US President-Elect Donald Trump's ties with PM Narendra Modi will be the strongest among all other leaders in Asia-Pacific, says the Chairman of the US-India Business Council, John Chambers. He is optimistic about the Indo-US trade relations and feels that the two nations will march the world into a better economic growth environment.
Trump's policies will be a win-win situation for both India and the US. He says the bilateral trade between the two countries can go up to USD 500 billion in the next 7 years.
He agrees with Trump's optimism on job creation in US. There is a high probability of achieving the target of creating 25-35 million jobs, says Chambers.
Below is the transcript of John Chambers interview to CNBC-TV18's Prashant Nair.
Q: At the Vibrant Gujarat Summit you are leading about a 100 business people, representatives of top US companies to the Vibrant Gujarat Summit. I hear you speak at the summit, you called Narendra Modi one of the greatest transformational leaders you have met. You called India the best place to invest in the world, why is that?
A: It is two reasons, I have met every leader in the world and a great deal of time over the last 25 years. I am able to see which leaders are able to outline a vision, a strategy and execution of changes that is going to occur. I have also had the rare opportunity to see what motivates the leaders in terms of their vision, is it an inclusive one, is it a win-win one? So, when I think about Prime Minister Modi's capability, he is truly a visionary. He is able to translate vision into strategy and then part of the execution elements. Then he really focuses on the metrics to achieve that.
He has outlined a vision for India that I believe will allow the GDP to be the envy of the world, probably 7 percent plus. It would not surprise me to see it at 8-10 percent range.
If you look at the last 25 years, India has opened its markets, your life expectancy has doubled. Incomes have gone up 4 fold. What Prime Minister Modi has done over the last 2.5 years is established a foundation for the next 25 years. He has viewed Digital India and how all the pieces - from smart city to inclusion of 1.3 billion people to education to security. He ties it altogether in a way that few other leaders in the world have even started to do and he moves with a tremendous speed. I have watched him, how he thinks and I was with him probably 7 different times in the Gujarat Conference.
I have high energy, he has more energy than I do. So, I believe that he will go down as one of the greatest leaders in the world. However it is about results and I am very optimistic about the results.
Q: India needs capital to achieve a lot of what you said, all kinds of capital, FDI capital, portfolio investment etc. The US is home to that capital and that is the question I am getting to, under Donald Trump as President, we heard him talk about some of his policies and what he plans to do, how is this likely to change prospects for India, prospects for emerging markets (EM) going to change according to you?
A: When you really look at US India relationships, President Trump is really smart and so is Prime Minister Modi. This should be the strongest relationship we have in Asia Pacific. If you look at it from a business perspective, the bilateral trade it will go up and down a little bit at a given time period but it will end up being about 50-50. It has grown from USD 60 billion to USD 110 billion last year, we think in the next 7 years it can go to USD 500 billion.
Q: You think that target is achievable?
A: Yes I really do. Most important it can be a win on both sides where both sides generate jobs. I think you will find that India will be America's strongest partner in this region. The US-India Business Council (USIBC) is an example is committing USD 27 billion from 52 of our companies. We had a 100 leaders here but just 52 of us are committing USD 27 billion to India in the next two years. If you watch the increase in foreign direct investment, it was up 30 percent. So, I believe that they are two great democracies in the world that are going to lead in the economic growth, I think it will be India and US and I think we can do it together.
When there is any change, it takes a while for each side to get to know each other. I know that the conversations between the two leaders of the countries went very well. I know that the team meetings at the next level have gone very well. So, I am very optimistic about the relationship between US and India. India should know better than anyone else that when there is a regime change it takes a while for each side to kind of have that healthy give and take and to prioritise where they go.
Q: Do you believe we will see a reversal of globalisation we have seen over the last many decades?
A: The word globalisation is kind of an overused term just like nationalism. I think that a fundamental change is taking place is that digital era will completely transform every city, every country, every business. 40 percent of the businesses won't exists in 10 years when I said that 3 years ago, people looked at me like I was crazy. They now say it might be too conservative. You are in an era where there are start-ups and you are in an era where you create win-wins.
Q: You were talking about collaboration, countries coming together, working together, but the point is Donald Trump has won on the back of what some would say deep dissatisfaction that there aren’t enough jobs for American's in the US. Donald Trump even yesterday for example referred to that, he said I will be the greatest job creator that god has ever created. He believes that to do that he needs to actually bring companies back to the US and create jobs there?
A: Three different concepts, first of all I agree with his optimism. There is a very high probability and let us assume that he is in office for 8 years, I think the odds of that are good and I think a achievable number of 25-35 million jobs is very doable. Under a digital era that is exactly what Prime Minister Modi is doing in India, it is exactly what Prime Minister Benjamin Netanyahu is doing in Israel and it is exactly what is going on in France. France used to be the worst nation in Europe on business. We said 2.5 years ago France is changing and everybody said John you are wrong. We invested in France in partnership mode and they were the start-up nation in Europe for the first time.
