What were the challenges Rahul Bajaj faced when he became chairman of the Bajaj Group and how he coped with them, writes Gita Piramal in these excerpts from her book

What were the challenges Rahul Bajaj faced when he became chairman of the Bajaj Group and how he coped with them, writes Gita Piramal in these excerpts from her book Rahul Bajaj: An Extraordinary Life

Looking back, the 1970s was probably my toughest decade,” Bajaj says. The death of his father on May 1, 1972 hit hard.

“My father didn’t act on instinct alone,” Bajaj remembers those moments stoically. He would apply his intelligence rationally and objectivity to any matter, yet with a touch of humanism. He was very confident in his analytical ability. He believed in God, but his logical way of thinking ensured that he never sought refuge from fate. He always said that those who trust in fate achieve little; whatever you acquire is only possible through a scientific and objective approach.’

“Kakaji built and built our company building almost from scratch,” Bajaj says. ‘He never got involved in the details of the day-to-day business, but he knew his business. When the need arose, he was able to provide such insightful ideas and solutions that none of us could have ever thought of. It is thanks to such input that the Bajaj Group can rise to such heights in such a short time.’

“By nature, he never cared about success or failure,” continues Bajaj. “He only believed in action. He believed that a person should do their best to complete a task that is recorded, no matter how difficult it may be. He felt that the dividing line between success and failure is very thin.’ Bajaj adopted his father’s creed.

The board of Bajaj Auto consisting of Madanmohan Ruia, Viren Shah, Manmohan Lal Gauba, DS Mulla, Rishabdas Ranka and Ramkrishna Bajaj appointed Bajaj as chairman. He was thirty-four. And he had an arduous journey ahead of him: India’s economy was collapsing, the management bureau system was heading for ruin, business should be done differently.

Facing the Future

“The catch-up industrialization started in the early 1970s,” Deepak Nayyar, an economist and academic, reminds us, but it didn’t get very far. The restrictive policies claimed they were there to protect and grow the market, but Bajaj felt stymied from all sides.

“I first met Rahul bhai at my home,” Bakul Patel noted at the time. “He had come to visit my husband, Rajni Patel, who was a close associate and advisor to Indira Gandhi, the then Prime Minister of India. This was around 1974-1975. Rajni was chairman of the Bombay Pradesh Congress Committee. Rahul Bhai came in a ‘delegation’ with a young Sharad Pawar, then a promising politician, and Ajit Gulabchand, a scion of a prominent industrial family in Maharashtra and a budding industrialist.’

“They had come to discuss an issue related to an industrial policy issue in Maharashtra,” Patel continued. ‘Those were the days of the permit raj, and

perhaps they sought Rajni’s help and advocacy in taking their case to the then union industry minister to resolve their issues. As I sat listening to their presentation, I was struck by Rahul Bhai’s persuasiveness to put forward their point of view. It is clear that Rahul Bhai, with his good looks, confident personality and skill with words, emerged as the most articulate and poised spokesman for the “delegation”. This display of leadership skills and advocacy remained etched in my memory.”

For Bajaj and Bajaj Auto, the oil crisis caused by a war in the Middle East led by Egypt and Syria against Israel was a blow. Bajaj’s scooters ran on gasoline. He listened to the radio as oil prices quadrupled from $3 to $12. In the evenings, he watched Air Doordarshan’s grainy black-and-white television signals, relayed from Bombay TV station to Poona, and launched on Gandhi Jayanti on October 2, 1973.

The oil crisis led to double-digit inflation in India and a global recession. “From the mid to late 1970s, India was left behind China,” Bajaj told Datar. ‘In the 1970s, I think China’s GDP was about the same as India’s. But under Deng Xiaoping, China de-collectivized agriculture, opened it up to foreign investment and allowed entrepreneurs to start businesses.’ India’s economic growth averaged about 3.5 percent per year. The year 1980 was an eye-opener: according to World Bank data, India’s real GDP growth fell to minus 5 percent in 1980.

Corruption was ubiquitous. The State Trading Corporation, a state-owned company, for example, made money in rather bizarre ways in the 1970s. “Foreign diplomats stationed in New Delhi can import cars through the company,” describes economic historian Tirthankar Roy, “cars that would be sold second-hand to Indians. The business was very profitable for all involved. The diplomats got the cars they wanted, the state earned rates of 200-300 percent and given the famously bland design and inefficiency of Indian cars, used cars were sold at a price higher than the original price, the benefits of which the company hoarded . †

Bye! Bye!

“Both Piaggio and we wanted to extend the agreement for at least five years,” Bajaj recalled, but arriving was not an option. “In the 1970s, the government of Indira Gandhi did not extend any cooperation agreement in the auto industry, as in many other industries. We saw a period of extreme socialism.’

The license raj did not mean that there was no competition. In the 1970s there were half a dozen motorcycle manufacturers, with Ideal Java, Enfield and Rajdoot leading the way. The Lambretta stuck around in the scooter category. The technologically self-sufficient scooter and moped segment enabled two new entrants in the scooter segment and three in the moped segment.

The Foreign Exchange Regulation Act (FERA), which was introduced on January 1, 1974, had a far-reaching effect. The law was drafted to regulate foreign exchange and imposed strict rules on certain types of payments, transactions in foreign exchange and securities, and transactions that had an indirect impact on foreign exchange and currency imports and exports. The restrictions caused technological stagnation, with few new products or companies entering the market as this segment relied almost entirely on foreign collaborations for technology.

In the struggle for foreign exchange in the mid-1970s, the Indira Gandhi administration introduced a scooter priority allocation scheme against foreign exchange transfers equivalent to Rs 5000 per scooter. Under this plan, 18,200 “bajaj 150” scooters were released until March 31, 1975, “enabling the country to earn more than Rs 9 crore in foreign exchange,” Bajaj wrote to shareholders with some satisfaction. The following year, the government reserved 24,000 ‘bajaj 150’ scooters to be released under this scheme. “This will result in a further contribution of the company to the foreign exchange earnings of Rs 12 crore,” he added. And so forth . † †

The Czars of Development Finance

“I first met Rahul Bhai at the Akurdi factory in the late 1970s, where I had gone to review a loan proposal. He may not remember,” Kundapur Vaman Kamath described. ‘I saw a smart, young manager, sharp, quick and easy to deal with. As a young officer with ICICI in the 1970s, I admired Bajaj Auto as a symbol of the new India. I was impressed by the can-do attitude of the company that produced a scooter that appealed to the Indian public so much that it had a waiting list of several years.”

The concept of development finance and planning as an ideology arrived in India.

Extract from Rahul Bajaj: An Extraordinary Life by Gita Piramal, courtesy of Penguin Random House

Rahul Bajaj: An Extraordinary Life
Gita Piramal
Penguin Random House
pp 288, Rs 799

This post Symbol of the New India: Excerpts from ‘Rahul Bajaj: An Extraordinary Life’ by Gita Piramal

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