of cooperation where the whole country worked, as a famous writer remarked, 'as Japan Incorporated.' The Japanese were under a totalitarian regime but, strangely, they took the democratic path and experienced phenomenal growth. As an overpopulated country, India could best be compared with China. But China had a system of government that automatically eliminated a lot of political problems.

Sohrab constantly liaised with people in various ministries, interpreting his uncle's and father's beliefs to them. He would recall a prayer in Sanskrit which, translated, means, 'May we prosper together and enjoy our prosperity in common; let our exploits be joint endeavours.' Brought up on the Gandhian philosophy, he along with other industrialists felt that Gandhi, who was critical of industry, would have changed his mind if he had known that modern industry had created an elite class of workers who had improved their social status, with good working conditions plus good housing. In the past, it is true, workers were made to work in unhygienic, unventilated factories for long hours; they had hardly any time for their families, had no benefits and enjoyed no holidays. But conditions were changing.

The trouble was that, like trade, from 1947 industrial policy in India was highly restrictive. Domestic industry was subject to a wide array of detailed and discretionary government control. Such controls took various forms such as barriers to entry and expansion of capacity through industrial licenses, reservation of large numbers of industrial products for the public as well as the small-scale sector, highly time-consuming procedures for exit of firms and prices and distribution controls on various products.

A young entrepreneur found it very difficult to function easily and therefore he resorted to anti-social methods, and what is called a parallel economy began to function. 'Wage goods' was a word commonly used, but enough was not done to give basic amenities to the people, to people who could manufacture things on a large scale and tap its benefits, and which would in turn also benefit others.

There was discrimination against industry in favour of agriculture. Because of political reasons, and because the agricultural sector had its own lobbies, it was not taxed, whereas some parts of the industrial sector were over-taxed, even up to 100 per cent and more. This was a golden opportunity to make sure that the rural sector did develop and that it generated its own income to contribute to the country's prosperity. The government had a good scheme to help industrialists who wanted to do something to better the lot of the people in the countryside.

Industrialists did deplore the fact that many people, particularly politicians, had not taken the trouble to understand how businesses were run, what profits meant, and that profits were to be allocated for several purposes; that maintenance and future security of a company required conservation of profits. In spite of everything, however, the national saving rate was quite good.

In this context, Sohrab was, however, critical of sections of the very privileged who made a vulgar display of their wealth, which set a bad precedent, got talked about and vitiated the industrial atmosphere.

Part 3: Espousing the cause of Indian products

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