This Article is From Jan 24, 2013

Government's FDI push too little, too late, says Azim Premji: Full transcript

India's super-rich cannot treat extreme wealth as personal wealth, Wipro chairman Azim Premji has said, calling for higher consciousness among India's wealthy. In such a poor country, there is a legitimacy in taxing the super-rich, he said. (Read | Video)
Mr Premji was speaking to NDTV on the sidelines of the six-day long World Economic Forum meet, which kicked off yesterday in Davos, Switzerland on a broad range of topics from IT sector outlook to government's reform agenda and Rahul Gandhi's succession within the ranks of Congress.
Here is an edited transcript of the interview:
NDTV: A philanthropist a game changer in the IT space and clearly one of the most respected leaders in the world it is such a pleasure to have you with us sir. Azim Premji Sir, thanks for spending time to talk to us. 
Davos is really a time when we do a mood check on the global economy. What's it looking like this year?
AZIM PREMJI: I personally feel more optimistic about the world economy 2013 and so did for 2012, particularly USA. And the US drives a lot of the world's scene and China is nowhere as morose as people make it out to be. It will just end up with 8 per cent growth, which in current circumstances is not a 10 per cent growth rate. But there is a major shift taking place from investment to consumers to fill up demand. India you see changes been made which is more or less economic progress, Middle East continues to be strong, you get your 4 per cent to 5 per cent growth rates there, Europe there is a little bit of an uncertainty but they seemed to have stabilized the Greek problem, no longer a crisis. They are looking for constructive reforms and putting their act together, Spain is facing very hard time due to unemployment. So over all with the Gartner forecast I just read for the services growth this year was somewhere between 5 to 6  per cent which is decent and even Forrester came out with numbers which weren't too different.
NDTV: So you are far more optimistic?
AZIM PREMJI: More optimistic not far more optimistic.
NDTV: But it's cautious optimism at the same time.
NDTV: Also many will now believe that crisis haven seem to become the new normal and it will take a while before we can finally say that the global economy is out of the woods.
AZIM PREMJI: I would think that that is correct.
NDTV: All right Sir let's also talk about the issues that are likely to get highlighted in Davos this year. One dominant theme that seems to be coming out is the huge wealth gaps that we seem to be seeing. Oxfam has come out with a report that says that what the 100 richest people in the world have earned is enough to end poverty 4 times over, world poverty 4 times over and that is an absolutely shocking statistic.
AZIM PREMJI: I have not read the statistics but that seems shocking.
NDTV: We are talking about 240 billion dollars that is the income of the 100 riches which can end poverty 4 times over; does data like this sadden you?
AZIM PREMJI: It does sadden you.
NDTV: So do you think there is a case now to start addressing the issue of extreme wealth? Do you believe the concept of extreme wealth is unethical as your Oxfam terms it?
AZIM PREMJI: I don't think it's unethical. I think a lot of trusteeship responsibility has to accompany it and wealthy people should consider that as a part of their obligation. And more they consider it as an obligation, as part of their wealth, as part of their trusteeship and not personal wealth, I think the longer will they survive, otherwise their socialism will overtake.
NDTV: But do you see that trend really happening? Do you see that realisation setting in amongst the wealthy people?
AZIM PREMJI: I think you see it happening in the US since we see what Bill Gates is doing etc. We are trying to get some amount of awareness because of the philanthropy. We kicked off and we formed a little cell, which gives specialised advice as part of our core group and we are meeting twice a year. I think it is consciousness. A lot of people still don't know how to go about it, they don't know how to scale it.
NDTV: But there is an inclination?
AZIM PREMJI: There is an inclination.
NDTV: And what about India, would you believe the same for India?
NDTV: There is an inclination too?
AZIM PREMJI: Without a question.
NDTV: But also there is fact, a need to much, much more because you are talking about a country that has a vast majority of world's poor, and yet when you see the rise in disparity in wealth those are really worrying trends.
AZIM PREMJI: And the rise in disparity in consumption.
NDTV: Yes disparity in consumption as well. So do you think redistribution, addressing some of this inequality, something that is going to be a dominant theme of economic policy making of corporate thinking in years to come?
AZIM PREMJI: I don't think so much is going to be the issue of redistribution it is going to be increasing the base of income and wealth. You know you don't create wealth by just redistributing wealth; you create wealth by creating wealth. I think that is more important than redistribution of wealth, but there should also be a higher consciousness among the wealthier people that they have a responsibility towards that wealth, and not just a legacy to leave it to their family and keep growing and growing.
