This column is not an obituary on Ratan Tata. The purpose of reading this column is to understand the connections between major events and your money. Tata’s demise is certainly a significant business event. You must understand the impact he had on your money. The values he leaves behind will continue to influence your behaviour regarding money.
It is well established that in his lifetime, Ratan Tata’s leadership created enormous wealth for the Tata Group businesses and shareholders. He nurtured people who enabled that remarkable surge to the $ 500 bn market value of the Tata Group by the time he stepped down from executive roles. If you invested in any Tata Group companies at the turn of the century and remained invested, you have made a fortune. As a minority shareholder, you may have had moments of frustration.
However, as a long-term investor, you are happy with wealth creation. The operating word here is ‘long-term’ investment. Tata always put integrity above everything else. He inherited that culture from J R D Tata, another group patriarch. However, it is remarkable that he nurtured those values even though no specific rules were mandated in the 1990s.
You have made money on Tata group companies only if you have invested in those companies over these 30 years. Any short-term moves could have meant that you left holes in wealth creation. Integrity is also connected to your temperament. In this column, we have often talked about the importance of staying invested to benefit from the long-term compounding of wealth.
If you wish to have adequate money for your retirement, you must follow a disciplined approach to investing. That requires an effort to manage your income and expenditure. Your integrity is tested when you work hard and still fall below your expectations. It is also tested when you have money but have more ways to spend it. Tata always concentrated on doing ‘the right thing’ when pushed into a corner.
Doing the right thing
If you consider the term ‘ethical capitalism’, you may think it is an oxymoron. That is how we were taught about capitalism in the first four decades after independence. However, people like Tata have not only talked on that path but walked it too.
That was even when the environment was hostile to businesses. From your money standpoint, you must focus on things that allow you to create wealth legitimately. For example, you must clearly understand the importance of ‘tax avoidance’ and ‘tax evasion’. You can benefit from the exemptions and deductions that the government gives you on tax payments as much as possible. You can engage a competent chartered accountant to help you with that.
However, not paying your taxes and not adhering to the rules of filing your returns is not doing the right thing. Many who get into wealth move out of India for tax havens. These are places where you pay the least or no tax.
The idea is to live in India but not pay taxes here. Any country would have been happy to have Tata as a resident. However, he demonstrated humility in the way he lived. For example, there has never been any discussion ever in the media about where he lived. He led a simple life despite overseeing billions of dollars worth of lifestyle businesses. Professionally, too, you rarely see Tata talking about the wealth of the group market or the size of his businesses.
There is a lot to learn about managing your money from his life. The tax system in India has evolved significantly over the years. The infrastructure in India is changing and will continue to change with the right government policies.
That is irrespective of the political party in power. You must do the right thing by creating wealth in legitimate and ethical ways. You must do the right thing by spending your money based on your income, not peer pressure. The balancing act you do in your lifetime on the two heads of income and expenditure will be your tribute to Tata.
Rajas Kelkar
(The author is editor-in-chief at www.moneyminute.in)