August 23, 2017

Speaking at the book launch of ‘India Transformed’, in Mumbai

…after the celebrations, and I am sure the year ahead is going to bring, as they say, Ganesh is the Vighnaharta. So, lot of the past is going to behind us and we hope to see a much better future. As Mr Viral Acharya was saying, things moving for the better, and the government and RBI and everybody working towards a brighter and better future; not always in agreement on most things, but still working to find ways that we can take the country to the next level.

I must compliment you Rakesh on your effort to bring together thoughts and experiences, and the practices that several of the illustrious business leaders followed over the last 25 years of economic reform. Of course, I was just wondering whether ‘India Transform’ or ‘Transforming’ would be the right title. Because we still are in that journey. We are still going through a lot of evolution, a lot of things are happening, things are changing, changing for the better, by the day, by the hour.

But yet, 25 years hold a lot of promise; hold a lot of experience and information, which can help us plan for the next 25 years. Clearly, 1991 was an inflexion point in many of our companies’ lives, in many of our business lives, in the lives of so many professionals and, therefore, in the life of the country as well. Through this journey, all your contributors have explained what they did, how they did, what was the impact of their actions, some good, some not so good. But I think the biggest achievement that ‘91 brought to fore was the change in mindset. I think the mindset of the nation changed in ’91.

What we had imagined or what we had assumed to be a nation, as Chandar rightly said, going at maybe 4.5, in a good year 5%, and being generally happy about what we were achieving so far changed to an aspirational India, an India that could imagine big things and good things happening in the country, an India which was not willing to accept that whatever is there is there and we have to live in that. I think that change in mindset really defines this period of last 25 years, over the 25 years, of course, we have had some periods where the process of reform faced some hiccups. So, you had a very strong start in 1991, period ’91 to ’94 gave us a huge leg-up on the journey.

Around ’95, the then government I think slowed down; they had their own challenges, election coming up, political decisions overtaking economic decisions. And I would think ’95 to ’98, we saw a little bit of a hiatus. Clearly, the two years of the United Front government in 1996 to ’98 wasn’t able to do much, despite the fact that they came up with big bang budgets and dream budgets and all. But I think just a budget or just some tinkering with certain aspects of taxation cannot really sustain a long-term growth agenda.

Post-1998 also, if one sees the first two years of the NDA government under Mr Vajpayee; I think they were still wetting their feet in the water. There was political instability during that period; we saw an election within 18 months post 1998 and then one in ’99. So, we had another 2 years of opportunity lost. So, if you ask me after 3 good years, and one must compliment the then Prime Minister Narasimha Rao who unfortunately, his party seems to have relegated not even into the history books, but probably even outside that.

But he really was the person who enabled, who empowered the then government to bring about such transformational reforms. And after that this 6-7 year journey where we didn’t see much happening, we saw some benefits. So, technically, we removed the industrial license that was a great thing that happened. We possibly did a lot of reform on the financial world; FDI – making it easier to get investment into the country, banking sector. So, we saw an element of change, but not enough to take the country to the levels that we saw in the period 2000 to 2010.

I think it was Mr Vajpayee’s government from 2000 to 2004 that possibly did some of the most game-changing reforms, sector after sector. You see the new licensing policy in the telecom sector in 1999; you look at what happened in the road sector – huge thrust given both to rural roads, the Pradhan Mantri Gram Sadak Yojana, as well as the Golden Quadrilateral, the huge investments to create a national grid of superhighways. It was around that period that we saw the Mumbai-Pune Expressway, which was the first truly world-class road that India made, and the testimony to its quality, to the effort and planning that went behind it is that even today you can drive at a 160 km/h on that road.

We saw changes happening in the electricity sector, the new Electricity Act of 2003 that came in. You saw India going in for large scale oil and gas exploration around that period, lot of licenses were given out, the new licensing policy came out at that point of time. It was around the same time that you saw housing getting a big boost. If you look back, and today employment and labour and jobs is one of the most important statistic that everybody looks at. The largest job growth that has happened in independent India happened during that 2000 to 2014 period.

If you look back at the numbers, during 2000 and 2005, I think we added nearly 60 million jobs in the Indian economy, and most of them came in through infrastructure and real estate. That’s the numbers that I remember because I remember a lot of debates with Arnab Goswami after that when we used to highlight the fact that 2000 to 2005, we saw 60 million jobs being created in different sectors. And from 2005 to 2010, it trickled down to probably 2.7 million or thereabouts. These days one has to be very careful remembering those figures, because you have these websites, which are continuously trying to pick up a flaw in your figures. But, if I remember, broadly, this used to be the number about 6 crore jobs and then 27 lakh jobs that was the kind of drastic fall that we saw in the post-2005 period.