NDTV: And that brings me to the question another debate that is taking place even in India, taxing the super-rich. Is it an idea whose time has come?
AZIM PREMJI: Well the Finance Minister is talking about it, but I don't know what's the outcome.
NDTV: Would you favour it, taxing the super-rich?
AZIM PREMJI: Am frankly neutral on it.
NDTV: Why would you say that? You usually have very strong views on issues like philanthropy. You lead by example but on taxing the wealthy you don't seem to have a clear stand?
AZIM PREMJI: I don't really have a clear stand on it, am ambivalent on it, it sounds alright thing to do politically, but I don't actually know if it will come up. The same thing has come up on estate duties, most parts of the world have estate duties, is it the right thing to do or not a right thing to do?
NDTV: Why would you say it isn't the right thing to do? Because even politically and economically speaking it's again all about those who are earning more should contribute more. The overall philosophy remains the same, would you agree with that?
AZIM PREMJI: The end result should be that you get into a very complex tax game to be able to mitigate it, which has happened in most parts of the world. The wealth has remained. It's got re-gamed in terms of very sophisticated tax structures and there is not a country where the tax structure has not happened. So you get into. Moreover, in terms of how you handle wealth, whereas to tax rich at a higher slab rate is a little more straightforward.
NDTV: So what about changing tax slabs in a way so that those who earn a certain amount pay more? It's almost about re-jigging tax slabs, you being in favour of that?
AZIM PREMJI: It depends on what rate do they start but in terms of the super-rich I think there is a legitimacy in a country as poor as ours.
NDTV: You believe so?
NDTV: You talked about lot of efforts that you made in areas of philanthropy, share with us some of the initiatives, because it has been a while since you made that big announcement. Do you think you have made significant progress in the direction?
AZIM PREMJI: We have made significant progress in our own foundation.
NDTV: Getting others to do the same?
AZIM PREMJI: What we did is a core group has funded 4 to 5 man team lead by a person called Venkat Mohan of GiveIndia and he has put together a small team under him which has got a category of rich people, some with a track record of philanthropy, some stronger, some less stronger record of philanthropy. Asking them what do they need from a core group like this and there are various needs; one is you know how do you structure it, not necessary to avoid tax, but to have its continuity. The other is if they want to work with NGOs which are specialised NGOs, reliable and they can have scaling. The third is what are the areas that have priority, if it's in a niche area how can they broaden that area. And we will be having another get together in the month of June and we have smaller groups that meet once in two years or twice a year. In addition to this there will be healthcare group, there may be an education group, where people of the core group have that expertise and can share that expertise extensively.  
NDTV: So also the Oxfam Report we mentioned talks about another disturbing trend, the fact that they believe politics around the world is totally controlled by the super wealthy. As a result what we see it that the policies that are made are to suit the elite or the rich and not necessarily embrace other section of the society. Do you see it as a worrying trend around the world and in India?
AZIM PREMJI: It is a worrying trend and it is not the right trend because the super-rich don't really represent the interest of the people.
NDTV: In India we are not making enough policies that are socially inclusive, is that a concern?
AZIM PREMJI: I think we are making policies that are socially inclusive which are not executed on social inclusion, because of all the leakage factors. There is just no point in making policies unless the grassroots implementation of that policy is validated. You can see that, three hundred thousand crore plus subsidies which is for people below the poverty line. I mean various reports of how much reaches to the people below the poverty line and some of those reports are really an eye opener and there is certain amount of integrity in those reports.
NDTV: Do you see the direct cash transfer as a game changer?
AZIM PREMJI: Yes it will be a game changer.
NDTV: And that is something which will address the issue of leakages that you were mentioning?
AZIM PREMJI: Significantly I think it's a step in a right direction but they should ensure that it will go into the right hands and what goes in the hand of the main leader of the house is not abused. So the thinking is that it should be distributed to the actual recipient; education in account of a child in case of subsidies involved; in account of the wife because she has more family responsibilities.
NDTV: So we should not see gender discrimination or the fact that it's been used for a purpose other than what it's intended to do so?
AZIM PREMJI: For consumption of drinking, that a major concern because it can have a very bad backlash if that happens in terms of its critics.
NDTV: And do you believe government is addressing that issue in, especially in areas of food, if you see cash replacing actual food? Those are very valid concerns.
AZIM PREMJI: They might not extend it to certain items concerning foods, they may not.
NDTV: And you believe they may not?
