'My biggest regret is not listening to my co-founders and leaving Infosys when I did in 2014'. That's the word coming in from Infosys Founder, NR Narayana Murthy. In A candid chat with CNBC-TV18's Kritika Saxena, the father of Indian IT while admitting his regret at leaving Infosys, says the company did a good job with goods and services tax (GST) implementation.
Below is the verbatim transcript of the interview.
Q: From an avid reader to a philosopher, to an IT watcher, to an entrepreneur, you have been across a gamut of sectors, gamut of areas, gamut of roles, are you still a bull on the economy, are you still a bull on the Indian growth story?
A: I think so because there are a lot of things that have happened. For example, the International Monetary Fund (IMF) report said we would grow at 6.6 percent, the World Bank said we will grow at 7.2 percent, these are not bad numbers in the current situation. India has grown faster than China then there is a lot of hard work, smart work and commitment put in by very dedicated bureaucrats in Delhi, the Prime Minister has been travelling to various countries to strengthen our geopolitical equations and then Securities and Exchange Board of India (SEBI) has been working very hard to ensure that friction to business is reduced. So there are a lot of good things and then the goods and services tax (GST) implementation has gone off very well without any problems of course its credit to Infosys too.
Q: Some problems were there in terms of initial issues with respect to smaller industries getting used to it, lack of clarity on falls in what area, do you think that government could have perhaps postponed or given the industry some more time before the implementation?
A: I don’t think so because it doesn’t matter how much time you are given. Most human beings tend to do everything at the last minute. It is true in India, true in America, true in Australia, doesn’t matter where it is. It is always like that.
Secondly, it is very important for all of us to remember that no matter what system it is, when you implement an information system like this, a compliance system like this, there will always be some teething problems. So we have to provide rapid reaction warrantee teams. Those teams should work on 24/7 basis and I am very happy that Infosys was part of that effort and I am very happy that Infosys participates both in direct taxes as Infosys did the electronification of income taxes, now Infosys platform is being used for GST which is an indirect tax. So therefore, I think I am very happy about what Infosys has done.
We should all realise that there would always be some teething problems. I am not that much worried.
Q: There are estimates of 1-2 percent being added to the gross domestic product (GDP) by GST, do you agree with these numbers because if you look at the other countries that have implemented GST, we haven’t seen a significant jump to the economy, do you agree with these numbers?
A: I think the Chief Economic Advisor’s (CEA) committee is the one that looked at it very carefully. After all he is a very well-known economist, highly accomplished and therefore who am I to contest that. My own view from the side-lines is that when you reduce friction to business, which the GST does, after all it is a value added tax (VAT) then it is bound to make the life of citizens better. Let us remember the slogan of our PM, minimum government, maximum governance. So this GST is in keeping with that principle and I do tend to agree with the estimates of 1-2 percent thanks to reducing friction to business.
Q: There is a sense that the organized businesses will grow in six-seven years timeframe but the unorganised may either shrink, consolidate or completely fade away, do you agree with that thought?
A: Not really. I think this is an opportunity for unorganized business of a certain size - I am not talking about street vendours – even the mom and pop stores, to introduce systems of accounting, to introduce systems of taxation so that they are not harassed by the authorities, so that they can focus lot more on their business, so that they can focus much more on serving their customers. Therefore my personal view is that whenever you introduce any system like this, it is a win-win-win for all the three stakeholders, the government, the small businesses and of course the customers.
Q: What do you think about the investment cycle right now? A lot of foreign investors were waiting for GST to come in but the new investment cycle seems to be dead right now. Do you expect there to be a revival, do you expect there to be a revival before the next general elections?
A: For the first time, in the history of the world, during the last 200 years or something like that, we are seeing a situation where the entire world is experiencing problems in growth whether you go to US, whether you come to India, whether you go to Europe, whether you go to Singapore, Japan – of course Japan has been in trouble for a tough time, everywhere there are issues of how to improve growth.
Therefore, I don’t think we should get too much worked out about the fact that we are not receiving as much of foreign direct investment as we all wanted. In fact, I am the Chairman of the alternate investment policy advisory committee of SEBI and thanks to the extraordinary open-mindedness of SEBI, thanks to the dedication of their chairman, their executive directors, their officers etc, we are working very hard towards enhancing alternate investments into the country.
Q: What are the options then, what are the options to bring in alternate investments that are right now being explored and tapped into?
A: Some of it is public because we have submitted report one and report two but the reality is simply this. First you have to reduce friction to business, second you have to make it more attractive to outside investor, you have to make it more attractive to domestic investors because we have to mop up a lot of domestic investments into the alternate investments. Third, we have to make it easier for venture capital players, fourth we have to make it easier for entrepreneurs. So, we are looking at all these issues and I find it a great pleasure working with Sebi because they are very open minded, extremely keen on enhancing the investments into India.
Q: What can be done differently and by when do you expect the investment cycle to pick up?