What President elect Trump is doing and I think it is the right thing, he is outlining a very bold vision, that is what Prime Minister Modi did. He is going to work through the changes and what has to occur to achieve that vision. He is a businessman so he is going to try different things and approaches. However I think it can be a win-win. USD 500 billion mutual trade equally divided will create a lot of jobs both ways. Go to the US, if Trump takes and leads on an digital era in the US and he looks at how do you create 25-35 million jobs? He thinks about how do we grow the average American income over this time period to 20 percent plus so it is inclusive. Americans are upset because for the first time in their lives we don't think that our lives will be as good as our parents or our children's lives will be as good. So, we have to do things differently and neither political party was delivering. So, change was needed. I think when you watch his Presidency, I think the odds are extremely high that you would see him achieve many of the goals. However he is also a businessman at heart and so he would look at that healthy give and take.
Q: Some believe it is mostly take not give at least from his conversations.
A: Every good businessman outlines a very aggressive vision for his strategy. If you go back and look at Prime Minister Modi's vision 2.5 years ago, it was very effective. Most people thought it wasn’t achievable and most people viewed India as a slow follower. India now has become fast innovator.
If you watch Gujarat and what occurred, if you watch Andhra Pradesh where I was just a short time ago and what Chief Minister Naidu is doing there transforming and bringing it to all of the citizens. You watch what is occurring throughout your country, Rajasthan is an example. What the Chief Minister is doing in Rajasthan, you are seeing movements at tremendous speed in India. This is one that the US and India could do together. It is just like Cisco. We will grow our headcount in the US and we will grow our headcount globally. We have always been 50-50.
Q: Trump has talked about bringing down the corporate tax rate to 15 percent. What will that do to companies who may want to build outside? Unless other companies can match that why should capital go to other countries?
A: I do think in this digital world there is going to be a flow of goods on a global basis and it has got to be a fair flow and it has got to be wins all sides. If you watch what Prime Minister Modi and his team articulated extremely well is they said we aren’t going to fall under this trap of protectionism and nationalism. We are going to approach it as a win-win. One of the words that I have always liked that he said in Make in India session almost a year ago when everybody was saying we are not moving fast enough, is this vision really doable and today people are saying are we moving too fast and I think India has got it really right. However he would say you take one step as USIBC and we will take the next two for you.
I think the alliance between the US and India would be very strong but as in any democracy when the changes occur it takes a while to settle out. When you have a broad vision and an innovative vision whether it is in the US from President Trump or here from Prime Minister Modi, it would naturally by definition be both disruptive and it will also have bumps along the way. So, I am optimistic. I think businesses view that the changes overall would be good even though all of us are going to watch how this evolves. I think it is unrealistic to expect President elect Trump or Prime Minister Modi 2.5 years ago to say on day one here is what we are going to do. I am very optimistic on both the relationship between the countries and how to create a win-win.
Q: What do you make of all the talk about border taxation? Trump has been tweeting and yesterday he claimed credit for companies staying back. Large car companies scarping plans to build overseas and build in US and create jobs in the US. He said the word is out that you can't build outside and sell to the US without paying a cost. How would you see that as a businessman?
A: I think you got to take a step back and look at fundamental changes that are occurring. If you look at what is going to occur over the next 1-3 decades, it is going to be a digital world. You are going to go from a 1000 devices connected to the internet to 15 billion to 500 billion. It has the opportunity to increase the income of every person in the world and for the first time to have probably 3-5 times the benefit of the internet today.
As you watch governments as they reinvent themselves and it was time for change in the US, just like it was time for change in India. That is where I go back to the fundamental foundation of what Prime Minister Modi has done. In the last 2.5 years he has laid a foundation for tremendous growth in India over the next 25 years. President elect Trump will do the same thing in the US. It is like any good business leader - you track things, you watch what occurs etc or not. I think you have got two leaders that will get along very well. I do think we can be each other's strongest allies as we go forward.
I would not fall into the trap, my parents were doctors, don't look at the symptoms of today's transaction. Just like the demonetisation issue here in India, it was bold. It has risks but I think it would shock people how this will move every sales in this country closer to digital era and be a foundation on which they can build growth in the future and avoid many of the undesirable effects that were occurring before. So, you see a leader here who is bold. I am very optimistic about the future of the US and you would continue to see us keep our headcount in the US 50 percent and grow well there and remember India is our second world headquarters. We have grown well here and we have kept that in balance for many years, it is like going from USD 110 billion in mutual trade that USIBC was driving to USD 500 billion in 7 years, that is a bold vision. Both sides can really win together.
Q: Two sectors which come up and get talked the most is Indian IT services and Indian pharmaceutical companies. Yesterday Trump mentioned that pharmaceutical companies are making a killing and they should be better regulated. He talked about proper bidding. US being the largest market they should get lower prices. IT of course there has been this H1B issue, raised the minimum H1B wage to USD 100000 from the current USD 60000. What would you like to say to leaders in these two areas, in these two sectors? Should they be worried? This question also often comes out from large investors in these two sectors.