But, if you look back also to another dimension, which you are seeing nowadays is the strategic sale of PSU companies that was undertaken during 2000 to 2004. That process was started, then you saw hotels getting disinvested, you saw a number of …… units closing down and getting disinvested. Post 2004, when the economy, and if you look back again, 2004, we had very good macro-economic indicators. Very often, we used to joke with Mr Vajpayee that he spent most of his time fixing the economy, setting the parameters of the economy right. And by the last 2 years of his government, we saw that big thrust, the growth rates almost doubled from ‘98 to 2004, it became I think 8.4% or thereabouts under the old series in 2003-04.

And on the back of a strong economy with, I think a $119 billion of foreign exchange reserves, which was also a huge change… During the good times, if we would have kept away some money for the bad times in the future, possibly, we wouldn’t have had to do what happened during the 2007-08 and 2008-09. We saw during that period 2008-09, the fiscal deficit was allowed to slide within the year from 2.9% of the then GDP to 6.1% of GDP within the year. This was a decision taken mid-course. During the year, we allowed fiscal deficit to almost double from 2.9% to 6.1%, because during 2004 and ’08, whatever were the large reserves that were available, that could have been available with the government, we frittered it all away in large amounts of subsidies. So, everything was subsidized that feel good factor in the system albeit for a short time may have won a particular government an election, but cost the Indian economy so dear that that 2008-09, 2009-10 period where possibly growth went up as high as 9%-9.5%. But it was an artificial growth on the back of large amounts of money being pump primed into the economy, and then we saw 2010 to 2014, four years of distress in the economy, and all the problems that we accumulated between 2008 and 2010, coming home to roost between 2010 and 2014.

Of course, it was also a period where inflation then took its toll because of large fiscal deficits. As Viralji just said, with inflation you are logically going to have inflation and the Reserve Bank today is trying to fix both the inflation and interest numbers right. During this period, we also saw large current account deficits come back into the economy. During this period we saw the cost that the nation paid for large amounts of corruption scandals, while the corruption scandals came out in 2010-11-12 or 2008-09-10-11, the reality is it was UPA-1 when Commonwealth happened, when Coalgate happened, when the 2G telecom scam happened, when Antrix Devas scam happened; all those scams actually happened in 2004 to ’09, but came to life between ’09  to ’14 and completely demolished the mood of the nation, the investment psyche of the nation and created a policy paralysis, which then once again took its toll in this journey of India’s transformation.

So you once again had a period, 2010 I would say, to 2014, where almost all processes in government came to a standstill. So, you had a process, which Viralji just referred to in banking of ever-greening all the NPAs during that period, you kept the books good, you showed a good performance, but the reality was not really good. You saw government officers not taking decisions, you saw the aftermath of the Coalgate resulting in all government allotments and sanctions and government natural resources coming to a standstill.

So, what I was trying to say is this fits and starts that have occurred over the last 25 years have also taken a toll on the national economy. And, while there is no denying that during this period there was growth and national wealth, there is no denying that we were able to reduce poverty, there is no denying that a new class of neo middle class, the people who have just come out of poverty, may not yet have a good quality of life, but are somewhere in between, a very large new middle class got created. But we also got rid of shortages in many areas. LPG cylinders, for example, once upon a time, Members of Parliament would get a 25 coupon book, which was like a passport to even a doctor’s appointment. The first ever time we got an appointment with Dr Advani, the famous oncologist, I remember the most attractive thing for his secretary was the gas coupon that my wife was able to give him and got us a walk-in interview with the doctor.

That was the sorry sad state of affairs in the country. You had a situation pre-1991 where telephony was what, 1%-1.5% in the country? Post 1991, and the new licensing policy in telecom, today we can boast of almost 70-75% people being connected with telephones and at abysmally low rates. No shortages of any kind in a variety of basic amenities that the people of India need. So, there have been great outcomes out of this liberalisation process. But, to my mind, we could have aspired for much more.

And I remember when in 2014, when this government came in, when we taking stock of the legacy and I remember at that point of time there was a lot of clamour that we come out with a white paper, we tell the world what really is the state of the Indian nation. But it was the wisdom of Prime Minister Modi and Finance Minister Mr Jaitley that they decided against it, they decided that this would not do the country any good. It would be like washing your dirty linen in front of the whole world and cause more agony to the nation and the economy. We should rather go around and see what we can do to repair what we have inherited.

