Remembering Jamsetji Tata: The Father of Indian Industry

March 3, 2019 was the 180th birth anniversary of Jamsetji Nusserwanji Tata. While he is known as the founder of the Tata Group, his true contribution has been empowering the economic ecosystem of India at a time when the country was under British Rule. He firmly believed that India’s industrial self-sufficiency was a prerequisite for its political independence. He once observed,

‘Freedom without the strength to support it and, if need be, defend it, would be a cruel delusion. And the strength to defend freedom can itself only come from widespread industrialization and the infusion of modern science and technology into the country’s economic life.’

It's no surprise then, that he is called 'the man who saw tomorrow'. As we pay homage to his memory this day, let's go back two centuries and revisit milestone events in his life. I believe that India hasn't seen a start-up king like Jamsetji in the last 200 years. His start-up ventures no doubt created wealth for him, but they created enormous value for the nation. There are tremendous lessons from his life that budding entrepreneurs can imbibe even in today's milieu.

The Tata Story Begins...

The Tata family had a strong connection with traditional Parsi religion and each generation of the Tatas typically included a priest of the Zoroastrian faith. In such a lineage was born Nusserwanji in 1822 in the town of Navsari (Gujarat)[i]. He was the first in the fifteenth generation of the Tata family to move out of formal priestly duties for trade and commerce. He apprenticed with a Hindu banker and saved enough money to start his own business.

On 3 March 1839, at the age of seventeen, Nusserwanji and Jeevanbai Tata sired a son and heir, Jamsetji. A decade later, Nusserwanji left Navsari for Bombay and after settling down called his son. In 1852, at the age of thirteen, Jamsetji arrived in Bombay. Four years later, he joined the Elphinstone College and graduated in 1858 as a ‘green scholar’ (equivalent of today's graduate). In the same year, he married Heerabai Daboo. A year later, their first son and heir, Dorabji, was born. While Jamsetji delighted in liberal English education, he also witnessed with dismay how the British brutally quelled the 1857 uprising. On the steps of Bombay’s Town Hall (now the Asiatic Society Central Library), India was transformed into a British colony.

Image: Jamsetji Tata and his family

Young Jamsetji joined Nusserwanji’s firm and was sent to Shanghai and Hong Kong to develop trade with China. He started and stabilized a branch of the company, where Nusserwanji, Kaliandas and Premchand Roychand were principal partners. The American Civil War (1861-65) brought a cotton boom to Bombay. The war had caused a blockade of ships that brought American cotton to England. The British mill owners soon realized that Indian cotton was the alternative to keep them alive, and were willing to pay twice the normal price for its cotton. Nusserwanji’s firm and many others made bumper profits. On the partners’ insistence, Jamsetji sailed from Bombay to England to set up a cotton agency in December 1864. He carried bills of exchange and securities on the cotton market. However, even before his ship docked on the London harbour, the American Civil War ended. The Manchester mills once again had their stock of American cotton; the Indian cotton market collapsed. The scripts he was carrying had become worthless overnight; Jamsetji was penniless in the British capital.

When Nusserwanji's Business Failed...

Not the one to lose hope in adversity, he brilliantly negotiated with the shrewd bankers at the Bank of England and the Royal Exchange. This was perhaps his first independent display of business acumen. They were so impressed with the integrity of the 25-year old lad from India that they appointed him his own liquidator with an allowance of 20 pounds a month. Nusserwanji had to sell his seven-storied house in Bombay to discharge debts. But the creditors were paid in full. During his four-year-long stay in London, two fellow Parsis helped him—Dadabhai Naoroji and Pherozeshah Mehta. Both were eminent freedom fighters for India’s struggle for independence. This association, which was to last a lifetime, probably sowed the seeds of nationalism in young Jamsetji.

The Tata Story Begins

Worldwide conquests had made the small island of Britain a mighty power. ‘The empire on which the sun never sets’, is how Christopher North described His Majesty’s rule. The British Empire was at the acme of its supremacy, and when Jamsetji visited Manchester, the greatest of the Lancashire cotton cities, he marvelled at its mills. What struck him the most were its industrial slums, which were as dark and sulphurous as the medieval vision of hell. He was appalled at the contrast between poverty and prosperity in the world’s most efficacious country. This inspired in him the ambition of creating another Manchester in the East and equipping India with the power to make for herself, with Indian labour and Indian capital, the cotton fabrics that she would use in large quantities, and thereby make a dent in the British dominance of India’s textile industry. All this, while ensuring the highest standards of labour and human dignity. Historically, Indian cotton goods were in great demand for over 2000 years. A Roman historian had complained that Indian textiles were draining Rome of its gold. It was the British Raj (henceforth referred to as ‘the Raj’) that had made concerted efforts to destroy the hand-crafted Indian products and impose the dominance of machine-made British products from the eighteenth century. 

