Digital India may become a key tool of job creation: Murthy

In a CNBC-TV18’s special series ‘Inside Bangaluru’, which talks about the developments in the IT Capital, NR Narayana Murthy, founder of Infosys made a strong point that Digital India has the potential of becoming an important instrument of job creation but only if the government accepted the international standards of contracts related to software development, timely payments etc. He said: “Digital India will start opportunities for applications in local languages but the important requirement is contractual clauses that are insisted by the government should be in line with contractual clauses insisted by the foreign corporation, simply because Indian companies derive over 90 percent revenue from these corporations ”So it is imperative that the government of India comes out with reasonably attractive and competitive set of clauses for large IT companies to be keen to work with them, he added.

Accroding to him large IT companies are sure to rally behind making government's Digital India initiative a success if things like price, making payments on time, accepting software on time, not changing requirements midstream and of course in some cases not insisting on corruption are properly tackled.Below is the edited transcript of NR Narayana Murthy’s interview with CNBC-TV18’s Latha Venkatesh.Q: This is the inside Bengaluru week for us but what made Bangalore tick. How is it that other cities with a much longer history of commerce and capital investment didn’t quite make the cut as much as Bangalore did and you guys did in the 90s?A: Because Bangalore was at a very strategic location viz-a-viz our borders, because Bangalore or Karnataka produced excellent engineering talent, the government of India started LRD, it started CIL, it started BEL, many electronic and aircraft oriented companies here. When the IT industry started its initial years Infosys was founded in Pune. However, pretty quickly we realised that while it was okay for the senior guys to ether rent a house or buy a house but for the end engineers it was almost impossible for a very simple reason, because Maharashtra had rent control act which was very draconian and which said if you occupy a place as a rentee for 7 years then you could even claim ownership. That meant most of the people were not ready to rent their apartments. Fortunately in Karnataka such a thing did not exists. In Karnataka, Bangalore it was very easy to rent a place and then the courts always decided in a fair way in favour of the landlord after giving a reasonable time for the rentee. These were all the factors that contributed for us to move from Pune to Bangalore.Q: What do you think is the next major wealth creating industry or sector or sub-sector like IT was in the 90s? Is it e-commerce or is it something else?A: I think internet of things has to play a major role in helping other sectors of our economy, the manufacturing sector leverage the power of IT, power of internet. Therefore, I would expect internet of things to be the area that will provide opportunities for our IT companies not just in India but throughout the globe because that is what will provide the next level of innovation for other sectors of the economy leveraging the power of internet.Q: Are you satisfied for instance e-commerce is an obvious offshoot of this foundation - the internet of things. Are you satisfied and happy with the way it has grown, is it looking like the next wealth generator or the next job generator?A: Even in the IT sector, there was only one company which distributed wealth to its employees in a big way, it is Infosys. At today’s price we distribute about USD 11 billion. No other company has done that even in the IT sector. Therefore, it depends on the founders of these companies what their mindset is, how they want to distribute the wealth that they create. It is not limited to IT sector or any sector, it can happen in any sector.Q: Wealth generation perhaps is a more specific way of putting it; it was also a job generator. It was wealth generator for the nation in that sense, not just the stock investors. What is that next idea which may generate that kind of jobs, that kind of economic growth?A: If Digital India were to succeed, if it becomes easy to work with the government, if government were to accept the international standards of contracts in software development, in accepting the software that the companies develop, if they pay on time, etc then I believe Digital India will become a very important instrument for creating huge number of jobs. Digital India will start opportunities for applications in local languages, in Hindi, in Kannada, in Tamil, Bengali, etc but the important requirement is the contractual clauses that are insisted on by the government should be in line with contractual clauses insisted on by the foreign corporations simply because Indian companies derive 90-98 percent of the revenue from these corporations and the prices are very attractive outside India. So, therefore unless government of India comes out with reasonably attractive and competitive set of clauses I am not very sure of the large companies will be keen on working with the government. Q: Price will be the big thing? A: Not just price, price is one but payment on time, accepting software on time, not changing requirements midstream and not allocating enough time to define requirements and in some cases not insisting on corruption, etc. If those things are all adhered to, I have no doubt at all that the entire IT industry will rally behind the government in making Digital India a success.Q: But at the moment, you see margins within India lower that margins outside India. A: No, not lower. I do not know if, certainly, I