After all, all these NPAs that are being talked about today, not a single loan has been given during the last 3 years, in any case, I think today the bankers are so risk-averse that they are any case not sanctioning any large loans. But all of this is a legacy, which may be as old as 10 years, 12 years, 5 years, which had kept on being evergreen as Viralji just said,  but has now being recognised for its true colour for the first time.

And if you look back, what was the situation we inherited? As I said, policy paralysis, economy once again down to a growth rate of about 4.2%, current account deficits also at about 4% or thereabouts, inflation was in double-digits, particularly, CPI; interest rates sky-rocketing, fiscal deficit was about 4.5% or so. There was not a single macro-economic parameter on which we could take pride. Of course, between 2004 and 2014, our foreign exchange reserves had gone up from a 114 billion to about 290 billion, but there was a corresponding increase on the external debt of the nation also. So, net-net there was really no accretion to our foreign exchange reserves, like we had seen between 1998 and 2004 where without increasing debt we had been able to almost quadruple the foreign exchange reserves.

So, we were in a situation where the paths before us were two. One – we could have done what was done in 2008-09 and look at letting the fiscal slide, letting there be a false sense of prosperity quickly, that’s the quick fix solutions, let the bankers continue to do the NPA resolution as they have done over the years, evergreen, restructure, different forms of restructuring, patiently and slowly wait for some time when hopefully the account will by itself become all right.

And, I am not completely saying that was wrong. It had its merits, it had its own advantages, may be politically it could have been very advantageous for us. But Prime Minister Modi thought of a more sustainable path to achieve what Mr Rakesh Mohan has just suggested that now India needs to plan how we are going to have sustainable growth in double digits, not for 1 year,  2 years, 5 years term of a government, but for at least 2 or 3 decades, so that once and for all, this country can meet the aspirations of a billion plus people, an aspiration for a better quality of life, as aspiration for  all the basic amenities, as aspiration for a livelihood as Chanda said.

And, to my mind, our effort of the last 3 years has been focused on building that framework, that framework which can sustain the national economy, which can ensure that India provides a platform for investment, provides a platform for growth which is both economically prudent, environmentally sustainable, and if I may add, honest. And, in that sense, if one looks at the last 3 years gone by, it’s been 3 years of attacking all the things that we think were going wrong in the country.

We have had a sustained attack on corruption and black money, literally right from the first cabinet meeting when the SIT on black money was set up, a series of steps thereafter, I will not go into each one of those, culminating with the large big one that was the demonetization on 8th November. One can argue what one believes was good or bad in that. But, we believe that unless that kind of a real attack on black money was in the market place was there before the country, we would never have been able to give the GST a fair run in this country, given the large amount of informal economy and the fact that India – World Bank says 20%, some estimate go as high as 40% – was largely an informal economy. Unless all that informal economy comes into the formal economy, becomes a part of the formal economy, which the GST has been designed to really capture, we will never be able to really make this a truly honest country.

And I think that’s been the effort that this government has consistently over the 3 years focused on policy after policy. Today, we have made it so iron-fisted that no government in the future, no Minister in the future can ever give out the national resources of this country, resources which really belong to all of you without a due process. And I remember when we first formed the new law for coal block auctions, one of the Sundays I landed up in Delhi at about 4 o’clock, put together, assembled my whole team and for the next 8 hours all that we did, maybe because we were inefficient as Rakeshji just said. We had to work till late hours during that period to get the whole thing done in 6 months. When the court asked how much time do you need to auction all these mines, at least the operating mines, Mr Mukul Rohtagi, the then AG had said whatever my Lord decides, and they said by 31st March. And I would challenge anybody to come out with a parallel where from the day the court cancelled 204 coal mines on 25th September, 2014, within 6 months, we were able to auction out all the operational mines, some of them were allotted to the states which were already with the state. Within a defined frame which included framing a new law, passing the law, failing to pass it the first time in December and then putting out another ordinance and passing it in March of 2015. And, simultaneously, on a calendar making sure we meet our deadline within 6 months.

But all of this is leading to create a framework which will ensure honesty in this country for, I think not only generations but for the future of India. Nobody can ever change this psyche that has been created that politicians or bureaucrats cannot dole out benefits to anybody free of charge, there will be a due process. And I remember those 8 hours we spent, I had one mandate given to my team and I was sitting with them. I said that even if I want my own brother to get a coal block or if the Prime Minister asks me to give a coal block to somebody, I should not have the ability to do it.

