Examination of Witnesses (Questions 340-359)
THE INDIA
GROUP
14 MARCH 2006
Q340 Rob Marris: Why not?
Mr Chatterjee: Because it does
not exist in our corporate structures.
Q341 Rob Marris: Could you expand
a little on that?
Mr Chatterjee: Let us take ICICI
Bank, and I am sure Anwar can also take that up. We employ about
30,000 people in India. We are the largest financial services
group. Today one-third of our managerial staff are women and I
would say that in the last six months to one year there has been
a lot of interaction with global companies, as they are trying
to understand why one-third of the managerial staff are women.
In my main Board there are five executive directors and three
of them are women, and the only answer to that is that it is merit
and merit alone that counts. This example is really the same for
India of today and there would not be any difference in any one
of these companies, any difference in the 15 to 20 companies which
comprise the India Group. I am 37 years old and in those 37 years
I have not seen any situation where caste has come to play a part
in terms of business interests either corporate, industrial or
in engaging with the global economy. That is our experience of
today's India.
Mr Hasan: Now, more than ever,
if you have those considerations, you are carrying a lot of baggage.
Non-merit-based selection or posts reserved for certain castes,
I do not think that happens now. Yes, surely there would be perhaps
institutes where perhaps this might be used to sort of get more
people to be educated to give them a large number of seats to
try to employ them, and particularly with the tribes living in
our area who really help our operation, that definitely would
be perhaps so, but once you come to the interview, I think it
is what you do at the interview which is important.
Mr Chatterjee: That has a lot
of linkage into what DFID is doing and, given that India is DFID's
or the UK's largest partner, I think the situation that exists
there is that, because of governance and other issues, you see
DFID engaging a lot more with states like Andhra Pradesh and Tamil
Nadu where you have the right governance structures and virtually
not engaging at all with states like Uttar Pradesh where issues
like caste and other things exist at the lower structures of society
and it becomes a kind of chicken and egg situation where there
is a whole host of social issues, but we are active in all of
these social aspects. We have made some submissions to DFID that
we should be a partner together to kind of solve that and to get
into the area that needs development the most and not just where
you are comfortable doing development.
Q342 Rob Marris: You were mentioning
how many of your senior managers are women, which is commendable,
but how many of them are scheduled caste?
Mr Chatterjee: The difficulty
in answering this question is that I do not know and that will
give you an idea as to how irrelevant it is in the context of
merit.
Mr Singh: I would say that anybody
who gets employed in corporations like ours, I do not think anybody's
application form would have stated on it that you should declare
whether you were actually scheduled caste or not. I find it is
so simple now, it only talks about merit and there is no such
information required of any individuals in our corporations, the
developed corporations of India.
Q343 Mr Weir: We have been told that
one of the main reasons why UK trade is not as large as it could
be is because, unlike Indian chambers of commerce in the UK, UK
chambers do not have dedicated offices in India. Can you tell
us whether this is true and how important for Indian businesses
are the dedicated Indian chambers within the UK?
Mr Chatterjee: Indian chambers
have been very proactive and they have engaged a lot. If you see
what CII and FICCI have been doing in Britain, getting a serious
team of Indian business leaders in, and in many instances that
is the first step of trying to get to understand, I would say,
the local environment better, they have, I would say, really helped
the process a lot and certainly in having the same amount of interaction
from British industry groups back into India because they know
where the gaps are. One gap, and it slipped my mind to mention
it, is the area of food processing where there is a crying need.
If you see India's production today, there is a huge amount of
production happening, but India does not optimally use it, like
exports, because they lack the technologies, the refrigeration
technologies, and this is something that British companies could
walk into and fill a huge gap.
Q344 Mr Weir: Does that not take
us back to the whole question about foreign direct investment?
My understanding of the structure in agriculture is that it would
be very difficult at the moment for a UK agri-business to get
much of a foothold in it, so is that not the case?
