Cyrus Mistry’s first major appointment at Tata is a young charismatic head of business development. Madhu Kannan will leave his role as the Bombay Stock Exchange’s chief executive to join India’s largest corporate house next month. With the younger pair of Mistry and Kannan leading the charge, Tata may be one of the few groups with the political and economic clout needed to breathe life into India’s retail and financial services markets.
In Nehru’s India, conglomerates played an almost exclusive role in incubating new businesses. That’s no longer the case, but Tata remains an important driver of change in the Indian economy.
It may be too early to jump to conclusions about how Mistry will run the group once he succeeds the current Chairman, Ratan Tata, next year. He will no doubt himself focus on the three largest Tata businesses: Tata Steel, Tata Motors and Tata Consultancy Services. But Kannan’s appointment suggests he also wants to make a mark in developing new markets.
Retail and financial services are two areas where Tata has been trying to build its presence, and where Kannan could play an important role.
The old state monopolies in banking and insurance have been lifted. But India continues to miss an opportunity to access large pools of domestic savings. Though 81 percent of rural households have savings, only half keep them in a bank account. Only 2 percent of households opt for any kind of insurance according to research by India’s National Council of Applied Economic Research.
Retail remains hugely fragmented, bound by restrictions which protect vested interests and which pander to the fears of the three million small shop owners. It is groups like Tata, rather than foreigners such as Wal-Mart or Tesco, that can push the Indian government to make space for new business models and develop an environment that’s conducive to business development.
For better or worse, it is still the top business houses in India that can prise open these markets.