Wiser for the experience garnered by nine years of working with his father, Jamsetji started his first independent venture in 1868—a trading firm with a capital of ?21,000. This marked the formal beginning of the Tata Group. Like his father, Jamsetji was also ordained as a Zoroastrian priest. He brought those value systems into business, and made Humata, Hukhta, Hvarshta (good thoughts, good words, good deeds), the fundamental tenets of the Parsi faith as his motto and inscribed it on his family coat of arms.

Among Jamsetji’s first initiatives in 1869 was the acquisition of a derelict and bankrupt oil mill at Chinchpokli (near present-day Race Course) in the industrial hub of Bombay. He converted it into a cotton mill and named it Alexandra Mills, after the Princess of Wales. Within two years he turned it around and sold it for a significant profit to Kesowji Naik, a local cotton merchant. He once again headed to Britain for an intensive study of the Lancashire cotton industry. On his return, in September 1874, he registered the Central India Spinning, Weaving and Manufacturing Company, with a seed capital of ?15,00,000. He was 35; the Tata odyssey had just begun...

From a Trading Firm to an Industrial Group

Image: Making of an iconic industrialist - Jamsetji Tata through the decades

...Over the next 30 years and in Jamsetji’s lifetime itself, the Tatas had transformed themselves from a small trading company, often considered as a backbencher in the Bombay industrial circuit, and emerged as the largest indigenously financed and managed industrial group in India. In 1887, Jamsetji converted his trading business into a company. He found Tata & Sons with Dorabji (his elder son) and Heerabai’s nephew Ratanji Dadabhoy (RD) Tata. Ratan, Jamsetji’s second son, was only sixteen years then, and added as a partner two years later.

Image: Founding Members of Tata Sons

Unlike its British counterparts, the Tatas’ style of business was characterized by a desire to experiment with investments in new technology and a non-aversion to risking private capital. For example, in 1881, Jamsetji put up an electric light installation to run Empress Mills (established in 1877 in Nagpur) at night, and even experimented a double-shift for two years. When it did not give results as expected, the electric installation was scrapped. What is noteworthy is his desire to look for improvements, learn from mistakes and profit by them, a trait his British peers in India lacked.

The prevailing practice was calculating managing agents’ [ii] remuneration on sales. In contrast, Jamsetji established a system at Tata & Sons to claim 5% commission on net profits. This ensured that a loss-making firm wasn’t burdened. He was probably the first mill owner to even allow for depreciation while calculating net profits. These systems and processes were eventually adopted across the managing agency system in India. 

The British managing agency houses preferred an individualistic small-firm approach to business and refused to diversify into newer industrial sectors post World War I, especially in steel, chemicals, construction and transport. These were exactly the areas in which the Tatas invested substantially through new enterprises. Their nationalist outlook played a significant role in large investments in new industries despite conditions of uncertainty. It was noteworthy that by 1925, the Tatas controlled ￡210-million of industrial capital compared to Gillanders, Arbuthnot & Co., a leading British partnership firm, that had capital assets of about ￡1-million.

Sir Lawrence Jenkins, Chief Justice of Bombay, once told an audience that when speaking of the hardships of the poor, Jamsetji’s eyes were filled with tears. His philanthropic vision like his industrial forethought was distinct from prevailing wisdom, and developed in parallel to his industrial success.  

To this end, Jamsetji established the JN Tata Endowment in 1892 to enable Indian students to pursue higher studies overseas. By 1924, two out of every five Indians coming into the elite Indian Civil Service were Tata scholars. By 2016, there were more than 5000 JN Tata scholars all over the world. Some of the illustrious names include K.R. Narayanan, former president of India, scientists Jayant Narlikar, Raja Ramanna and Raghunath Mashelkar, and Jivraj Mehta, former chief minister of Gujarat. I too was a beneficiary when invited as a visiting scholar to Harvard Business School.

Image: With a life-like statue of Jamsetji Tata during my visit to Tata Motors Pune Campus

More about this doyen in another article...

Note:

[i] The town of Navsari in Gujarat is one of the leading settlements of the Parsi community. Originally known as Nag Mandal, it was named Nav-Sari (new Sari) after ‘Sari’, former capital of Iran, to which the city’s atmosphere bore several similarities.

[ii] Under the managing agency system that began in India under the colonial rule, a managing agent (either an individual, partnership firm or company) would be appointed to manage one or more joint stock companies. The managing agent also held shares in the managed companies and controlled their boards of directors. This limited liability system was introduced in early nineteenth century to facilitate trade and investment by British businesses in India, and was eventually adopted by Indian businesses. Investors ordinarily cautious of investing in a new venture would willingly lend money based on the reputation of a managing agency. By early 1900s, there were sixty significant managing agency houses in India and almost half the total employment in Indian industry was provided by them.

Published by Penguin Random House India, 'THE TATA GROUP' is now available at your nearest bookstore and on select metro airports. It can also be ordered on Amazon and Flipkart in Print and Kindle versions. A lot more information is available on my website: shashankshah.com