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Karan Thapar: Hello and welcome to Devil’s Advocate. As we enter 2007, is India pursuing the right policy to eradicate poverty and encourage development? That’s the key issue that I shall raise today with one of the country’s top industrialists, the founding Chairman of Infosys, N R Narayana Murthy.
Mr Narayana Murthy, just over two years ago you said: “I believe that if India has to solve its problem of poverty, we have to embrace capitalism. Ensure that jobs are created and make sure that market-driven policies are accepted. I believe that is the only hope we have.” Do you still stand by that?
Narayana Murthy: Oh, absolutely. I entirely agree with that, because after all at the end of the day, the responsibility of the government is to ensure that people are happy and prosperous. And if people want to be prosperous, you have to have economic growth. And for that, you have to encourage entrepreneurship and that means creation of new jobs. And second, of course, is access to healthcare, education, nutrition and shelter.
Karan Thapar: You also said, “A socialist system will not succeed because people need opportunities, incentives and competition to better themselves.” And that, you added, “is the essence of capitalism.” Is it your belief that capitalism better understands and, therefore, better responds to human nature?
Narayana Murthy: Capitalism is about providing equal opportunity for everybody and to make sure that people have incentives to perform better and better. Capitalism also thrives in an environment of competition. So, it is very, very important for us to create an environment where there is intense competition among people and where there is opportunity for everybody to succeed and the results are shared by every body.
Karan Thapar: It sounds as if you are saying that human beings perform best when they get rewards and when they know that they will make a profit and earn an income. Give them that income and they will perform miraculously.
Narayana Murthy: Oh, yes. Let’s remember that all countries, which embraced Communism, have failed. Even in Cuba, the only person that Fidel Castro could trust was his brother. There was nobody else in the whole country that he could trust to hand over the government when he was not well. That clearly says that Communism as a system has failed miserably.
Karan Thapar: So in India, where we began to treat capitalism as if it was a bad word, as if it was sinful, we have actually misunderstood capitalism. And the truth is that we have misunderstood human beings as well.
Narayana Murthy: There is no doubt at all. I think in the ’50s and ’60s, we went ahead with our fascination with socialism. It wasn’t true socialism. True socialism is what prevails in Sweden and Norway. We followed pseudo-socialism and unfortunately, the results have been less than desirable.
Karan Thapar: You said in one of your speeches recently, it is the task of the government to create an environment where business thinks it has enough incentives to create more and more jobs. In a sense, that’s your message to the Manmohan Singh Government.
Narayana Murthy: Yes. It is not the responsibility of the government to create jobs. It is the responsibility of the government to create an environment where there is greater and greater incentive for more and more entrepreneurs to create a larger and larger number of jobs. That is the primary role of the government.
Karan Thapar: And the secret to creating that kind of an environment is to understand that the capitalist spirit is something that you have to nurture.
Narayana Murthy: The story is all about creating opportunities for people. The story is all about helping people create more and more jobs, more and more wealth, and that is possible only through capitalism.
Karan Thapar: How effectively is this government creating an environment for entrepreneurship which can in turn create jobs and tackle poverty?
Narayana Murthy: The intentions are all very good. We have been making some incremental moves. But we have to take some big bold moves and, I’m sure, we will do that.
Karan Thapar: In a recent survey of the British magazine, The Economist said: “India has taken off. But only with further reforms can it spread its wings and soar.” Do you believe that if those reforms don’t happen, India’s potential will remain unfulfilled?
Narayana Murthy: Let’s remember one thing: we have the largest mass of unemployment, we have the largest mass of illiterates and our agriculture sector is not growing. So if you want to address these issues, then you have to de-licence the education sector. You have to focus on creating greater and greater productivity in agriculture and you have to make sure that we take up low-tech manufacturing so that more and more people can move from agriculture to manufacturing.
Karan Thapar: Let’s go thorough some of the key reforms and I want to ask you to what extent you agree with them, and then I want to come and ask you whether they are politically feasible in India today? Do you believe that we need to see extensive labour reforms, including polices that permit hire and fire?
Narayana Murthy: That’s one of the primary things that we have to do. We have to be bold enough to bring labour reforms. Concomitant with that requirement is that we have to have a good safety net. In other words, corporations and the government must work together so that even if people have to be retrenched, they would have the wherewithal to support themselves for six months or a year before they can get another job.
Karan Thapar: But the right to retrench is the right that entrepreneurs must have?
Narayana Murthy: All over the world, it has been demonstrated that only when you have the right to retrench, then only you will become bold to create more and more jobs.
Karan Thapar: Do we need to also privatise India’s public sector?
Narayana Murthy: Very clearly. There is no doubt at all. I don’t believe the government should be in business.
Karan Thapar: What about what they call the Navratnas? People often think of them as holy cows. Should they be in government hands or should they be given to the public and be run by the public?
