George Fernandes, a die-hard socialist and a fiery trade union leader, is a footnote in India’s business history even though he served as the industry minister in the Janata government under Prime Minister Morarji Desai in 1977. But one defiant move when he lived up to the sobriquet “George the Giant-killer” which he had earned when he defeated veteran Congress leader S.K. Patil in Mumbai during national polls in 1967, had major ramifications for Indian business and indirectly seeded one of India’s most successful industries.

In the 1970s, as the Western world woke up to the opportunities created by the micro-computer revolutions, Indians were still having to make do with bare minimum computer technology with only the country’s defence labs and a handful of research and educational institutions like the Tata Institute of Fundamental Research (TIFR), boasting of some old mainframes from giant multinationals like IBM and ICL. None of them considered India an important enough market and in any case their fortunes at home were soaring.

This was a real pity since as early as in 1963 the Bhabha Committee appointed by the Government of India had proposed the establishment of the Department of Electronics (DoE), and stressed the importance of electronics and computers in national development. The department itself was formed only in 1970 and by 1977 only a hundred odd computers were installed in the entire country.

The prospects were also looking grim for further development since Clause 29 of the Foreign Exchange Regulation Act (FERA) of 1973 which into force with effect from January 1, 1974, made it mandatory for foreign companies operating in India with a parent holding of over 40 percent to dilute their stake over the next two years.

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Many MNC heavyweights such as Colgate and Unilever chose to comply with the requirements. The one company that seemed to be immune to the law was IBM. Initially, it wasn’t clear if Big Blue, which believed it enjoyed a special status having been invited to set up operations in the country by Jawaharlal Nehru as prime minister in the early 1950s, would be exempt from the provision. The IBM of the 1970s was the global lord of the computing universe with a near-monopoly over mainframes. Not surprisingly, it was smug enough to believe it would be an exception.

Fernandes, never one to respect reputations, had other ideas. One of his first acts on taking office was to ask all MNCs who hadn’t yet complied with the regulations of the FERA to do so immediately. Among them were Coca Cola and IBM and Fernandes decided to make an example of the two. Fernandes told them that if they wanted to stay on in India they would have to either share their technology or list the company on an Indian stock exchange or ensure that their Indian operations were majority controlled by the Indian partner (Source: Azim Premji: The Man Beyond the Billions by Sundeep Khanna and Varun Sood). For Coca Cola the idea of sharing its secret sauce with an Indian partner was blasphemy. As for IBM which had merrily dumped obsolete technology on India, it was simply a non sequitur.

Both chose to exit the country though they would return 15 years later. By then the Indian IT industry was well on its way and IBM’s absence wasn’t particularly missed. As for Coca Cola, Thums Up, a wholly Indian product created in its absence, which it bought on its return, is among its largest selling brands in the country.

—Sundeep Khanna is a former editor and the co-author of the recently released Azim Premji: The Man Beyond the Billions. Views are personal

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(Edited by : Ajay Vaishnav)

First Published:Aug 30, 2021 12:47 PM IST