Let’s pick holes in the law that we have framed and go through line by line and see that we have no ability at all to favour anybody at all. And with that precision, you look at each of the policies that this government has focused on, and what is the holistic approach of the government.

Let me take the example of financial inclusion since there are lot of people from the financial world here. 27th August – 4 days from now, we will complete 3 years of the launching of the Jan Dhan accounts, 3 glorious years if I may say so. I remember, at Davos in 2015, which was barely 4 or 5 months after that, the President of the World Bank in an interaction on financial inclusion, said it was beyond our imagination how India could ensure that at least one member of every family and 99% of the households in the country in a span of 4 months have at least one bank account, all across the country, the length and breadth of rural and urban areas. 4 months, and every household in the country had at least one bank account, more often than not in the name of the lady.

Now look at the transformational change that has had, not that financial inclusion is anything new. I am sure Chanda has been talking of it for the last 15 years, but the speed, the scale, the skill with which we implemented the programme to take it to every household and look at the holistic approach and the benefits we got out of it. Because of that, we were able to take social security schemes to every household. We began with a small one rupee a month, Rs 12 accident insurance, and we get lot of cases, lot of feedback where people who died of a sudden accident,  a car accident or anything, who otherwise, the family would have got into poverty or despair. At least this Rs 2 lakh gives them a breathing space to get back into life. The Rs 1 a day, Rs 2 lakh life insurance policy that we gave out, both with the support of the insurance companies.

So, social security was one straight fall-out benefit, the direct benefit transfer, nearly Rs 60,000 crore saved so far, only because we have moved gradually more and more things to direct benefit transfer. You are all aware of the DBT, LPG subsidy for instance, now it is 100% only DBT in LPG subsidy. I remember, the earlier days we used to keep arguing on the television whether one should get 4 cylinders or 6 cylinders or 8 cylinders. Prime Minister Modi said no, give everybody as many cylinders as they want, but ask the people to give up their subsidy.

And, I am sure, each one of you in this room must have given up your subsidy under the Give It Up programme. And you draw satisfaction today that when you gave up your subsidy, it was not misused or went into some corruption. It went to give a free LPG connection to a poor woman who otherwise has to take in 400 cigarettes’ smoke every day, cooking in her old chulha with wood or coal.

So, you draw that satisfaction that your saving, your contribution what Mr Mohan said, somewhat what Kennedy had said, that all the panellists today spoke about what they would do for the country, not what they want the government to do for them. In a similar vein, all of you gave up your LPG subsidy, so that a poor woman could get the benefit of that subsidy.

Then the Mudra Yojana, over Rs 3 lakh crore gone to nearly 7.5 crore small beneficiaries, and today we had a meeting on that, we were seeing the statistics about more than 60% of the Mudra loanees are women, more than 75% of the loans are about Rs 50,000 average amount.

So, really the small man, the common man, getting out of the clutches of the moneylender, getting money at 10 and 11% able to make a livelihood in this changing world, where jobs are not going out of government, jobs are not going to come out of, maybe, large power plants and large steel plants, as much as they will come out of the start-ups of tomorrow, as much as they will come out from the decentralized way energy is going to be produced tomorrow.

I was doing a math Anandji of 4000 MW thermal power plant to provide 1/10th the jobs that a equal amount of energy produced through solar would provide. 1/10th! In the same way, as services become more and more important, as we move towards promoting tourism, as we move towards having better and better infrastructure in the country. Livelihoods are not going to be created only through formal jobs, whole paradigm of jobs in this country is changing. Why in this country, across the world. In each of the speakers whether it was the Deputy Prime Minister of Singapore, whether it was Mr Michael Porter, whoever came on the Niti Aayog lectures, their one central point was ‘in this changing world where 3D manufacturing is coming in, where artificial intelligence is going to rule the roost.

In this world of innovation, the nature of jobs, nature of investment is completely going to change, which is why our thinking is that how do we move away from traditional way of working. And, over the last 2 weeks, we have engaged with 400 of the brightest young minds, young start-ups, young entrepreneurs, young CEOs. We have had two sessions over the last two weeks and some truly good ideas have emerged from these sessions where all your colleagues, may be your children in many cases here, have actually aligned themselves to thinking about the new India, the India of tomorrow, what can we do in the next 5 years to ensure that every citizen gets a roof on his head, every citizen gets 24/7 electricity at home, can we ensure clean drinking water for every citizen of India, can we upgrade the quality of healthcare and education, can we ensure at least a toilet in everybody’s home? And ladies and gentlemen, that is the vision that this government is working on.

