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

What were the challenges faced by Rahul Bajaj when he took over as chairman of the Bajaj Group and how he dealt 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,’ says Bajaj. His father’s passing away on 1 May 1972 hit hard.

‘My father did not only act by his instincts,’ Bajaj recalls those moments stoically. ‘He would apply his intelligence rationally and objectivity to every issue, and yet with a touch of humanism. He had great faith in his analytical skills. He did believe in God, but his logical way of thinking ensured that he never sought the refuge of fate. He used to say that those who rely on fate achieve little; whatever one acquires is possible only through a scientific and objective approach.’

‘Kakaji founded and built upon the edifice of our business almost from ground up,’ Bajaj recounts. ‘He never involved himself or spent time in the minutiae of day-to-day activities, but he had a great grasp of business matters. If the need arose, he could give such insightful ideas and solutions that none of us could have ever thought of. It is because of such inputs that the Bajaj Group could rise to such heights within such a short span of time.’

‘True to his nature, he was never bothered about success or failure,’ continues Bajaj. ‘He believed only in action. He believed that a person ought to try his best to complete a task that has been taken up, irrespective of how difficult it might be. He felt that the line dividing success and failure is a very thin one.’ Bajaj adopted his father’s credo.

The Bajaj Auto board composed of Madanmohan Ruia, Viren Shah, Manmohan Lal Gauba, D.S. Mulla, Rishabdas Ranka and Ramkrishna Bajaj, appointed Bajaj as chairman. He was thirty-four. And he had a tough journey ahead of him: the Indian economy was tanking, the managing agency system was headed for its demise, business would have to be conducted differently.

Facing the Future

‘Catch-up industrialization began in the early 1970s,’ Deepak Nayyar, economist and academician, reminds us, but it didn’t get far. Restrictive policies claimed they were there to protect and grow the market, but Bajaj felt stymied from all sides.

‘I met Rahul bhai for the first time at my home,’ Bakul Patel remarked at the time. ‘He had come to see my husband, Rajni Patel, who was a close associate and adviser to Indira Gandhi, then prime minister of India. This was around 1974–75. Rajni was president of the Bombay Pradesh Congress Committee. Rahul bhai came in a “delegation” along 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 concerning an industrial policy matter in Maharashtra,’ continued Patel. ‘Those were the days of the licence raj, and

perhaps they sought Rajni’s help and advocacy in presenting their case to the then union minister of industry for redressal of their problems. As I sat listening to their presentation, I was struck by Rahul bhai’s powers of persuasion in driving home their point of view. Clearly, with his good looks, self-assured persona and facility with words, Rahul bhai emerged as the most articulate and poised spokesperson of the “delegation”. This display of leadership qualities and power of advocacy stayed etched in my memory.’

For Bajaj and Bajaj Auto, the oil crisis triggered by a war in the Middle East led by Egypt and Syria against Israel was a thwack. Bajaj’s scooters ran on petrol. 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 the Bombay TV station to Poona, and launched on Gandhi Jayanti on 2 October 1973.

The oil crisis led to double digit inflation in India as well as a global recession. ‘The mid- to late-1970s is when India got left behind China,’ Bajaj shared with Datar. ‘China’s GDP, in the 1970s I believe, was about the same as India’s. But under Deng Xiaoping, China de-collectivized agriculture, opened to foreign investment, and permitted entrepreneurs to start businesses.’ India’s economic growth rate averaged around 3.5 per cent per annum. The year 1980 was an eye-opener: according to World Bank data, 1980 saw India’s real GDP growth drop to minus 5 per cent.

Corruption was rampant. The State Trading Corporation, a public sector company, for example, in the 1970s made money in quite bizarre ways. ‘Foreign diplomats stationed in New Delhi could import cars through the corporation,’ describes Tirthankar Roy, economic historian, ‘cars which would be sold second-hand to Indians. The business was highly profitable for all concerned. The diplomats got the cars they wanted, the state earned tariffs of 200–300 per cent and given the famously dull design and inefficiency of Indian cars, second-hand cars sold at a premium on the original price, the benefits of which the Corporation pocketed.’

Ciao! Ciao!

‘Both Piaggio and we wanted to renew the agreement for at least another five years,’ remembers Bajaj, but arrivederci was not an option. ‘In the 1970s the Indira Gandhi government did not renew a single collaboration agreement in the automobile industry, as also in many other industries. We saw a period of extreme socialism.’

The licence-permit raj did not mean there was no competition. In the 1970s, there were half-a-dozen motorcycle manufacturers with Ideal Java, Enfield and Rajdoot leading the field. The Lambretta continued to hang around in the scooter category. Technologically self-sufficient scooter and moped segments enabled two new entrants in the scooter segment and three in the moped segment.

The Foreign Exchange Regulation Act (FERA), introduced on 1 January 1974, had a more far-reaching effect. The Act was formulated to regulate foreign exchange and imposed stringent regulations on certain kind of payments, the dealings in foreign exchange and securities, and transactions that had an indirect impact on the foreign exchange and the import and export of currency. The restrictions caused technological stagnation, as a consequence of which few new products or firms entered the market since this segment depended almost entirely on foreign collaborations for technology.

In the scramble for foreign exchange in the mid-1970s, the Indira Gandhi administration introduced a scheme of priority allotment of scooters against foreign exchange remittance equivalent to Rs 5000 per scooter. Under this scheme 18,200 ‘bajaj 150’ scooters were released up to 31 March 1975, ‘thus enabling the country to earn foreign exchange of over Rs 9 crore,’ Bajaj wrote to shareholders with some satisfaction. The following year, the government earmarked 24,000 ‘bajaj 150’ scooters to be released under this scheme. ‘This will result in the Company’s further contribution to the foreign exchange earnings of Rs 12 crore,’ he added. And so on . . .

The Czars of Development Finance

‘I first met Rahul bhai at the Akurdi plant in the late 1970s, where I had gone for appraising a loan proposal. He may not remember it,’ described Kundapur Vaman Kamath. ‘I saw a smart, young business leader, sharp, quick and easy to engage with. As a young officer in 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 which produced a scooter so desirable to the Indian public that it had a waiting list of a few years.’

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

Excerpted from Rahul Bajaj: An Extraordinary Life by Gita Piramal, by permission of Penguin Random House

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