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Cover Story

“I wish we had more reforms”
Narayana Murthy laments the fact that despite clinching evidence on the benefits of liberalisation, India has done little on reforms since 1991
Issue Date - 16/02/2012
When it comes to naming a company that emerged in the 1980s and is respected for an unflinching commitment to values, Infosys would undoubtedly come to mind and so would its Founder and Currently Chairman Emeritus N. R. Narayana Murthy. The man who has been one of the most vivid and iconic symbols of a resurgent India to the world, has seen through the entire transformation at India Inc. in these past 30 years as he took Infosys to dizzying heights. He talks to Prof. A. Sandeep and Virat Bahri of B&E on where liberalisation took India and where we missed out.

What has changed most significantly for Indian entrepreneurs between 1981 (when Infosys was born) and today?
There have been many changes. First of all, then there was huge friction to business in the 1980s. For example, it was very difficult to get a bank loan. When we wanted to import our first computer, we went to MNC banks – Citibank, Bank of America… They said, “We don’t give money to you guys. We only give money to very rich people.” These were the MNC banks. The Indian banks were also sceptical. Finally, we got funded by the state financial institutions. Secondly, infrastructure was very poor. It would take us two-three years to get a telephone connection. Thirdly, there were no data communication facilities. We used to sometimes fax source code to US. Fourthly, travelling outside India required approvals from RBI as we did not have current account convertibility. We couldn’t hire consultants from outside India in quality, brand building, et al. These things are all taken for granted today. Today, it is all about competing in the marketplace based on innovation & based on how market worthy you really are.

Our growth over these years is constantly benchmarked with China. Is that healthy, and also, where do you think we really missed out?
Benchmarking is always very good. If you benchmark on a global scale, your benchmarking is the best in the world. That enables you to not only provide the best products and services to your domestic market, but also makes you fit enough to compete in the most competitive markets of the world. And as you know, in most developing countries, the economy improves first by exporting as most people in a developing country have very little disposable income. The first task has to be creation of jobs with disposable income. To do that, there has to be someone who will buy your products and services. So you will see that most developing countries who have done a good job in improving their economy have focussed on exports.

Now where did we lose out? In 1991, we had only 15 days worth of foreign exchange; today we have around $300 billion. At that time, our economy was growing at a rate of 3-4%. Today, we are all upset that the economy is growing only at 7%. There is enough data to prove that economic reforms and liberalisation have indeed added tremendous value to us. Inspite of that, we have done very little in the last 20 years after 1991. I think that is the tragedy of India. That is where all well meaning Indians would feel very disappointed. I only wish that we had taken up further reforms, be it with labour reforms, infrastructure, secondary reforms, at the state level, reforms in terms of education, et al. If only we had realised the importance of becoming competitive in manufacturing, we would have been able to create 100-150 million jobs like China.

Is diversity of India and multiple aspirations a problem, since we seem to spend endless time in consensus building?
Diversity does not mean that leaders should not show integrity of thought. No one in this country should think ten times or argue about the fact that we need to improve the lives of the poor. No one should argue that creation of jobs with disposable incomes is the only way to improve the lives of the poor. There is no doubt about that. The problem is that “when I am in government, I introduce some policy; and when I am in the opposition, I oppose it”. That is the tragedy of this country.

Is the weakness only policy related or is the way Indian businessmen manage their companies also to blame?
Look at it this way. The economic reforms of 1991 paved the opportunity for the Indian IT sector to grow. We have grown pretty well. We were $100 million in 1991; today we are $60 billion. Between 1981 to 1991, we (Infosys) grew from $140000 to $2 million. Today, it does not take a rocket scientist to figure out that we will be between $7-7.1 billion. In other words, we have grown by 3500 times in the last 20 years as opposed to 150 times in the first ten years. So it is very clear that economic reforms in manufacturing would have placed our manufacturing industry on a global platform. And therefore we would have created tremendous number of jobs, particularly if we had brought in labour reforms – flexible labour or hiring policy with a very good safety net. Unfortunately, we haven’t done that, which is a pity.

The world went from admiring the Japanese to the Koreans to the Chinese. How has the perception of India changed in these years?
Thanks to liberalisation, our software sector did pretty well. And our people of Indian origin in the west, particularly in Silicon Valley and in Route 128 succeeded. Therefore India received a lot of respect as a country that had entrepreneurs in the area of hitech. Consequently, our GDP has been growing pretty well. Bollywood songs got popular outside India & our cricketers did pretty well too for some years. Then we mounted campaigns at Davos and places like that. Therefore there was tremendous expectation that India would perform very well. And even in a bad year, we will grow perhaps by around 7%. So over time, we’ve done decently well. However, we could have done much better. If only we had brought in secondary reforms to make our manufacturing competitive, built proper infrastructure, liberalised our education & health care sectors, looked at how to enhance agricultural productivity & mounted a big campaign to promote low cost housing; I believe we would have grown much faster and got a lot more respect. We have not lived up to our own potential, but we have received a lot of respect. There are a lot of reasonable expectations still from India. Of course, they are not in the same league as China – we clearly got left out around 6-7 years ago.
Virat Bahri           

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