Markets Zoom 1,439 points
Indian markets rose to hit fresh records after commodity stocks jumped on expectations that China is likely to cut interest rates on mortgages
On Episode 386 of The Core Report, financial journalist Govindraj Ethiraj talks to Harish Bhat, Advisor and Director at the Tata Group and co-author of the book ‘Jamsetji Tata: Powerful Learnings for Corporate Success’.
SHOW NOTES
(00:00) Stories Of The day
(01:09) Bulls tire of pause, hit play again, markets zoom 1,439 points
(02:56) ECB Cuts Rates Again, All Eyes On Federal Reserve Now
(04:09) Inflation comes in at 3.65%, higher than projections
(05:29) Will India cut fuel prices?
(08:20) Major European carrier says air fares will fall
(09:19) Jamsetji Tata, how he attacked economic problems and social gaps
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regards any feedback, you can drop us a message on [email protected].
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Good morning, it's Friday, the 13th of September and this is Govindraj Ethiraj, headquartered and broadcasting and streaming from Mumbai, India’s financial capital.
The Top Stories & Themes For The Day
Bulls tire of pause, hit play again, markets zoom 1,439 points.
Inflation comes in at 3.65%, higher than projections
ECB Cuts Rates Again, All Eyes On Federal Reserve Now
Will India cut fuel prices ?
Major European carrier says air fares will fall
Jamsetji Tata, how he attacked economic problems and social gaps
Markets Zoom
Indian markets rose to hit fresh records after commodity stocks jumped on expectations that China is likely to cut interest rates on mortgages to boost consumption.
Cues usually flow from the west but this was one of those occasions when it flowed from the east.
A slowdown in Chinese consumption thanks to a real estate crisis has hit commodities ranging from iron ore and steel prices to of course oil prices worldwide.
Any reversal in that is good for commodity companies because prices of these could potentially go up.
Indian indices have gained 17% each this year and are among the best performing globally, Reuters reported, adding the Sensex crossed the 83,000 mark for the first while the Nifty logged its 55th record high in 2024.
The big jump came at 2 pm though, a little more than an hour before the closing bell.
Earlier, stocks in Asia-Pacific markets tracked gains on Wall Street fueled by a tech rally. Japan’s Nikkei 225 jumped 3.41% to close at 36,833.27 and The Taiwan Weighted Index advanced 2.96% to finish at 21,653.25.
The BSE Sensex zoomed 1,439 points to close 1,439.55 points higher at 82,962.71. The Nifty50, on the other hand, closed at 25,388.90, up 470.45 points.
Among commodity stocks, Hindalco was up 4.15 per cent on the Nifty. JSW Steel, JSW Steel, Grasim, Tata Steel and Coal India were among the gainers.
In the broader markets, the Nifty MidCap index rose 1.2 percent and the Nifty SmallCap gained 1 percent.
ECB Cuts Rates
The European Central Bank lowered interest rates for the second time in three months with inflation falling back toward 2% and, on the other hand, concerns about economic growth increasing.
The key deposit rate was cut by 25 basis points to 3.5% — something analysts polled by Bloomberg had predicted.
“We shall remain data-dependent,” ECB President Christine Lagarde told reporters in Frankfurt, adding that Thursday’s decision was unanimous. “That is particularly justified in view of the uncertainty that abounds.”
“A declining path is not predetermined,” she said. “Neither in terms of sequence, nor in terms of volume,” Bloomberg reported, adding that the ECB is getting more confident that consumer-price growth is returning to target following its historic spike.
The euro zone’s 20-nation economy, meanwhile, is losing momentum, Bloomberg said, adding the weakness prompted the ECB to trim its forecasts for gross domestic product in 2024, 2025 and 2026 — now seeing expansion this year of 0.8% compared with 0.9% in the last round of quarterly projections.
Inflation Low
India’s inflation numbers have come low as predicted.
India's August retail inflation was however slightly higher than economists' expectations, thanks to a sharp rise in vegetable prices, according to government data released Thursday evening.
Vegetable prices rose 10.71% year-on-year in August against a 6.83% rise in the previous month.
Vegetable price fluctuations in general seem to be something that the Government has not been successful in controlling as it is a combination of weather and supply chain and storage factors.
Annual retail inflation was 3.65% in August, compared with a revised 3.60% in July. Economists polled by Reuters had forecast August inflation at 3.5%.