A: First of all it is important to know as a leader what you know and what you don't. I am not an expert in pharmaceutical. So, I am going to focus on the IT sector. When you look at the future of IT every company in the world would become a digital company. It doesn't matter if you are in retail, manufacturing, you are going to move to an IT infrastructure. So, as you begin to look at this, I think the future for Indian IT companies are very bright and I think the future for American IT companies are very bright. This is a foundation for the next two decades and it is going to have huge growth in markets. Now with that there will be disruption.
The real competitors to the large American IT companies and the large Indian IT companies isn’t each other, it is the start-ups and the new ideas that come along. This is where I am going to pull you back a little bit, let us move out of transactional mode and the issues that all of us are going to learn over the next couple of quarters. This is what good business leaders do and good government leaders, you make your decision for what is right 1,2 and 3 years down. What Prime Minister Modi has done so effectively and that is why I would put him in the top 3 that I have ever met, he has outlined a very bold vision, he is able to translate that into strategy. He then breaks it into component parts and then he puts metrics with it.
Everywhere I have travelled in India over the last year, the first year and half people were saying I am not sure I understand it. Many people in India and in the US couldn’t even pronounce digitisation. Now you are seeing people move with tremendous speed. When you go Rajasthan and what they are doing in Jaipur, Jaipur is the top smart city in India. They are doing what Bangalore did 7 years ago, remember Bangalore was a top innovation city around the world except that they doing for a digital world and making the transitions.
So, I am optimistic across the board what is going occur in India. I am equally optimistic with the tax changes and the vision that Trump has outlined that you are going to see both countries do very well.
However I keep going back to what India and US have always done, it is create a win-win.
Q: You think that won't change?
A: I think these two leaders will find a way to make that happen.
Q: I want one number from you, I looked at data from 2000 to 2016, that is a 16 year period in terms of the amount of money which is FDI equity money which has come in from the US into India, that number is about 6 percent of the total money that India has received as FDI equity inflows. The money coming from the US is 6 percent of the total, that's it. Where would you see that number in the future?
A: The way Prime Minister Modi is deregulating the economy, the way he creates a business friendly environment that will allow you to create jobs, his vision of inclusion of 1.3 people and how education has to change and doing this on a inclusive basis and putting states and cities into competition and still focusing on how do I do this for the poorer regions so that you bring everybody with him, that is on the same scale as what President Trump is outlining for America. He is saying we have to change, we have got to be willing to take risks. There is going to be some disruption, there could be some bumps along the way but if they change the tax policy in the US which I think absolutely will happen you will see USD 1.2 trillion or maybe USD 2 trillion come back and invested in US.
Q: Repatriated back?
A: It isn’t repatriated back, it is getting a tax structure that is finally competitive and that will encourage people to create jobs in the US.
Q: You think a lot of the money will go into investing or that could be distributed as dividends etc, where will that money go?
A: How each company does that has to be a decision of companies and that is what the great thing is about competition of markets. I think the question you are asking me is, is this a win-lose? The answer is no, it is a win-win. If there are two nations that are aligned they should win together over this next decade. India will be fastest growing economy in the world, the US will be the fastest growing out of the large developed countries. I think both groups can create huge number of jobs and we are much better together than we are separate. So, I think you will see both of them move past issues of the past. Some of the challenges that US might have with other countries is a whole different discussion.
However I think the two largest democracies, most successful democracies in the world, with two great leaders, I think you are going to see us work together.
Q: Let me now come to the role of Cisco and what Cisco is doing to help digitisation in India. Why don't you tell us what Cisco is really upto?
A: What we have done on a global basis more than, in fact there isn’t any other hi-tech company realigning with governments around the world on digitisation of their country and the job creation and the inclusion and how it transforms this new market. India is our second world headquarters and if you watch our commitments to India, it has been dramatic in terms of both the engineering segments but also our corporate social responsibility. We are training 250000 people in India for this new digital world, for the network academies. We are working in individual provinces on IT training for women. We have invested over USD 250 million in start-ups, USD 40 million alone in my last visit here. You are seeing us moving on all fronts and truly a win-win and a creation of ecosystem partners with India. You see us doing the exact same thing in the US and this why I think our nations are actually aligned so well to work together. If you watch what we are doing in the US, it is the same type of commitment.
As the funds return with the new tax system you will see us continue to invest in the US as well.
Q: Do you think the infrastructure backbone which the government has to provide is coming along fast enough as well along with the private sector?
A: If you watch what Prime Minister Modi has done, he has outlined an amazing vision. A year ago at Make in India people said we can't do this vision and we are moving to slow, now people say you are going too fast and that is what innovation and vision is about. Will there be bumps, the answer is yes. However you are beginning to see it implemented. In the last year you suddenly see a place like Rajasthan, in Jaipur you are seeing a city that in 18 months outlined a smart city and brings it altogether. Everything from transportation, to education, to the environment, to lighting, to training and inclusion etc, they have bought it together probably better than any other city in India. It has been just 18 months, that's the speed of change. So, that is what you will see us do also in Cisco in the US. You will see us align both with the US government, the states and the cities to transform those economies and the benefits. Again when you are talking about USD 19 trillion opportunity over the next 10 years, that is the size of the US economy and I think you will see both countries do well.