The Tata group is expanding aggressively within India and abroad. Keeping in step with the rapid growth is the Department of Economics and Statistics (DES), the Tata economic think tank and research group, which is evolving in new directions and adding new services to its portfolio. Cynthia Rodrigues discusses the changes in an interview with Siddhartha Roy, economic advisor, DES.
DES is an economic think tank. It dovetails its research activities with the business requirements of the Tata group. As a research group, it attempts to go beyond the usual macro and micro trends and provides policy and consumer behaviour insights. Founded more than 60 years ago by former Tata Sons Chairman JRD Tata, DES has been continuously adding new services to its portfolio in order to retain its relevance to the group.
For an economic think tank, three things are extremely important:
Originally, the mandate was to provide macroeconomic inputs alone. However, we have widened the focus to align economic theory with the various business activities of the group. The department’s services are required in critical areas such as forecasting, scenario-building, sector-specific analysis, country-risk studies, and public policy and regulatory studies. It also has two key publications: Statistical Outline of India and Global Statistical Outline. The latter, launched a year ago, has been well received.
Do you sign an annual contract with Tata companies or do you work on a case-by-case basis?
Our strategy is to have an optimum mix of both. We have specific client-servicing desks, which are manned by experienced economic professionals who cater to the individual requirements of various Tata companies. Simultaneously, we are involved in a lot of assignments that originate from other quarters within the group.
For example, a company wanting to invest for the first time in a new country or restructure its supply chain based on developments in Regional Trade Arrangements (RTA) may be wading through uncharted waters. At this point, our services could be requisitioned to carry out a thorough assessment of the risks and opportunities involved. We also address specific problems of companies (where we charge on a project-to-project basis), the focus once again being strategic value creation for the client.
We have a proactive system of ‘knowledge dissemination’ throughout the group. The main vehicle for this is Economic Update, our much sought-after omnibus publication, which apprises readers of the impact of recent developments in the world economy, especially in regions where the group has investments. The publication, widely circulated and reaching at least 200 senior Tata managers, also analyses the domestic economy and its likely impact on the corporate sector.
Specific notes are also sent to those companies whose interests may be affected by changes in the economic environment or regulatory policies. We also brief senior members of the group on a regular basis to apprise them of the likely changes in the economy and policies.
What is your role in the globalisation of the group?
With the group’s outwards thrust, a number of companies have approached us to analyse the risks (and benefits) associated with investing in new geographies. For example, some time back we were mandated to scan business opportunities, covering all aspects from agricultural to industrial investments, in Africa. Our country study packages are comprehensive, covering areas such as political overview, social milieu and macro trends, as well as raw material availability and market opportunities. This apart, we have a ‘WTO FTA-RTA’ cell that constantly seeks to understand the impact of new developments in these areas on business.
The study is executed through a combination of occasional country visits, discussions with investors familiar with the political and economic climate of that country, discussions with international organisations and lending agencies which have a stake in the country, like the World Bank, the OECD, the African Development Bank (for the Africa study), etc. We also use publications like Africa Online, Ecowin, EIU and other international information bases.
The country studies carry a generous quantum of political coverage. We portray an unbiased view of a country’s political profile and the likely course of its economic policies under that particular government. It is then up to the concerned company to integrate the analysis into its strategic plan and take a decision accordingly.
In recent times, DES has started offering services to companies outside the group. Is that a business you are pursuing strongly?
We have offered our services to a few international companies. But the business is still at a nascent stage. Our priorities continue to be with the Tata group.
There are a lot of opportunities outside. Taking up some of these enables us to have a window to the world and to benchmark ourselves against the best. It also allows us to have a resource-generating activity.
Whenever we do an external assignment, it encourages us to look around for improved methodologies and operating practices. International benchmarking is an added spin-off.
Four years ago, we started a successful programme for postgraduates in economics from both Indian and foreign universities. They go through a two-year training programme, where they are exposed to applied economics problems before joining DES. Those with doctorates undergo a year of training.
We need people with an analytical bent of mind, good communication skills and with expertise in at least one functional area such as quantitative economics, econometrics, public finance or international business. They undergo rigorous training in a particular domain such as automobiles, chemicals or information technology.
We encourage them to work as a team and gain from the expertise and experience of others. Many of the problems we tackle cannot be addressed by one person; you need the synergy that comes of combining the skills of many people. You also need domain knowledge of a number of industries.
How do you enhance the skills of your people?
We have training programmes on a regular basis. We invite speakers or we send out our people to receive specialised training in well-known institutes.
Do you benchmark yourself against other institutions?
Unlike some of the other economics departments attached to business groups in the country, ours is a research group with a certain amount of critical mass. So one would like to benchmark against international research groups attached to conglomerates such as Samsung, LG and Mitsubishi. Many of them have research departments similar to ours, focusing on strategy and economic research related to group companies.
Benchmarking exercises are normally initiated on a like-to-like basis. We service a group with diverse business interests. Therefore, benchmarking for us is best done with similar departments hosted by large conglomerates.
Unfortunately, their divisions are “closely held” with very little or no information available in the public domain. Based on our discussions with some of them, it is our understanding that each organisation / group has its own set of characteristics, objectives, mission and vision. Economics and strategy group activities are dovetailed with the overall business objectives of the conglomerate. In our case as well as theirs, repeat demand, new customers developed within the group, enhanced funding and satisfied customers are the benchmarks.
The contribution of a think tank is in terms of influencing strategy and it becomes evident only in the medium or long term. Barring some immediate policy impact and macro-economic studies, the rest of the activities are focused on the future scenario. You may look at how the supply chain is going to get re-configured once the Regional or Free Trade Agreements (RTAs or FTAs) are put in place. They may either give you opportunities or pose a restraint. So you can point out the issues that will be a direct consequence of this arrangement. Similarly, one can examine business cycles or issues pertaining to raw material security in the future.
For example, at the strategic level, our role is to proactively flag ‘danger zones’ for Tata companies, whether in the form of sectoral recession, regulatory changes or potential competition in India and other countries. We also indicate new opportunities for least-cost sourcing and assess new markets for Tata companies via various changes in international trade dynamics such as under WTO policies, RTAs and FTAs.
We have also addressed high-level investor delegations from abroad, briefing them about business and trade opportunities in India and within the Tata group. We assume a proactive role in supporting the group’s strategy overseas as well as its domestic thrust.
We have been involved in several economic policy-related committees of the country. The objectivity and integrity of our presentations are well appreciated. We have given unbiased inputs to government policy-makers directly or through the apex chambers of commerce. We have conducted academic programmes for policy-makers, and participated in the policy discussions of multilateral bodies such as OECD-EmNet and the World Bank.
What are the areas that DES will focus on in the coming years?
As a group, we operate in seven sectors. In each area, there are a large number of sub-sectors. Keeping a tab on them is a tall order. We have about 12 economists in our department. Improving the productivity of our researches is a continuous endeavour. In the coming years, people will have to move a lot faster on the learning curve. Things are changing rapidly. Knowledge creation is an asset that remains with the organisation. The next time the same problem occurs, you can tackle it better. We need to enable this process.
The other thing that DES needs to focus on is the international front. The global perspective needs to be strengthened if DES is to genuinely serve the needs of the Tata group in a scenario in which at least two-thirds of the turnover is coming from outside the country.
Finally, one area where we are trying to put a lot of emphasis is on developing consumer insight; this is critical for our businesses.