The figure is also below the Reserve Bank of India's target of 4% in July and has been reached after a gap of nearly five years, largely due to the high-base effect.
Prices of food, which account for nearly half of the retail inflation, rose 5.66% in August, compared to a 5.42% rise in the previous month.
Separately, the growth in the index of industrial production (IIP) increased to 4.8 per cent in July from the upward revised figure of 4.7 per cent in the preceding month.
Global Oil Demand, Will India Cut Prices?
Oil companies will consider reducing fuel prices if the price of crude oil remains low for an extended period, an official at the Ministry of Petroleum and Natural Gas said on Thursday.
Oil prices are near a three-year low, hovering around the $70 a barrel mark, which makes it more profitable for oil marketing companies like Indian Oil and BPCL.
With elections ahead in states such as Maharashtra and Haryana, there is an expectation that this could be a good time to cut prices at petrol pumps.
Petrol prices by the way were decontrolled in 2010 or largely market determined while diesel was decontrolled in 2014.
Petrol prices are over Rs 100 per litre in most states while diesel is above Rs 90 per litre.
Meanwhile the International Energy Agency has said that global oil demand will rise less than previously thought this year, led by weakness in China, Reuters reported.
World demand will rise by 900,000 barrels per day, the adviser to industrialised countries said in a monthly report, down 70,000 bpd or 7.2% from its previous forecast, which is at the lower end of the range the industry expects.
There is a difference in 2024 demand growth forecasts between what the OPEC is saying and the IEA though the OPEc has also cut its 2024 forecast.
"With the steam seemingly running out of Chinese oil demand growth, and only modest increases or declines in most other countries, current trends reinforce our expectation that global demand will plateau by the end of this decade," the IEA said.
China has for years driven global rises in oil consumption.
The IEA has been saying that slower Chinese economic growth and a shift towards electric vehicles have changed the paradigm for the world's second-largest economy.z
Not that other economies are doing better.
Gasoline use in top consumers in the United States has dropped year-on-year in five of the first six months of this year, it said, adding that "Outside of China, oil demand growth is tepid at best," the report said.
HealthCare For Above 70
The Government has announced it is expanding a programme to provide citizens aged 70 and above with annual medical insurance coverage of Rs 500,000 rupees or Rs 5 lakh per family.
The new plan is expected to benefit an additional 60 million people, adding to Modi's 2018 healthcare initiative which already covers more than 500 million citizens, the Government said, also considered the world’s largest healthcare programme which offers free treatment for serious illnesses, already providing poor families with an annual cover of 500,000 rupees.
Ryanair Projects Lower Air Fares
While airfares in Asia and India are steady to higher, including outbound, particularly to the west, demand is slowing in Europe.
RyanAir, which has a fleet of 594 aircraft and flies to 250 airports in 37 countries, mostly in Europe, has said ticket prices could fall as much as 10% from the year-ago period, Bloomberg reported.
The Irish carrier previously expected prices to be about 5% lower this winter, but Chief Executive Officer Michael O’Leary said on Thursday the drop in the July-September period could extend to as much as 10%.
Consumer spending remains constrained after travel rebounded following the pandemic. The airline cut its outlook in July for ticket prices during the crucial summer season, saying fares would be “materially lower” as consumers grow more cautious.
Tata
Jamsetji Tata, founder of the Tata Group, was born in 1839 and died in 1904.
Along the way, he pretty much pioneered modern Indian industry.
From Empress Mills to Tata Steel and what is now the Indian Hotels Company or the Taj Group of Hotels, he built it at all.
A new book by Harish Bhat and R Gopalakrishnan focusses on the entrepreneurial principles of Jamsetji Tata rather than the man himself, given that there are several authoritative biographies on him.
Bhat is former Chairman of Tata Coffee and former CEO of Tata Consumer Products and on the boards of several Tata Companies and R Gopalakrishnan was on the board of Tata Sons for 17 years until 2015 and worked with Unilever before that.
What interested me about the book and Tata was his interesting approach to solve both business and social problems simultaneously and seeing them as interconnected.
I caught up with Bhat in a somewhat longish conversation but then this is a Friday !
