"Never before has India had that kind of image," he said in a freewheeling session with the media, three weeks ahead of his retirement on December 28 after serving the group for 50 years, including 21 years as the chairman.
In an hour-long interview, Tata, who turns 75 later this month, spoke about the major decisions taken during his chairmanship, the current investment scenario, and business ethics and crony capitalism. India has been "hurt" by scams, court process and some of the retrospective taxation acts which had given "a sense of uncertainty to investors in terms of the credibility of the government", he said.
"You get FIPB approval to invest in India and to own a company, you get a licence to operate and, then three years later the same government... tells you that your licences are illegal and that you have lost everything. This leads to a great deal of uncertainty. Never before has India had that kind of image. So that really rattled me because then anything can happen, the Tata patriarch said.
India must give an "irreversible commitment" that law of the land has sanctity and the government approval cannot be taken lightly, he emphasised, adding "otherwise India would be taken lightly".
Despite being critical of the current situation, Tata sounded quite optimistic about the future of India as an economic power. Welcoming the recent steps taken by the government to boost investor confidence, Tata said, "what they did recently to FDI and other things, I think, will reinstate some degree of confidence".
While these steps may have had a "great" positive impact it was not not enough, he said. "There will have to be efforts made to reassure people that the laws that are in place, the legislation that is in place, is here to stay. If it is changed, it has to be changed in some rational way of announcing a change which is prospective and not retrospective," he said.
Describing FDI in multi-brand retail as a significant step, Tata said that it would help the consumer in terms of having an opportunity to choose, hopefully at lower cost. "If it doesn't do that then the model has failed."
Tata had words of praise for Prime Minister Manmohan Singh describing him as a leader of high integrity and an architect of the 1990 reforms. "My view is that the PM had to move. If he got attacked from all sides... you don't do anything after that. If you want him to do something and you attack him from all sides, then in all likelihood he would not not do anything."
Answering a question about crony capitalism, Tata said it was becoming an issue not only in India but globally. India was not a leader in this but "we are quite prominent".
He said crony capitalism leads to a situation of the rich getting richer and the poor getting poorer. Tata said the problem of crony capitalism can be done away with basically by the law being implemented in its spirit.
"There is nothing wrong with the legislations that we are doing with. What we unfortunately tend to do in India is we legislate, drafting of which is fairly ok, but enforcement of it is poor," he said.
Giving an example, he said there would be quite a noise 30 or 40 years ago if a man broke a queue in a cinema house to get a ticket out-of-turn. "But today if somebody barges in nobody will dare say anything and he will get what he wants and take ten tickets and it will be a houseful. He may be a black marketeer and selling tickets. He may be doing whatever he may be doing. So nobody stops him. Eventually what happens is the little guy says the fact that a little money to get to the front of the line, if I do this I can do. Pretty soon it becomes a normal thing. And that I think is what has happened over the 50 years of Independence," he said.
To a question on whether he was optimistic about the future of the Indian economy despite all the shortcomings, Tata said, "I have always been very confident and very upbeat about the future potential of India. I think it is a great country with great potential. Unfortunately, we bring about some of the things on ourselves.It is not because of the environment around us. Our environment is big enough and complex enough. So we can operate smoothly. We would really be an economic power to deal with, I think so."