Mr Chatterjee: I make no differentiation
between agriculture, what is happening right at the rural end
in terms of growing crops and other things, and what to do with
the produce once it is up. India has made huge strides in terms
of from being deficient in terms of food production to having
huge surpluses, but there is no commercial advantage in having
a surplus.
Q345 Mr Weir: You are talking about
the distribution?
Mr Chatterjee: Distribution, warehousing,
refrigeration, whether they can export. If Kenya can export into
Britain, can India also? Why not? Britain could make a huge, I
would say, change in India's economic situation if you look at
the bottom of the pyramid approach where large sections are still
in the agri side.
Q346 Mr Weir: But, given, as you
have said, that there is quite a lot of UKTI work in India, and
you have talked about the RDAs and the likes of those that come
to India, how big a hindrance to increased co-operation is the
lack of UK chambers of commerce being there? Would it not be another
level, if you like, another structure which needs to be tightened
rather than spread?
Mr Chatterjee: One of the problems
is multiple levels and I think somebody needs to get a hold of
who is going to be able to correct this. Recently, the City of
London, their committee were in Mumbai and I just happened to
be by chance that day in Mumbai when they called on us and I attended
that meeting there. They also want to set up an office there,
so now London for the first time has some engagement there. UKTI,
as I have said, is driving a set of processes and you have an
Indo-British partnership there and also an Indo-British trade
partnership, so we have a lot of multiple agencies. Very often,
I would say, talking about elements in India or interfacing with
India, I think somebody needs to take hold of that as to how to
engage with India which is the real India and come out with some
better results.
Q347 Mr Weir: So, in your view, rather
than perhaps looking at setting up another level with chambers
of commerce, should we perhaps be looking at a one-door approach
to it?
Mr Chatterjee: Certainly the CBI
is, to my mind, one such agency which should be actively engaging
in this, given the success of CII and FICCI.
Q348 Chairman: It is quite an important
point and this Committee is very struck with this. We hear that
London is likely to have three different representative bodies
in Mumbai alone—London First, the City of London and the
Mayor himself—as separate agencies. I heard some complaints
in Mumbai as well in previous visits from people who cite the
North-East Development Agency, the South-East Development Agency,
the Welsh Development Agency, Scottish Enterprise and so on. I
want to be clear on this point because Mike is asking about some
very important issues here. My personal conviction is that the
British effort in India is too disparate, that we have too many
separate initiatives, too many separate bodies and we are not
focused enough. Is that a view you would share?
Mr Chatterjee: I would completely
agree with that and I saw a recent example in the context of London
First where in respect of two of the acquisitions we supported,
when I arranged for the CEOs of those companies to meet the agency
in London and when it was told, "Their manufacturing presence
is not in London, therefore, it does not fit in". So I would
completely agree with that, that they should not have such disparate
situations where people are pushing their own little areas forward
and their own agendas.
Q349 Mark Hunter: We have been told
by a number of people that India is no more bureaucratic than
the United Kingdom is. I would be interested to know if that is
a view which you would go along with. We have also heard that
the recent introduction of laws on transparency in India have
acted as a disincentive to corruption. Would you agree with that
as well and, if you have got any reservations on that point, could
you tell us perhaps what you think the Indian Government could
do to reduce corruption?
Mr Hasan: Corruption is a huge
issue and it is to do with the attitudes. I can only tell you
of the Tata example of how we have sort of faced up to corruption.
We have lost licences, we have lost commercial advantage in these
kinds of situations, it is now known that Tatas just don't pay
and it would take you a week, it will take you a year, it will
take you five years, but at the end of the day they get to realise
that Tatas don't pay, and that this is in their ethos, so when
you reach that stage, people just don't ask us anymore. As far
as the day-to-day kinds of situations are concerned, I think that
the less control, bureaucratic control on the situation, I think
that is the only answer. The more you need to get approvals and
that approval has to be given by an agency, somehow the other
becomes endemic in it, so in an ideal world you could get to a
situation where there is no control, it is your money and if you
want to invest it there, you take the chance that if your money
comes good, you get rich, otherwise you are bankrupt. It is that
kind of situation and I think it will be a little bit of time
before we get to this, but I think we are on the right track of
cutting down on bureaucratic approvals.