INTERVIEW TRANSCRIPT
Govindraj Ethiraj: Harish, thank you so much for joining me. So we're speaking today in the context of your new book, co authored with our Gopalakrishnan, called Jamshedji Tata, powerful learnings for corporate success. So you've taken care to preface this by saying that this is not a biography, but it's actually about distilling learnings from Jamshedji Tata, from his time, and then the principles that he set forth, which have obviously sustained the institution of the Tatas for all these decades. So let me start with a question about jamshetji Tata and whether or not we could today see similar entrepreneurs, visionaries, founders, businessmen. And let me build on that a little more before handing over. So as I could see at his time, someone like Jamshedji Tata was always trying to solve many problems at the same time. He was spotting economic opportunities, but he was also trying to see the social gaps and trying to address both at the same time, which obviously became the bedrock of the Tata Group in general. But simultaneously, he was trying to, let's say, Build an Institute of Science. He was trying to build a steel plant solve an electricity problem use hydroelectricity, which turns out to be more sustainable, and all of that at the same time thinking about the people, the contribution to society, and the values that would go forth this sort of multi layered entrepreneurial personality. Would we see someone like that today? Or, to put it in one sentence, could a Jamshedji Tata exist today?
Harish Bhat: So when Mr. Gopal Krishna and I wrote this book, you know, Jamshedji Tata powerful learnings for corporate success, you're quite right. This is not a bigraph. We have distilled what the principles of Jamshedji Tata were, what were his core ideas, and we have actually come to the conclusion that they're very, very relevant to today's entrepreneurs, today's businessmen, today's leaders. So the categorical answer to your question is yes, a Jamshedji Tata could exist today, because the ideas that you and jamshi Tata were very simple and very powerful. You know, the core going the idea which powered him was that the community should be center stage in an enterprise, and not just another state. He was a very astute businessman. The very first Greenfield industry that he founded, Empress Mills was one of the most profitable companies of its kind in India. It was a textile mill based out of Nagpur, but it was also the mill where he implemented for the first time ever in India, the concept of accident insurance, the concept of graduate just pension for workers, the concept of a provident fund. And people went and asked him, Mr. Tata, why are you doing this? And in 1895 he delivered a speech where he said, you know, we founded this institution on very straightforward business principles. Our wealth belongs to our shareholders, but we believe that the prosperity, the welfare of our workers, is the surest foundation for a prosperity of tomorrow. And to him, in his mind, workers, the workforce, the community, in his mind, transformed to the nation. And after that, the core principle that he pursued was to do what was good for the nation. He was, of course, a very astute businessman. He saw the areas that had business opportunity, but he also identified the areas which were extremely important for India and for the nation. Which is why he went into steel, because he thought domestic steel was very important for the future of India. Which is why he went to clean hydroelectric energy, because he thought that was essential for the city of Bombay, which used to run completely on coal at that time, or which is why he wanted a institution of higher education in science, which resulted in the Indian Institute of Science coming up. So while you see him doing multiple things in his life and pursuing multiple streams? The origin of that, or the Gangotri, or the, origin of that river was actually his love for the country and his love for India, and that's what we have tried to express in this book. So an entrepreneur of today who spots very good business opportunity in a space that he creates, or in a space where he taps into potential demand, but at the same time, is doing things for the love of the country, for the good of the country and the community. I think there is every opportunity for yet another, Jamshedji Tata, to be born in this country, for many, many entrepreneurs like him, to flower out in India. We do hope that this book will be read by many aspiring, potential entrepreneurs and even current entrepreneurs, and they will adapt some of these principles to their own lives and companies.
Govindraj Ethiraj: The other example that struck me was the Stata silk palm, the silk now what became, then subsequently, the Mysore silk and the central silk board, which followed silk, is something that is completely off the beaten path, even at that time. And I'm sure even I won't be surprised if it's the case today, too. What is the thinking that you know? I mean, if you've been able to, let's say, pick his brains, in retrospect, how does that you know come into your radar, that you know that you pick something like this?