know about Infosys, there is not a single project, Infosys has done, and I believe the same story where the company has not lost money. That is the reality. We are dealing with governments, whether it is the State Government or Central Government, that is the same thing. Q: You end up losing money?A: Of course. I mean, you can talk to other companies too.Q: No, we hear that and of course infrastructure and other non-IT areas, but is that the experience in IT as well?A: Absolutely.Q: So, what is the dos and don’ts for the government in that case if it wants to make this mission succeed?A: The reality is the government will have to take a contract that is considered fair to both the government and the private companies from an international corporation, of course, from Indian companies. And then say, let us be fair to ourselves and fair to the parties. Let us make sure that we are reasonable in our expectations, let us make sure that we show our commitment to completion of the project. Let us allocate enough time of our officers to define the problem properly, let us make sure that we take accountability for success in the project. Let us make sure that the hardware is delivered on time. Let us make sure that the software is accepted on time. Let us make sure that there are no unfair penalties. Q: But if the record is so poor so far, you think that there is a need for some external committee or some advisory committee, otherwise it may go the way it gone all the way?A: I am sure the government is smart enough to know all of this. But the reality is certainly in so far as I know, the status today, I do not think there has been any project that has made money in dealing with both the State Governments and the Central Governments for IT companies in India. I maybe wrong, I hope I am wrong, but in the case of Infosys, as long as I used to be there, that was the case. Now, maybe the story is different. Q: We will have to wait and see. After all, Digital India is only an idea at this point in time.A: But it is a great idea. It has potential to make the life of every Indian better. It makes life more comfortable, it provides better transparency, better accountability, all of that is there, but making sure that that extraordinary succeeds requires a commitment on the part of the government and on the part of the private sector IT companies. But to do that, they will have to be a fair contract between the two and that contract must be honoured by the government.Q: You raised this angst when you were delivering the convocation address at Indian Institute of Science (IISC), that India is not innovating at all. Even the word innovating enough is not the right phrase, that innovation is seriously lacking. You pointed out that the country is so poor that there are opportunities galore. Is not that itself the drag? Afterall elsewhere governments are funding research. Here we do not have the money for research.A: Let me first of all distinguish between what I said and what is set. I did not say innovation, I said invention. You know the difference between the two. You see, Indian Institute of Science is number one higher educational research in Science and Engineering in the country. There is no doubt about it. Whether you look at the number of PhD, whether you look at the citation, the quality of paper produced, by all counts it is the number one institute. Therefore, when number one institute in education and research in India invited me to deliver the convocation address, I took it seriously. I started preparing and a couple of months ago, I was in Cambridge Massachusetts and I got a booklet called ‘100 new gift of ideas from MIT” and I found that MIT had contributed earth shaking inventions that made the life of common man better. For example, e-mail by Ray Tomlinson, Text-to-speech recognition, Viterbi algorithm without which you would not be able to use your mobile phone, Then RSA encryption without which banking transactions would not be safe, GPS, etc. an micro chip, all of that.So, then I said, look, why can our institution, which is number one in India, not also be like that? Q: But, does that not require money? A: Therefore, when I spoke to the students, I said all the encouraging words and then I said, the reality is that we have not been able to bring one stunning earth shaking invention that everybody in the globe uses or that impacts everybody in the globe. _PAGEBREAK_Q: The application industry. Innovation or invention also come from industry and IT industry was admirably placed. In terms of already being globally ahead of the curve in the 90s and creating enough capital for itself to invest in itself. Do you think it is losing the race or do you think it will catch up? It is only a question of investing. A: I do not think the IT industry is losing the race. There are new areas internet of things I talked about about the big data, digital, social media. Connecting social media with corporations, they are all big opportunities and the opportunities for application development and maintenance will continue. And there are a lot of smart things you can do to improve productivity. Therefore, automation is another area which is receiving the attention of all these companies. They are all working on it. You have seen TCS has come out with something stunning. Infosys is working on, Wipro is working on. So, all these companies are doing, but they are not going to announce because they all want it as their competitive advantage. So, while you and I may not know what is happening, I have no doubt at all that TCS which is the largest company today in India with a stellar record. Infosys, Wipro, Cognizant, they are all working, they have good research and development (R&D) departments, they