Narayana Murthy: I think the Navratnas would perform better if they are in private sector hands or if they operate as if they are in the private sector. In other words, create an environment where they have an absolute freedom to pursue the best policies.
Karan Thapar: But of the two choices, private sector hands would be better?
Narayana Murthy: I would think so.
Karan Thapar: What about something else that is being talked about, but is a controversial area in India: opening of the retail sector in India to foreign direct investment?
Narayana Murthy: When we have opened it (the retail sector) to large Indian groups, which means that the mom and pop stores are likely to suffer anyway, so why not open it to large multinationals? Let them bring the best technology, let them bring the best practices so at the end of the day, the consumer benefits.
Karan Thapar: They often say in India that the government is wasteful in the way it handles subsidies. No one denies the way the poor need to be taken care of. But in India, subsidies are wasted. Is there a case for perhaps targeting subsidies and cutting subsidies as well so that government’s physicals health is improved?
Narayana Murthy: There are all sections of society that need subsidies. However, what is wrong is that we do not have accountability in government. So we have to work on a model where we have to enhance accountability, which means that we have to create public-private partnership where the private sector can bring its expertise in efficiency and effectiveness, and the government brings its good intentions.
Karan Thapar: There is no doubt that is all that you are talking about, and admittedly it is a very big if it were to happen, manufacturing in India would get a huge boost and as a result, there would be a terrific pull with the creation of new jobs from agriculture to industry. Is that the right way of tackling India’s problems of rural poverty and rural unemployment?
Narayana Murthy: I believe it is the only way because for example, China has created 140-plus million jobs in the last 11 years. They have moved people from agriculture and from rural areas into low-tech manufacturing. Let’s remember we have the largest number of illiterates and semi-literates in the country. And if these people have to be gainfully employed, they have to move into low-tech manufacturing. And then, the per capita productivity in agriculture is about one third of the per capita GDP of the country, because 26 per cent of the GDP is produced by 65 per cent of the people.
Karan Thapar: So what you’re saying is that if India’s going to tackle poverty, particularly rural poverty, which is the worst, you have to boost low-tech manufacturing. And for that, you have to encourage entrepreneurship and that means embrace capitalism.
Narayana Murthy: Absolutely.
Karan Thapar: There are no two ways about it?
Narayana Murthy: No.
Karan Thapar: The concomitant of this that the government will then be freed up to concentrate on infrastructure and education. Are those the two qualities that government should concentrate on?
Narayana Murthy: I believe even infrastructure should be built by the private sector. The government should create policies that encourage the private sector to create infrastructure – for example, airports, roads, power companies, distribution companies, ports.
Karan Thapar: So the government facilitates it by providing the incentive, but leave the task to the private sector?
Narayana Murthy: Absolutely. And the government will be a regulator too.
Karan Thapar: You have a clear idea in your mind of what the government should be doing. It shouldn’t be in business, it should be encouraging private sector business. What it should concentrate on is health, education and perhaps incentivisation.
Narayana Murthy: No, but even in education and healthcare, I do believe that in urban areas the government should leave it to the private sector and government should provide subsidies by way of vouchers, which the late Milton Friedman (Nobel Prize winning economist) talked about, so that the poor people get the best of education, so that there is competition in the private sector to provide all these facilities in the most efficient manner.
Karan Thapar: You really do believe in competition?
Narayana Murthy: Yes.
Karan Thapar: And in private enterprise?
Narayana Murthy: Yes.
Karan Thapar: What you are saying is that the selfish instinct of people is the secret. If you can modulate it properly, you can produce profits, the good life for everyone. But if you curb people, you curb the future as well.
Narayana Murthy: I think so. But however, I would like to slightly modify the selfish part of it. I believe that what I term ‘compassionate capitalism’ – capitalism in mind, socialism at heart which means corporations, which make profits – will have to make sure that they live in harmony with the society around them. So that they use a part of the profits to make sure that they help the less fortunate in society.
Karan Thapar: Mr Narayana Murthy, you have said that if India is going to tackle poverty, it has to create more jobs. And to create more jobs, it needs to embrace capitalism. And you then sketched out the sort of reforms India has to simply implement. The problem is that the Left disagrees with you. How do you persuade the Left?
Narayana Murthy: I think it’s all about leadership. Leadership is all about raising aspirations of people. It’s about being bold, it’s about taking courageous decisions. It’s about communicating that vision to every body. I think we need that kind of leaders.
Karan Thapar: It’s very interesting. You say it’s all about leadership and I want to talk about leadership, but before I do, do you think the problem is simply limited to the Left or do you think there is a real sense in which Indian politicians, and may be a large section of Indian society, are scared of change, because they don’t know what lies on the other side?
