Narayana Murthy On How India Can Become A $10-Trillion Economy & More #BQ

Well, I personally believe that no economic transformation can take place unless there is a cultural transformation. When I say cultural transformation, it means hard work, discipline, courtesy, honesty, trust, putting the interests of the commons ahead of private interests. These are extremely important. No matter where I have gone in the developed world, I see these attributes. There are some exceptions everywhere, but the critical mass of people have subscribed to these values. However, in India, we are still in the initial part of this journey. So therefore, I would say the first focus would have to be on cultural transformation. And for that, we need leadership by example, not just by Mr. Modi alone. It has to be by every leader: leaders in politics, leaders in bureaucracy, leaders in the corporate world, leaders in civil society, leaders in academia, etc. Somehow we Indians tend to get saturated very quickly with minor achievements. Therefore, we have to somehow instill in our people that desire to sustain hard work, discipline, honesty, trust, putting the interest of the commons ahead of private interests. If these things happen, I believe that is where Mahatma Gandhi was the greatest leader able to have walked on the face of this earth, but definitely on the face of India, because he walked the talk, he led by example. In fact, during his journey throughout the country, he insisted on living in an austere manner. He wanted to travel by third class, he would eat whatever others ate, except there had to be many plainclothes people guarding him. No wonder Sarojini Naidu, his compatriot, once said, 'It takes a fortune to keep this old man in poverty.' There was a valid reason for that man to symbolize the poorest Indian, because that message was very important. Therefore, I would say the first is done. The second is we have to enhance the contribution of exports to GDP. Today, somewhere around 13 to 14 percent, in a good year maybe 15 percent. But no country in the world has managed to show aggressive growth on a sustainable basis unless the contribution of exports was between 25 and 30 percent. China is one. Look at any of the ASEAN countries, even Vietnam today, which has left India behind. I think all these are great examples. The other value of focusing on export is you bring good quality at competitive prices even in the domestic market. So therefore, we have to focus on export. Third, India has to focus on the quality of its education. The quality of education in India, while we all want to say 'Mahan' and 'Jai Hind' and all that, the reality is that the quality of Indian education is one of the poorest in the world. Just to give you a data point: in 2003, we conducted a controlled experiment. We gave a very simple test to students who had passed being computer science, our BTech in computer science. The average mark obtained by them was just three out of a hundred. Just about three months ago, one of my former colleagues conducted another test. While 95% of the BE in computer science in several colleges in a state I don't want to name got 95 marks out of 100 when they were given problems that had been solved in the class by the teacher, they got three out of 100 when given problems that had not been solved by their teachers. So therefore, I think our education system has to be... and the fourth one, of course, is that we have to reduce friction to business. You know, Harish and I were discussing, and even though the friction to business today is much less than what it was when Harish was the chairman of NASSCOM or the president of NASSCOM and I was the vice president, even today there is a lot of friction to businesses. I mean, angel tax is a classical example. Praveen has been fighting, but we have to... if this country really wants to create jobs, the only way is through entrepreneurs, and entrepreneurs must be revered. Let me give you a simple example, simple data. Two years ago, I received an honorary doctorate from Krakow University. That's where Madame Curie studied, that's where Copernicus studied. And the mayor of a small town near Krakow came to know that I was going to be there. He brought 20 elders from his small town, almost a village kind of stuff, and he met me for an hour. He was literally begging me to create a hundred jobs in his place. That hunger, that passion, I don't see it in India amongst the politicians and the bureaucrats. I think therefore, if we combine all these, I do believe that a ten trillion dollar economy by 2030, which requires us to get to a compounded growth rate of 12%, which appears extremely impossible, I believe can be achieved if we did some of these things.

Well, I think Harish has been very kind. The reality, Harish was the president and I was a vice president when he and I had that discussion. Being very kind, no, because the liberalization was introduced in 91, and one of the points of liberalization was allowing 100% ownership for foreign companies in technology area. So Harish has been very kind. I'm very grateful to you, Harish. And I, we had long discussions on this issue. There were lots of people who were representing foreign companies, and there were members of NASSCOM, there were members of the Executive Council, they were very much against this. But I think Harish and I, we had a long discussion, and many a man, Ashank was there, and then our friend Shah was there. I think there were lots of wonderful people who had a long-term vision. And that's that. So in some sense, it happened. The reason is very, very clear. I think our argument was: look, if we can't compete with multinational companies in our own backyard, how can we go and compete in the US or in the UK or in Europe? So our belief was that this is a great opportunity for us to compete with great multinationals who can teach us so many lessons. And by learning all these wonderful things, hopefully we would beat them in their own game. That was the principle, and that will help us to compete in their backyard. But I must say that NASSCOM was perhaps the only industry which took that decision so early. And the result is that NASSCOM is the only industry where in the top five, I think almost all, perhaps four of the top five, are Indian companies. I think that is something truly, that's something which all of us have to keep in mind. I think that was the rationale: if we can't compete in our own backyard with these wonderful multinationals and learn from them, how can we compete in their backyard? It has been kind to me, basically.