A: I think we will have to create a paradigm where the government in Delhi and the governments at the state level, they have to come to an understanding that they will work together when it is a question of investments into the states. They have to speak with one voice, they have to speak one language, they have to satisfy the party loyalties and work with the Prime Minister in making sure that the country as a whole benefits.
Second, if you look at the medium to long term issues of growth in the country, we have to look at the issue of women labour. The percentage of women who are working in the organised and unorganised sector in India is perhaps the lowest. A certain percentage of them are ready, they want to work, they want jobs. I think we need training for them, we need to make the workplace that much more hospitable to them, that much easier for them to work, we need to make sure that they can discharge their dual roles of both, a worker in their workplace as well as a mother at home. I think these are some of the issues that need to be tapped.
Q: Would you give two years’ time to the investment cycle to pick up or longer as an investor yourself?
A: I don’t have a crystal ball and I am not an economist. So, therefore, who am I to give a definitive answer?
Q: As an investor yourself, what are the sectors that you are bullish on in the country when you are looking at startups?
A: I think India has to realise that it has a big competitive advantage in three or four major sectors. One is IT clearly, second is pharmaceutical, third you can say specialty chemicals, fourth perhaps in precision manufacturing. Now for all these areas to accelerate their growth, you need to improve the quality of talent that comes out of our universities, our engineering colleges, our science colleges, our students who pass out in biology and all of that. Therefore I think the role of Ministry of Human Resource Development (MHRD) in making India ready for the next 10 years or 15 years is of paramount importance. This will not have any impact in the short term, but in the long term, definitely.
Supposing we did this and we enhanced the contribution of IT, pharmaceutical, specialty chemicals, and precision manufacturing by leaps and bounds, then it will give us economic power to strike a fair deal with industrialists countries, particularly the US and therefore then we can say look we are going to import this from you therefore you have to provide us these facilities. I think that is the strategic view that I would have.
Q: As far as India-US trade relation is concerned, given the Trump administrations recent changes, be it in terms of visa cost, be it in terms of tightening the border norms, do you expect India trade relations to sour in the near term?
A: No I don’t because I have gone through this in my 33 years of founding and nurturing Infosys. I find that there is only one antidote for all these concerns and that is innovation, that is learning new areas, that is working harder, that is working smarter, that is focusing on quality, focusing on productivity, etc. As long as we focus on innovation, productivity, quality, etc. and we move with the leading edge of movement of technology in the work, I don’t think anybody can stop us. That is my way.
Q: You don’t believe that the Trump administration could have a negative impact on trade in the country in India?
A: Why would, the reality you know better than I do that the CEOs or sales force of large corporations in the US, they have a signal responsibility to ensure that their investors get the right return as long as it is done legally and ethically. So, therefore they will flock to the most innovative vendors, most innovative partners. It does not matter what view of government is in Washington DC, or in New Delhi, or in Beijing, or in London, it does not matter.
So, therefore all of us must realise that enhanced trade is the best way to bring two countries together. In fact I would say that is what we should do even with Pakistan. So, I am not that much worried about the administration of President Trump simply because I believe that we have the wherewithal to bring the power of innovation, power of enhanced productivity, power of enhanced quality, power of learning with us.
Q: Let me ask you about the IT job outlook right now. The concept of performance based separation is not new. That has been happening over the years. However, this time around, the kind of staggering numbers, that can’t be limited to just performance based separation. The numbers have been unprecedented this year, what do you make of it, where have Indian IT companies gone wrong, have they missed the bus in understanding the balance?
A: I am not very familiar with what is happening at the micro-economic level inside companies. Therefore I do not want to comment on that. However, let me tell you how we handled when we were running Infosys. We used to have six monthly evaluation of the performance of talent at all levels. Mohandas Pai, was one of the architects, Nandita Gurjar did a brilliant job, all of that.
What we did was, we had kept an absolute floor level for performance standard, while for promotions we had the normal distribution curve. For absolute performance measurement, for being within the company or not being within the company, we had laid down an absolute floor level. If I fell below that floor level, my line manager and the HR person connected with that unit would sit down with me and would show me data to convince me that my performance was not good enough and then they would tell me, friend we have mounted a special program for performance improvement program (PIP).
In this program, we will provide special attention to you, we will provide additional training to you, and we will expect you also to contribute by working a little bit harder. Maybe it may require a little bit of a certain percentage of extra time every day. We will watch you for six months. Now at the end of six months, two things could happen. One, I perform better because I put in a lot of hard work, I took all the wonderful advice they gave me, I attended all the training program, I learnt all the stuff that you wanted and then I would move into the normal level. Remember this is not normal distribution, this is an absolute floor level standard.
However, if I did not improve, then the HR people would deal with this issue, not as cost optimization, they would deal in a very humane way. They would tell him we have given you an opportunity, but for some reason you did not -- most often people did not improve when they did not put in extra effort from their side, not from the organisation side, I can guarantee you that. So, we would say you have not demonstrated your commitment to this therefore we will connect you with an outplacement agency. You can continue for three months -- this is almost we are giving nine months of notice, six months of additional training, additional attention, plus three months and we believe you will get a job but otherwise we would explain to them that we cannot jeopardize the existence or jeopardize the welfare of the entire company to protect you.