Harish Bhat: This amazes me. Govind, you know, I stay in bhaswan gudi in Bangalore, and the data silk farm is just next to my it's right next to you. It's just next to my house. There's a bus stop there called the data silk farm. And it was, I was wondering. Why is this called the Tata silk farm? And then I researched the story. You know? What actually happened was Jamshedji Tata visited Japan in 1893 and then he saw, you know, Japanese silk farms and Japanese mastery over the art of silk. And he said, Why can't we bring back a thriving Sikh industry to India? When he returned to India, he decided to establish this in the state of Mysore, where a sink industry had flourished. In the distant he knew the Divan of Mysore, who was open generally to such progressive ventures. And then he selected Bangalore as the place because the temperate climate of Bangalore lent itself to the cultivation of silk. It was the start. I mean, he used it as a startup capital at that time. It continues to be one today. But the reason he did this go with, which became very clear, is that he wanted to create employment for local people and for Indians. And he wanted India on the world map of silk. You know, he actually writes the inspector general of agriculture on the 16th of April in 1903 saying, I have always, in my limited sphere, endeavor to keep to this aim of training the native talent. And I'm always prepared to offer all the help and facility to those who so deserve it. He actually got a Japanese couple to come down and stay in Bangalore and train people here, train the locals here, on on the cultivation, the rearing of the silkworm, the treatment of any diseases, eventual post cultivation and packaging for European markets. So he did a lot here. And you know, some of the giants of Indian Silk culture, like Apadura, Mudaliar and Lakshman Rao, were amongst the first trainees of the Tata silk farm. So the core purpose was to create employment for Indians, killing Indians, generating sustained employment for them, and creating an industry that India could be very, very proud of. It's a unique story, and I hope a few people listening to this podcast will decide to read further about the story.
Govindraj Ethiraj: So in your book, you've talked about persistence, which you've already touched upon. And then there are principles, profits and perspectives. So tell us about where maybe he saw and I'm talking about Jamshedji Tata, not so much, his successors. Maybe, you know, a conflict, or, let's say, maybe a mental or, I mean, an inner conflict between, let's say, am I compromising between principles and profits here? And therefore, then what did he do?
Harish Bhat: So let me take Empress Mills, okay, which was his first enterprise, so he rapidly made it the most profitable enterprise of its kind in the country. How did he do that? He used the best quality of cotton, long stapled cotton. He used manufacturing innovations like the ring spindle, which were not even being used in the UK at that time. And that led to enhanced productivity within the bills. And he made it the most profitable enterprise of its kind. Very clearly, for him, there was a potential conflict between the making of profits and the utilization of those profits. He resolved that conflict in his mind by ensuring that a good part of this profit went towards the welfare of the workers. So, you know, in this book, there is a reference to JRD Tata being asked, is the data group capitalist or is socialist? And he says it's a bit of both, or, I don't know, jamshita actually resolved that conflict, potential conflict, in his mind by saying it is the purpose of an organization to be very profitable, but it is also the purpose of that organization to use part of those profits to contribute back to the workers and the community. So that classic debate between what is capitalist and what is socialist, that is the way it got resolved in his mind. And later, as you know, his sons donated their wealth, which was the equity shares of Tata Sons, to the Tata charitable trusts. Which is why, until today, 66% of the shareholding of Tata Sons is held by the Tata Charitable Trust, which kind of hardwires the community into the center of the Tata.
Govindraj Ethiraj: So now, if I were to fast forward and look at, let's say, the more recent forays of the Tata Group, what are the original principles you feel most reflect some of these forays or ventures, including acquisitions and the way they're rolling out or the way they're playing out?
Harish Bhat: Very, very interesting question. Govind and as a business historian, I have studied that. Let's take some of the most recent ventures. Let me take, for instance, the semiconductors venture, which has been announced with the data group very recently over the last year or two. You know, it's very clear to me that semiconductors is an industry which India needs for the future. Virtually everything that you and I use uses semiconductors from our electronics to our cars, to our washing machines to our air conditioners. It's an area which is a very high importance to the country, and therefore the Tata group's entry into this area. And it's also a big business opportunity for the future, given the suppliers shifting supply chains across the world and so forth. So once again, here is a venture which is which keeps the country at its core and what is required for the future of the country at its core, but at the same time, is a very big business opportunity. In many ways. It's reflective of the kind of work that Jamshedji Tata did with steep, big business opportunity, but also poor core and required for the country for the future. So if you look at some of the recent ventures of the. Group as well. I think the same principles of Jamshedji Tata reflected in what the group today, under the leadership of Mr. Chandrasekaran, is undertaking for the future.
Govindraj Ethiraj: So you're saying, If I were to cap that recap, that the biggest opportunities for entrepreneurs in India still lie in India, as in looking at India as the market and India as the core opportunity. And then, of course, onwards?