AZIM PREMJI: I think they should go in stages. If they try to chew too much too fast you can get leakages in the system. But I think even in matter of food it must go to the housewife, it's very, very important.
NDTV: You have been someone who has been critical of kind of policies paralysis and government issues that we have seen with regard to the second term of the UPA. Do you believe things have changed for the better?
AZIM PREMJI: No I think there is a sense of urgency in the government. I also think there is sense of healthy panic, which determined by the falling employment rate and not getting created, which is a very serious problem for the country. And other concern is the rating agencies, that we should not be reduced to a junk bond. So there is an energy in the government. What I think is important is the energy that you see that the policy announcement should be translated to the grass-root level and not get compromised in the process of implementation.
NDTV: And do you see that as an concern since many believe that now we have our eye on 2014, we have really lost that precious time, even the healthy panic that you are talking about is perhaps too little too late?
AZIM PREMJI: It is too little and it is too late, but it will have its effect in a positive manner. I wish it could have happened 2 to 3 years back because we lost a lot momentum.
NDTV: And how is it showing up on the global scale, has it become harder for you to sell India since the momentum has gone down?
AZIM PREMJI: Talking to Indian industrialists there is certainly a high level of confidence and a lot of fence sitters will start investing. If coupled with that the government can get the large stuck up infrastructure projects, over 1000 crore projects moving, enclosures on that, it will a huge fillip in terms of confidence and trickle down of activity. I think that's a critical area that government must move, must start showing results, very, very important. And so far overseas investors are concerned think we are attracting a lot of FII funds, it's at a record level for the past two months. The FDI is still fence sitting, they are concerned with the outcome of the election and they can afford to wait 18 months.
NDTV: And it gets us to question if the FDI push was worthwhile or not, because we are not really seeing huge investment, at least in the monthly brand retail space. The Supreme Court also questioned the policy, asking if the government is doing enough to protect the small traders. So was it worthwhile both politically and economically?
AZIM PREMJI: You know we lost 2 weeks of Parliament and it wasn't worthwhile, the frustration it created. It's a good policy but there are more important priorities, to get a coalition with the Opposition to get moving forward.
NDTV: So you think that the priorities have been misplaced?
AZIM PREMJI: I think the government looked at it as a symbol, it was an important symbol of progress; and FDI, so looking at that point of view, it has sent an important message, that when there is an change in policy the government is determined to do, it has enough political clout to do so.
NDTV: And you believe that has happened? Is that the sense that you are getting from especially foreign investors, at least in terms of turning around sentiments, because even that was being questioned the last few months?
AZIM PREMJI: They should have a trade off, was the other thing possible. Time of Parliament could have been used in passing so many other important policies and now it will go to the Budget Session, which will again get pushed ahead.
NDTV: So in that sense that the political window of opportunities for the government remains very limited. What will be your prescription here on, since we have been slow in picking up momentum on reforms as you said, and there is very little time to go ahead with the unfinished agenda? What according to you should be the tough things on governments list?
AZIM PREMJI: Execute, execute, execute. I don't think there is a need to do all kinds of new things. You just need to execute and need to ensure higher standards of governances.
NDTV: Execution and governances, these are two things that you are focusing on. Share with us why you believe these continue to be critical concerns?
AZIM PREMJI: You know there is an enormous amount of power capacity lying idle because coal is not available. They got to close this loop of coal availability of mines and consumption of the coal requirements and that ...
NDTV: But do you see that changing in next few months?
AZIM PREMJI: Coal issues yes, since it has gone to crisis and it will be addressed, and higher tariff prices because there will be blend of coal imported, coal market priced coal and standard coal.
NDTV: That addresses the execution part in as far that you have mentioned. What about governances? Corruption has been a big issue, it has been highlighted time and again; there have been so many scams. Do you think we have moved forward in this whole governance's issue?
AZIM PREMJI: I think there has to be a level of discipline on execution, breaches of governance, I think government has to set an example, Ministers have to set an example, bureaucrats have to set an example and I think industrialists, like you can't clap with one hand, have got to have a higher conscience of what they do and got to have a higher fear on what they do at the same time. People don't have a fear of what they do. Similarly in the case of rape that took place in Delhi and subsequent to that I read in the paper another 15 rapes, it's unbelievable that after all the attention that it got, people still have the guts to take that risk. It means that people don't have respect for the law and believe that they can abuse the law and get away with it.
NDTV: And that's what really needs to change and how does one go about doing that?