Q350 Mark Hunter: One of the comments
often made again of course is that yes, corruption is still a
problem in India, but of course whoever we are talking to at the
time says, "But it's not in my company", or "We
don't get involved in it". Do you think perhaps that we over-emphasise
this perception of corruption in India or would you accept that
it is still a meaningful problem, but it is just not one that
impacts on your own company very much?
Mr Hasan: Actually it is difficult
to take a measure as to what the level of corruption is in different
countries. There is an organisation called Transparency International
and they do a kind of a survey of it and they have sort of marked
out which are the most corrupt countries and which are the least
corrupt, et cetera. I think you cannot get away from the
fact that there is corruption, but it is a question of how you
tackle this particular issue. If you feel, "Why am I wasting
my time here? I would not treat it as corruption, but as speed
money", or whatever you call it, so if you are beginning
to rationalise it, then there is no corruption, but if you feel
that in order to get something done either by payment or gratification
is wrong, then it is a question of your not doing that. It is
not an easy question to answer and it is not an easy problem with
an easy solution because there are so many angles to this whole
thing.
Mr Chatterjee: The same platform
would apply whether it was a British company or an Indian company
in that we are all in this together, whether it be bureaucracy
or whatever is linked to that.
Q351 Mark Hunter: This question is
for Mr Hasan as well in his capacity as Managing Director of Tata
UK. We previously took evidence from TCS, which is a subsidiary
of the Tata Group, and we asked them about news which we had picked
up involving the Tata Group expanding its operations in the UK
automotive sector by investing in a development centre near Coventry.
TCS were not actually able at that stage to answer the questions
we asked them about that, so I wondered if you could tell us a
little bit more about this investment and what, if any, expansion
of that investment in the UK you might have in mind for the future.
Mr Hasan: Actually the location
is not yet decided on, whether in Coventry, or it might go to
the WDA. We are temporarily housed at Warwick in the Warwick Manufacturing
Group because there has been a lot of association between Tata
Motors and the Warwick Manufacturing Group, so that is where we
are taking shelter at the moment, but it is now up for decision
as to where exactly we are going to be.
Q352 Rob Marris: Come to Wolverhampton!
Mr Hasan: The second thing is
also related to another question which was asked earlier about
British skills. We think that there are a tremendous amount of
skills available in the automotive industry and we are trying
to tap the skills that are available to set up this developmental
centre and this has got to be dovetailed with the low-cost, detailed
engineering which will be done back in India, so here you have
a terrific business model of getting the highly skilled people
here to do the developmental work where the detailing and things
like that ultimately would be done back in India. I think hopefully
that the next generation of cars that come out under the Tata
logo will probably be cars that will have been designed over here
and that really is the business model that we are wanting to move
with.
Q353 Mr Bone: Did I hear you say
that one of the locations would be with the WDA?
Mr Hasan: No, I am saying that
we have not yet decided.
Q354 Mr Bone: No, but it could be?
Going back to when I did inward investment many years ago, I found
that the WDA and the English regions were competing against themselves
and in fact the WDA had much, much more money to attract people.
I wonder if that is an issue you have come across or whether you
are finding that different parts of the country are actually competing
against each other in monetary terms.
Mr Hasan: Well, I suppose the
competition is there and there have been approaches which have
been made from the WDA for this particular location. Like I said,
this is still not yet decided because it is not just the Tata
Motors part of it, but there is also the TCS part and also the
Tata Technologies part because, you see, we are in the telecoms
sector, we are in the IT sector, we are in the automotive sector,
so ultimately it could be that you might have a knowledge centre
over here encompassing clusters of set-ups covering all these
businesses, so you might have 1,000 people, 2,000, 6,000 depending
upon how the situation evolves. The basic logic in this whole
thing is that you know where the talents are. I cannot have people
moving up from Birmingham to come and work in Poole and I would
much rather they do what they are good at doing in the place where
they are most comfortable and, with the technology that we have
now, all of this is possible.