Narayana Murthy: I think, baring a few exceptions, we do not have good quality leadership in the country. That is a fact. We do not have leaders who put the interest of the society out of their own personal interests. We do not have a large number of people who are connected with the modern world. We do not have people who can straddle both the world – the urban and the rural, the rich and the poor, the educated and not so well-educated. I think we need leaders who straddle all these worlds, so understand the divide, who are modern, who can connect with what’s happening outside India.
Karan Thapar: Lee Kuan Yew, in his autobiography, once said that “the leader should lead, the people will follow.” In India, quite often, what happens is the leaders try to push from the back. Is that the problem that our leaders lack confidence in themselves, they lack confidence in their beliefs, and a result of which they become prisoners of indecisions?
Narayana Murthy: I entirely agree with Lee Kuan Yew. Leaders have to lead from the front, they have to create a vision. They have to exhort people to follow them and they have to make sure that people around them feel an inch taller in their presence. Then people will automatically follow them.
Karan Thapar: Indian politicians often say that there are two problems with change. One is the political cost, which in a sense is party, political, personal cost. The second, they say, is that change could tear the fabric of India. Do you think the people underestimate the Indian nation’s capacity to accommodate change, and, in fact, Indian people’s desire for change?
Narayana Murthy: Let me answer this in different way. When I discuss with my political friends here, they say, we can’t bring about so much of change. But remember what Nehru did. In a short period, he built five steel plants, he built Bhakra Nangal, he built IITs, IIMs, Atomic Energy Commission. So many things he did. All of it in a short span of something like 15 years. It is extraordinary by its standards on a global scale. I think, we need people like Nehru, who are courageous, who have a vision, who are bold and who take quick decisions.
Karan Thapar: It seems to me as if the real problem is that we lack not just the leadership but we lack the right sort of people. Is there a crisis in Indian politics today that the type of person, who can rise to the challenge, is not becoming the politician?
Narayana Murthy: There is a serious crisis in the moral dimension of most of our leaders – there are a few exceptions, in the ethical dimension of our leaders, in the competence dimension of our leadership, in the ability of our leaders to connect with the large masses of people.
Karan Thapar: So, you are saying to me fairly bluntly that, today India has a failure of leadership? One or two exceptions apart, we have a failure of leadership in our country?
Narayana Murthy: There are a reasonable number of people, who are of the qualities that I talked about, but they are still in a small minority – five per cent probably, but that’s not sufficient.
Karan Thapar: At the top, do we have a person – man or woman – who has the vision, who has the political capacity and who has the risk-taking courage to forge ahead and say, ‘this is the way forward’?
Narayana Murthy: I personally think that we have one such in Dr Manmohan Singh. Unfortunately, he leads a very fragile coalition.
Karan Thapar: He has the vision, I grant you, there is no doubt about it. Does he have the political understanding? Mrs Thatcher had both the vision and political skill. And because of her political skill, she was able to withstand the backlash the change brought. Does Dr Manmohan Sing lack the political skill?
Narayana Murthy: No, but look at it in this way – he has done several historic things, for example, the nuclear staff with the US.
Karan Thapar: What about in terms of economic reform? He understands the need of it perhaps better than you and I, yet so many of the things you have talked about simply aren’t happening.
Narayana Murthy: No, but let’s remember one thing – the success of Infosys is entirely due to the economic reforms brought about by Dr Manmohan Singh.
Karan Thapar: But that was 15 years ago.
Narayana Murthy: Yes, but the point I am making is – he has all the wherewithal, he has the vision, he has the economic cartload.
Karan Thapar: What’s missing?
Narayana Murthy: What’s missing is he leads a very fragile coalition. That’s the problem.
Karan Thapar: So, the nature of the UPA coalition is the real drawback at the moment?
Narayana Murthy: Yes, I can tell you. If he was to lead a majority Congress Party-led Government, I have no doubt at all, that he would have moved much, much faster than he has been able to move. I am 100 per cent certain.
Karan Thapar: One last intriguing question. People listing to you will say that sitting in front of Karan Thapar today is a man with a vision, a man who achieved that vision in Infosys. Why is he not going to Indian politics? The country needs him, a catalytic change could start if he entered. Why is he suddenly hesitating?
Narayana Murthy: No. You know, as I say often, I have painted, on a very small campus a canvas.
Karan Thapar: Move to a bigger stage.
Narayana Murthy: It’s a very complex canvas.
Karan Thapar: But, it’s a challenge.
Narayana Murthy: It’s a challenge and I do think there are many, many people, who are much more competent than I am.
Karan Thapar: What if the country says, we need you today Mr Narayana Murthy. Don’t let us down.
Narayana Murthy: I think that’s a very hypothetical question.
Karan Thapar: Sounds as if you are saying that the country say it first, then I will answer it.
Narayana Murthy: (laughs)… you have always been very kind.
Karan Thapar: A pleasure talking to you in Devil’s Advocate.
Narayana Murthy: Thank you very much.