AZIM PREMJI: This is a very fundamental issue since the corruption level has gone so deep, it's a very fundamental issue has to be strongly looked into from the top in terms of a clean-up and example setting, and some states have exampled that really successfully.
NDTV: Would you like to mention some of those?
AZIM PREMJI: I think Gujarat has done a good job on the top level corruption which is reduced and Bihar is doing a major job at the grass root transformation, it's really a case study.
NDTV: And these are states that will really live by examples?
AZIM PREMJI: Yes they will.
NDTV: Talking about Modi, the kind of reception that he saw at the vibrant Gujarat Summit, which did make headlines, do you see him as a prime minister candidate? Do you see him replicating Gujarat's success at a national level?
AZIM PREMJI: You know I don't know well enough. I have been not following Gujarat closely. You know we don't have any large investments, we do work with the government, like some work with the government but not very large. I think that BJP is looking for a leader and unfortunately they are not able to arrive on the consensus of the leader. He is one of the serious contenders in terms of the leaders available who could build a rally in the BJP, and I think he is the likely candidate. I don't know if it will happen because there are enough partners who have expressed that they will walk out of the coalition if he would be appointed prime minister or candidate.
NDTV: Do you see him as the right candidate, given at least a success in what he has done, the way the corporate India has backed him and his policies?
AZIM PREMJI: I see him as one of the likely candidates, whether he is the right candidate or whether he can get consensus viz a viz the BJP and the coalition, which the BJP will have to have, I don't know. I really don't understand enough of politics.
NDTV: And?
AZIM PREMJI: Till the next election. You know the one party will be in majority so any party that comes back, whether it is BJP or whether it is UPA, will have to depend on coalition. Coalition will be far more fragmented than they are today. So candidate who is representing the new government will have to be able to build consensus across a lot of coalition compartments.
NDTV: Right, it also brings me to the other party. That is Congress party, the party that has formed the current government. Rahul Gandhi's elevation is also something that is obviously the talk of the town; everybody seems to be talking about him being the Prime Minister-in-waiting. So do you see this really as being Rahul Gandhi versus Narendra Modi and your thoughts on Rahul Gandhi as prime ministerial candidate?
AZIM PREMJI: See I don't know Rahul Gandhi. I have just met him in small groups in the past. He has not expressed too much in person about Prime Ministerial candidate. So one goes by what he says. But that doesn't mean that he does not play an active role as number two leader of the Congress party. I think he will be politically more involved. I think he'll have more legitimacy in terms of his involvement as being the Vice President of the Congress party, the same way the President of the Congress party has more legitimacy in being involved. He has done some good grass-root work, he should get credited for that.
NDTV: But not everyone seems to be praising the kind of work that he has done and the fact that he has remained very detached from politics, so this while the fact that he has not being as active as was expected out of him. Many are even questioning the concept of dynastic democracy, the fact that you are really because of the whole dynasty politics that we talking about. Would you favour that or not?
AZIM PREMJI: How can you favour dynastic politics?
NDTV: Right, but isn't that what Rahul Gandhi's elevation is all about?
AZIM PREMJI: But you have to face the reality, you have to reconcile yourself to certain realities.
NDTV: Even if he is not up to the job?
AZIM PREMJI: You know I think it is not a fair comment to make about him that he is up to the job or not up to the job. I think I mean he could be playing the role of Sonia Gandhi and he could be playing the role that Sonia Gandhi has played viz a viz the Congress party and the Congress government. They have considerable powers, but none of the responsibility for the results. It's a nice position to be in.
NDTV: It's interesting you say that you not responsible, but yet hold that considerable power, it's a nice position to be in. But for you leadership structure is also something that has attracted considerable criticism. Would you, you are almost backing the dual leadership structure here saying that it seems to be working, do you think it's worked?
AZIM PREMJI: Well the economic results currently don't seem to. To have said that, the governance levels don't seem to say that it works. You have to see the end results. The end results have not come forward.
NDTV: So is this really sad, that we have had the term of the UPA government now coming close, like we have got an economist Prime Minister who has, you yourself would say, perhaps does not have that kind of power that he should have had. The power really lying somewhere else is something that has probably led to the kind of slow down we have seen, policy paralysis, we have seen governance issues, we have seen he really doesn't have that kind of something that has led to the slowdown that we have seen. He really doesn't have that kind of ...
AZIM PREMJI: In fairness I think that he has much more power than what we realize. So he has to take responsibility and power you grab. I think he has a reasonable amount of freedom. Not perfect freedom on political issues but he has significant power in economic issues.