Well, I think entrepreneurs of today are much luckier than we were, because there is intense competition here in India itself, and there is intense competition outside. And competition is what will make you stronger and fitter, and is what will bring you much bigger rewards. The problems that we faced were primarily in removing the various hurdles that the government had put in our path to success. There was no current account convertibility, which meant that if I had to travel abroad for even one day, I had to apply to RBI, it would take 14 days. All of that... I must tell you a story here. Our friend, you know, Ashank, Harish, and our friend Mr. KV Ramani, he applied for three days for an exchange where he specified that he would spend two days in Paris and one day in Frankfurt. So when he went to Paris, the person that he was supposed to meet on the second day had gone to the headquarters in Frankfurt, and he said, 'Why don't you meet me in Frankfurt?' So the result was that Ramani spent one day in Paris and two days in Frankfurt. Those days, not only did we have to very clearly specify the purpose of travel, we had to even submit a report on how we spent our time. So Ramani, being extremely honest and a very decent guy, came back and submitted a report that said that as against the RBI approval of two days in Paris and one day in Frankfurt, he spent one day in Paris and two days in Frankfurt. He promptly got a show-cause notice. When I used to tell Bimal when I was on the board of RBI, he used to love it, he wouldn't believe that it happened. He would say, 'I can't imagine that this was the kind of India.' So our problems were current account convertibility, licensing. We had to go to Delhi fifty times and then wait in the corridors of the Department of Electronics to get a license to import a computer worth a hundred thousand dollars, which today is probably priced at maybe ten thousand dollars. Third, there were no telephone connections, forget about data connections. It would take seven years to get a telephone connection. The joke in India used to be that half the people are waiting for a telephone, the other half are waiting for a dial tone. And I'm sure Praveen will remember Mr. CJ Stephens, the Minister of Communications, telling people who were asking about telephone connections, saying, 'You should understand, this is a poor country. Even the Prime Minister's phone doesn't work. You should be happy at least there's an instrument on the table.' I am not joking. So our problems were all of that nature. However, today your problems are: how do I bring innovation and compete with the best people in the marketplace and win? That is a much tougher problem. The problem that every one of you is handling is a problem which I don't know if we could have handled, frankly. I am not very certain, because our mindset was not one of using innovation and succeeding in the marketplace. We did develop for a period of four or five years, or six, seven years, but in the beginning it was a difficult thing. The second problem, the second challenge you have, which we didn't have, is talent. Today, whether it is in India or in the Silicon Valley or Route 128 or Research Triangle Park, the biggest challenge is access to talent, and the salaries have gone sky-high, even in India. Number two, while we have raised the quantity of people coming out of our colleges, the quality is sadly going down. Let me give you a data point to buttress that. In 2002, I conducted an experiment. Those days, our selection rate was five people for every seven hundred resumes we received. In other words, five out of seven hundred, 1.4%. We conducted the same test for the teachers of the various engineering colleges, I am from all over the country. It was a wonderfully designed test. Do you know what the success rate was? 0.14%. So you can imagine if it was so in 2002, 18 years later, where there are so many students passing out and so many colleges, the quality of talent is going down. Therefore, your challenge is how do you mount excellent training programs within your companies, even though you're small, or use considerable amount of money to get these people trained. And then there is, of course, attrition. The attrition for you people is so much more than the attrition that we faced. So I think you're fighting a much tougher battle. However, your ambitions are also much higher. While it was normal for us to wait... I remember in 1981, I had told all my younger colleagues that we would go public by 1991. We couldn't go public. Ashank beat us, I remember he went public in December 1992, and we went public on 27th February 1993. In other words, it took us 12 years to go public. But now, you know, you're not happy when you're not satisfied. You want to go public even if you are not making profit, you're not happy on that. So your ambitions are high, your challenges are much tougher than we faced. But what that means is you are better warriors than we were. That's what I would say.

I don't know about this thing that Indians are more patient about their capital. I am not very certain. I think we are as impatient as any foreign capital. I don't think... and we are as materialistic as anybody else in the world. All that Bhagavad Gita and all of that is theory, it's good. But when it comes to signing a cheque, when it's a question of receiving returns back, I think we are as patient. So that's what I do disagree. Thank you very much.