New Delhi, Sept. 15 -- For 158 years, Tata Sons has run one of the world's greatest conglomerates the way a Victorian trust manages an estate: quietly, from behind a wall, with beneficiaries collecting the returns and nobody outside the family circle asking how the sausage gets made.

The Reserve Bank of India (RBI) last week effectively told the family that sausage-making is a regulated activity, rejecting Tata Sons' bid to deregister as an 'upper-layer' non-banking financial company (NBFC) and thereby closing the last exit ramp from a mandatory listing. The economics literature has plenty to say about what may happen as a consequence.

The case for listing: After IL&FS collapsed in 2018, RBI decided it could no longer let systemically l...