NDTV: But you can't divorce politics from economics. A lot of economic decisions need consensus building.
AZIM PREMJI: Yes and no. You have to draw the line somewhere. We didn't draw, that's why we are in an economic mess at the moment and now we are trying to draw out of it on an accelerated basis.
NDTV: And as you said perhaps it's too late to be doing that.
AZIM PREMJI: I don't think it's too late but we have lost momentum and to gather back that momentum is an uphill task. The world is very comparative. There is a lot claims in terms of leadership nation. What's happening in Korea, so you can't take things for granted and I think generally, we have lost a lot of momentum. Those who suffer the most are the people, because the incremental jobs that were getting created, they will not get created. Because you don't have growth, results on job creation are magnified.
NDTV: So it's really a lost opportunity in that sense.
AZIM PREMJI: Yes it is a lost opportunity.
NDTV: Sir, let me now change focus and talk about Wipro. Your quarterly performance was obviously a cause of concern for investors, punished on the fact that several of your rivals did perform but Wipro did not. Why would you say so?
AZIM PREMJI: I think relative to our competitors we performed a little poorly. Some of the kick-offs we expected got delayed. I still think our fundamental direction is very strong. I still think what we have put as base in the organization in the past two have really raised the fundamentals, whether in term of sales, customer satisfaction, employee satisfaction, in terms of delivery, that will give results. We were hoping that the results will come six months earlier.
NDTV: Are you disappointed?  
AZIM PREMJI: Of course we all are. Starting with Kurien, he is the most disappointed. But we are not changing directions. Because the direction is right, sales have started to click. Order pipeline is very good. Funnel of potential order is very good. It's the highest what we ever had in the past. Conversion rates of win are going up, the quality of job is increasing our realization. And don't read too much into volume growth rate. Lot of curtail volume growth is coming from more productivity, we are getting the top line growth we are not getting the volume growth because we are getting more productivity from our people. 
NDTV: Would you overall believe that the tough economic environment is perhaps making IT lose its sheen really?
AZIM PREMJI: You know I think you have to appreciate the size of the industry of $70 billion. It's not easy to keep growing the industry of $70 billion at 25 per cent every year. You have got to appreciate the international environment and the industry is basically import based. You have got to appreciate the slowdown that has taken place in India, so the growth rates have gravitated down to some 15 per cent levels. I don't think you are going to see growth rates of the industry of 25 per cent again coming up, but good you will see 15-18 per cent growth rates coming back.
NDTV: So it's not a sunrise industry as it used to be few years ago, that's clear and Wipro is also looking for more diversification, given that trend?
AZIM PREMJI: No IT business is focused on IT.
NDTV: Right, but as a group?
AZIM PREMJI: It could be said the other way around, we are focusing more on business.
NDTV: But which is the fact?
AZIM PREMJI: The fact we are focusing on business more, we don't want the IT business to distract from the non-IT business. So that will be managed separately as a private company, and that's well enough. It has very independent management, which is worked on a standalone basis extremely successfully with large growth rates and decent profitability in past many years. We are certainly going to focus more on IT business and we certainly are going to get back our growth and we are very confident about that.
NDTV: It's very wonderful to hear that and last year in Davos, you actually complimented TCS for its wonderful performance. Do you continue to share that the same sentiment right now?
AZIM PREMJI: Yes, they have done a good job. Hats off to them, we respect them for it.
NDTV: Mr Premji, last question before we wrap up, everyone talks about the pro-succession story and now everyone's waiting for Rishad to be elevated. How has he done in the past few years and is he now up to the job?
AZIM PREMJI: No, you must appreciate that he is little over 30 years old; he has been with us for 5 years now and he is in charge of strategy and MNA. It's a very responsible job. He reports to Kurien. Kurien is the chief executive officer and he is young and he has an enormous amount of the energy. Rishad will be representing ownership and you can represent ownership without being chief executive officer.
NDTV: But he is the possible contender in years to come?
AZIM PREMJI: For being the Chief Executive Officer? Not necessarily. No, I think the responsibilities of ownership are distinct and if I excluded them too much, one will suffer at the cost of the other.
NDTV: It doesn't it work, the way it works for the Congress party, with Rahul Gandhi being the successor?
AZIM PREMJI: Most certainly not.
NDTV: Alright, we are going to leave with that, with Azim Premji. Many, many thanks for talking to us, such a pleasure for talking to us.