Mr Singh: I think this point is
also about marrying the innovation capabilities of the West with
the cost-effectiveness at a manufacturing level from India. This
can be supplemented and brought to a better level if there is
a consideration of better tax credits on innovation within the
United Kingdom, whether that is certain tax breaks on innovation
or on R&D which is carried out within the United Kingdom.
If there is a consideration to bring about a better mark-up on
these R&D and innovation exercises, it would make the whole
exercise better.
Q355 Rob Marris: Do you do any R&D
in your work in Canada where we have heard there is a more favourable
environment?
Mr Singh: There are some skill
sets which are available in the UK coupled with having invested
in a large manufacturing infrastructure at Wockhardt UK, we naturally
prefer the UK as a better location.
Chairman: I suppose it might be the case
that Tata is slightly prejudiced against investment in the West
as a result of your experience with the Rover Group. How much
money did they owe you? No, we had better not ask that question
now and perhaps we should leave that to a separate inquiry!
Q356 Mr Hoyle: It is interesting
how you see that the UK has got the skills for a design centre
and R&D facilities. How long do you think it will be before
a new car manufacturer will set up a car assembly plant for Europe?
Is it going to happen? Is it under consideration?
Mr Hasan: I think it is unlikely
because we are just getting on to the road of car manufacturing
and we are more of a commercial manufacturer and it is only recently
that we got into the manufacture of cars. Then I think you need
to get to a certain scale and then you have got to have markets
to try and focus those skills. We are trying to get that in steel
where we perhaps help others in India, in Singapore and Thailand,
and in South-East Asia we have got a location and we will set
up manufacturing facilities there, so in a process of evolution,
that might be stage four or five.
Q357 Mr Hoyle: Okay, so forget about
car production then, but what about commercial vehicles where
you have got huge experience, is that a consideration?
Mr Hasan: Well, we could have,
just like we bought a factory in South Korea, so if we find some
undervalued assets in the UK and that makes sense. However, let
me say this: that there would be no better place for an Indian
company to set up shop than in the UK because we have a very high
comfort level here, we have no problem with the language, so there
are great advantages and if it is a choice, all things being the
same, the UK would definitely get it.
Mr Hoyle: Have you looked at LDP by any
chance?
Q358 Chairman: I think that is probably
commercially in confidence actually! We are drawing to an end
of this session, so perhaps I can just summarise some of what
you have said. We have seen enormous enthusiasm in India for the
higher co-operation among the developing countries and I have
to say we saw a huge enthusiasm on the part of British High Commission
staff, high commissioners and UKTI staff as well and we were very
impressed with the quality, and we have seen some good things
happen, but actually if you look at the UK trade figures in India,
the things that are dominant there are scrap metal, gold and diamonds
and actually the British exports to India are pretty poor, save
for the more unusual items, many of which are probably imported
into the UK and re-exported to India anyhow. One of our interlocutors,
I think it was the CII, said that the trouble is that some companies
had bad experiences in the 1990s and others came a year or two
ago, found they could not do something and went away again, but
they had not realised that a few months later they could have
done it. It is often our European competitors, for example, in
the food sector who are rather sharper at spotting what is happening
in what is quite a significant liberalisation of the wholesale
food market and they are really getting a great advantage over
some British food companies who should be in the market too. Your
message really would be that India is open for business, so go
and get it because, if you do not, you are missing out and the
train is leaving for one last time?
Mr Hasan: You have got to set
up shop and you have got to stay the course. That is the most
important thing.
Q359 Chairman: Is there anything
else you would like to say to us before I call this session to
a conclusion?
Mr Chatterjee: No, thank you.
Chairman: Well, thank you for your very
good written evidence and thank you for your very good presentation
which reinforces all we have learnt in the last week. We are very
grateful to you and thank you.
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