Harish Bhat: I would like to rephrase that as saying that as entrepreneurs, I think all of all entrepreneurs want to create profitable businesses, meet consumer needs and become financially very successful. But I think that cannot be the core purpose of an organization. I think having a larger purpose, which is dedicated to the community and the nation actually fuels you, actually gives you a lot of energy, which you cannot get just by the drive towards making more profits. So the point I'm reflecting here is that every entrepreneur in India today has an opportunity to contribute to the nation through the industry or through the enterprise that she or he is building up within the country. I think that is something that we try to put forward through this book. That purpose drove Jamshedji Tata. That purpose has driven his successors for 156 years of the Tata Group. And that purpose can drive 10s of 1000s of entrepreneurs in the country today and tomorrow,
Govindraj Ethiraj: Right, and one of the points that you prefaced, or in the prelude to your main book, you've talked about, you know, how do virtuous practices survive and at what point perhaps it will not so. And you're really saying here that, if you were to look at international examples as well, there are certain virtuous principles that you know that ensure that an organization sustains over time. And when we say over time, I think in this case, it's six generations.
Harish Bhat: So yes, Govind, it's very important for a virtuous philosophy to sustain over generations. And one of the things we have examined this book is, how does that virtuous philosophy survive? And what we say here is that, firstly, that philosophy should be well known across the company or the group. The philosophy of Jamshedji Tata is very well known within the Tata Group, very well known to leaders and to employees of the Tata Group. That's the first point we make. The second point we make is it cannot just remain at the philosophy level. You have icons of the group over the years, and you know you have icons within the Tata Group, like Suman Mulgaokar, Darbari Seth, Nani balkiwala, USC Bodhi, FC Kohli, these leaders, along with the likes of Jamshedji, Tata, Dharabji Tata, JRD Tata, are venerated. Their accomplishments are annually remembered at the companies that they led. So it's very important to have those icons who have actually implemented that philosophy over the generations for them to be remembered and venerated, so that we keep their philosophy alive. The third moment, which is very important, if you have to keep philosophy alive over the years, is to actually, you know, have narratives around that philosophy. Have enough story virtuous storytelling around it so that those narratives are very, very easily understandable across the length and breadth of the organization by all the stakeholders, which is why there is a lot of storytelling around what Jamshedji Tata did, around what JRD Tata did, and so forth. Because the stories remain in our mind. They are very powerful markers of the philosophy. And finally, go in, we refer to rituals. You know, rituals like within the Tata Group, we celebrate Founders Day on the third of March. Every year, we celebrate the JRD Tata's birthday on the 29th of July, and it's the day for business excellence within the Tata Group. There are, you know, rituals like you referred to the Tata Management Training Center. Most participants at the TMTC also get a guided tour of the Tata central archives, which is next to it. You know, within Bombay house, which is our group headquarters, there's the Tata Experience Center, where the where many, many people visit the Tata Experience Center to get a very good and when digital glimpse of the history and narratives of the group. So these are all the rituals. So we actually talk in the book about four things, philosophy, icons, narratives and rituals, all of which help to perpetuate the philosophy from generation to generation.
Govindraj Ethiraj: Right. Last question, Harish, so you've been in the group for four decades, and you've also led many companies within the group, including Tata tea what became Tata Global Beverages, among others, what's the one thing that resonates with you the most in all his Jamshedji Tatas principles.
Harish Bhat: So I think there's one thing that resonates most with me, govin, that's integrity. I think it's being true to yourself, being true to your beliefs, doing business with integrity, which Jamshedji Tata propounded right from the time he established his first Greenfield enterprise. Integrity is the bedrock on which the Tata Group is founded, and integrity is the reason why the Tata brand commands so much trust across the length and breadth of our country today. I think he's left that behind with us as a very, very powerful principle to follow in our lives. And I'm personally very grateful to the Tata Group. I've been working with the group for 37 years now, and not once, is the group asked me to do anything which has been against my conscience over these 37 years, which enables me to sleep well at night, which you would agree with me, is worth its weight in gold.
Govindraj Ethiraj: Thank you so much for joining me.
Harish Bhat: Thank you Govind. And I hope many, many of your listeners, decide to pick up this book. Jamshedji, Tata, powerful learnings for corporate success, and I hope they enjoy reading this book. Thank you very much for this interview.
Govindraj Ethiraj: Thank you so much.