Our philosophy is always to first protect the company because that means there are 200,000 families which are depending on that, and you did not do your part of the job, therefore we will provide you three months. That is the way, it is a very humane way. It gave the required time and attention to those people and it was done in most courteous manner.
Q: This time around that hasn't happened. Individual IT companies, I can think of six at the top of my head have not really done the process.
A: Let me give you one more example. In 2001, the internet boom had a bust and we had offered 1500 jobs to engineering college students including 150 from IIT Mumbai. Those days IIT students used to come to Infosys and all others. However we realised that the economy went down. We had grown 100 percent the previous year, that year we projected 30 percent. Of course we ended up growing by 60 percent, that is a different thing but then the base was small.
So, all of us - the directors and the senior management sat down. We said what do we do? I realised that I had committed a mistake because all my esteemed colleagues advised me right in the beginning not to recruit so many people that year. However I depended upon a very brilliant head of sales that we had at that time for whom I had special affection. I thought he knew what was happening at the ground level. Therefore I gave HR a green signal to go and recruit.
So, then I suggested instead of saying that we will not, we will defer the offer to all these youngsters. Let us see if we can welcome all these 1500 people.
The senior people can get reduced increments, the board level got the lowest level of increments, the next level got a little bit higher and like that. Finally when it came to the trainees, they were all absorbed and everybody was happy. It was because of our logic was very simple, we at the senior most level, even if we reduce the increment, even if you reduce it by 3-4 percent that did not hurt us because we are all getting reasonable salary.
So, the philosophy was reduce pain to those who get lower salaries and make people who get huge salaries take part of that pain. That is how we sorted it out.
Q: That should be the mantra that IT CEOs can follow right now?
A: I don't know whether that should be but this is what we did.
Q: Your best actor in India and overseas?
A: Amongst youngsters, probably Ranbir Kapoor.
Q: Amongst the older generation?
A: It will have to be Amitabh Bachchan. Is that a question to ask?
Q: Best actress? Favourite actress?
A: In terms of actress, it has to be Konkona Sen Sharma. Probably one of the finest actors India has produced.
Q: Favourite song, English and Hindi.
A: English, I would say Time To Say Goodbye by Adrea Bocelli and Sarah Brightman. Hindi is difficult for me to say.
Q: Your favourite movie that you would have taken inspiration from?
A: I think Chak De India was definitely an uplifting movie. In fact, when my wife and I went and sat in the theatre, we found that we were the oldest guys amongst some thousand youngsters. Everybody around us was a youngster, very smart boys and girls. And even though it was imaginary stuff, my mind says imagine if this was true, not just in hockey, but imagine if this is true in higher education, this is true in patents, this is true in exports, if this is true in Olympics, what a pleasure all of this would bring to youngsters in the country.
Q: Your favourite tech visionary?
A: It has to be Bill Gates. I do not think there is another person who had the right mind in terms of innovation and all of that and who had the right heart in the right place. What he did, he started the Bill and Melinda Gates Foundation. I do not think there has been or I do not think there will be another person of the calibre of Bill Gates, I cannot see that happening in the next 100 years.
Q: The next IT CEO you have to watch out for, be it amongst the startups, be it among the big IT companies.
A: I really do not take much interest in any of these companies.
Q: The one mantra that you think entrepreneurs should remember that has worked for you in your life?
A: If they are able to express the differentiated business value of their idea vis-à-vis their competitors in a simple sentence, then they have enhanced their probability of their success.
Q: If you were not at Infosys, if Infosys had not happened where would you be?
A: I think I would have been a professor. I had the opportunity to do my PhD, but I did not do it. I went off to take up a job in Paris. I think I would have been happiest as a teacher.
Q: This may be a difficult question because there is years to look into, but your biggest success story? It could be personal, it could be professional.
A: Sitting on those high stools at Nasdaq when we got listed, when we became the first Indian company to be listed on Nasdaq, borrowing the words of Neil Armstrong to say that it is a small step for Nasdaq, but a giant leap for Infosys and the Indian software industry. That was the best.
Q: Biggest regret across the board, personal, professional?
A: A lot of my founder colleagues told me not to leave Infosys in 2014. Stay a few years. Generally, I find that I am a very emotional person. A lot of my decisions are based on idealism and probably I should have listened to them.
Q: Do you miss Infosys? Do you miss being there in the campus daily?
A: No, I do not miss that.
Q: The one advice that you would want to give to the upcoming generation, what would it be?A: In every decision that they take in making their company stronger, they have to simply ask the following question: Will this decision of mine enhance respect for the company in the eyes of its stakeholders and will this decision of mine enhance respect for me in the eyes of my colleagues. That is all there is to it. If every business leader, if every entrepreneur asks this question, then everything becomes simple.