are all working.Q: You do not fear that, for instance artificial intelligence, that is one area TCS spoke about. You do not fear that today if global corporations want to give out a project, India will not be in the pecking order. It would be first somebody else and then we would get the lower build projects. You do not think we are losing the race in that, are we?A: I do not think so. As long as we remain relevant to customers, provide business value leverage to our customers, assimilate leading age technologies well and know how to apply it for the benefit of the customer, work on optimising our productivity, work on developing tools, that help us to bring to the table new ideas in software engineering, we will be safe. Q: I know you will not want to talk about Infosys. Let me take only non-Infosys examples. Look at TCS, for the past three years, the volume of sales, dollar revenues has been slowing. For the past three years margins have been slowing. Obviously people are in investment mode. Mindtree told us the same thing after their results. Gartners says the same thing. They seem to be saying that the industry has lost its elan. You think it is only a matter of time that they will reinvent?A: I know Mr Chandrasekaran very well. I have a lot of respect for him, a lot of admiration for him. So, without knowing details into what we have said or what Mindtree has said, I do not want to comment on it. But all that I know is that this industry has a lot of smart leaders. They know what to do and to grow even at 15 percent at those levels it is not easy. I mean you have to compare it with other global corporations. So, I personally think that the IT industry has been doing reasonably well. And we should encourage them and we should cheer them and give them whatever support we can.Q: I look more at macro economics and for students of macro economics it was a big thing that India didn't have to look back at another 1991 Balance of Payments (BoP) crisis because the IT industry from then on had made us comfortable on that angle. But when you start seeing margins dip year after year and volume of growth, speed of growth year after year, is this no longer a double digit industry, is this a single digit industry and at some point it will also hit capital formation and fresh innovation. Should we worry or do you think that this is only a passing phase?A: I should not be speaking on these issues but all that I can say is this that knowing the leaders whether it is of Tata Consultancy Services (TCS), Infosys either whether it is Chandrasekaran or Vishal Sikka or Azim Premji etc, they are all very smart, very experienced people and I am sure they will handle their responsibility very well. Therefore, I would rather be at the sidelines cheering them, supporting them so that they can run the marathon even better.Q: Other big and perhaps laudable project of the Government of India is Skill India. What would you advice be? In a sense it is related to your larger concern about invention, your larger concern about educational autonomy. Do you think Skill India is progressing in the right direction? What would you advice be to the people who are manning it?A: First of all, I congratulate the current government on continuing the two initiatives by Nandan Nilekani in Aadhaar and Mr Ramadorai in Skills India, both are excellent professionals and they have contributed immensely. So, coming to Skill India, it is a great initiative, doing a pretty good job but let us remember that it is a daunting task. Just as Aadhaar is a daunting task Skill India is also preparing developing skills for the hundreds of millions of youngsters in India is also a daunting task. Therefore, we have to be patient, we have to encourage them, we have to support them and the reality of India today is that, it is very difficult to get any skilled labour. Whether it is a brick layer, whether it is an electrician, whether it is an auto-mechanic, it is very difficult.Q: You can add even sub-editors and videographers to it.A: Everywhere, this is a tragedy of India. We say we are 1.2 billion people but it is so difficult. Therefore, the task for Mr Ramadorai and team should be lauded, that should be supported and we should have some patience. They are doing, they are showing progress. So, I am very happy that Mr Modi's government continued both Aadhaar and Skill India project and this is the only way India can provide employment for the large number of youth and this is the only way that we can build infrastructure. This is the only way that we can make the life of most Indians better.Q: We are living in troubled times, every other day the headlines are being grabbed by Greece or China and every subsequent report of the IMF only tells you started the year with an expectation of 3 percent growth but it is something like 2.5 percent . If you started US growth with 2 percent it ends up at 1.8 percent, will all this stymie growth for a long time? Would you worry that growth is going to be elusive for a goodish bit?A: As far as the IT industry is concerned any such happenings in the west in some sense is good for us because we provide better value for money. So, therefore, I wouldn’t worry about it. So, far as the country’s balance of payments are concerned, I think we have a wonderful RBI governor, we have a wonderful Finance Minister, we have USD 350 billion of foreign exchange reserves, oil prices are to our advantage. So, overall I would not be pessimistic. I would say that the conditions are such that we can take some big bold risks as a nation and this is the time to accelerate because we have a government with a majority, everybody is excited and other factors are all there. Therefore, I would say this is the time to press on the pedal.