We have just concluded 75 years of the Quit India movement – 9th August, 1942. We will be celebrating 75 years of India’s independence on 15th August, 2022. This gives us the 5-year window, just like our freedom fighter fought for India, fought for this independence that we all value so much, fought for the constitution, which has only yesterday, rightly said that Triple Talaq is wrong and will be stopped and will not be allowed to continue, a legacy of I don’t know how many years old, which in today’s world can just not be acceptable to anybody.

All of these things in independent India are possible only because we have independence. But can we now make sure that this independence reaches the 1.3 billion people, goes beyond the frontiers of Mumbai and Delhi and Bengaluru, into rural India. Can we see how we can make our agriculturist stand on his own feet, rather than only arguing and discussing whether we should have done a farm loan waiver for the agriculturists or not.

And since that issue has come up, I must say, and I must say to all of you in this room that I see a lot of voices and a lot of noises being made about the agricultural loan waiver being wrong. I wish some of us looks back into our past, some of us may have lived in the villages also, I don’t know. I didn’t live in the villages, but I do know my father studied under a street light to do his engineering course, or at least to be eligible to become an engineer. I know that even today, there are millions of farmers with less than two three acres of land, barely making a sustainable, not even having a sustainable living, very often, the women in the house in the agriculturist’s home doesn’t sell or produce, she’d rather just keep it aside, box it for the next 365 days, so that she can give one meal at least to her child. When we are trying to empower that….. and this is on the back of 2 or 3 years of bad monsoon. We have had drought for 2 or 3 years.

When you write off a loan of Rs 50,000 crores or Rs 40,000 crores for an industry which went wrong and all of us investment bankers, me included in my earlier avatar, make about all those fancy spreadsheets, talk about sustainable debt, talk about rewriting our books of account, talk about revaluing our assets, because we have been blessed to have large amounts of assets. How can you lose sight of the fact that there is a large section of India, which can’t make two ends meet, where malnourishment still prevails, where the child goes without milk within the first year of his birth, where pregnant women don’t get good healthcare, where a person in Odisha has to carry a lady for 12 kms on his shoulder to reach the nearest medical centre only to find that he’s too late.

So, it’s very easy to criticize that a poor person gets a benefit of 50,000 or Rs 1 lakh, it pinches all of us in this room. But we don’t bat an eyelid when we find that somebody has skimmed away maybe 10,000 crores from a company through over-invoicing or bad investments. We will party with all of them. We will break bread with all of them. We are very comfortable in flying on our private jets. I do wish, I am sorry, I think I have exceeded my brief. India transforming, or transformed, but the reality is still there in rural India, the reality is still there in the slums. And you don’t have to go too far, you can get them all across Mumbai, anywhere you want to go.

I remember campaigning for my mother in the slums of Koliwada and Wadala, some of the worst slums you can ever imagine in our backyard. And believe me, nobody likes to live in that way. Don’t think there is any virtue or they are very happy living there. Each one of them has come here because he had to come here; he wanted to feed his children. He wanted to make, maybe Rs 2000-5000 just to eke out a living.

And, we as policymakers Mr Acharya, you, me, all of us, will have to be sensitive to the real India. Very easy to make policy in our offices, whether I sit in Delhi or you sit in Ministry. But there is a real India out there. We will have to be sensitive to that real India. We will have to be sensitive to reality on the ground. We will have to be sensitive to what we are doing, and the impact of what we are doing to that last man at the bottom of the pyramid. Because, unless we resolve the aspirations of the poor person, the poor farmer at the absolute bottom of the pyramid, you will be landing up in a situation where today we have a 120 odd leftwing extremism infested district, who knows what can happen tomorrow.

We have tribal areas barely 70 kms from here Anand, in Palghar? Go and see the state of affairs. The world is not limited to the world that each one of us is living in. And, therefore, while India has transformed, lot of achievements under our belt in the last 25 years, I think the time is right for all of us to reflect on what should be done, what each one of us can do, how we can participate in the journey going forward – the next 5 years, the next 10 years, the next 30 years – to really take the country to the next level of growth, inclusive growth, growth which reaches the poorest of the poor, growth which is holistic, growth which impacts every section of society, particularly, the marginalized, particularly, those who for years have been discriminated against.

And, to my mind, when all of us put our hearts and our minds together to work for the transformation of India in the next 25 years, then I am sure,  come  2042, maybe I may not be there, but a lot of youngsters in this room will certainly be there to take pride in the fact that we all participated to make India an honest country,  a corruption-free country, a developed country,  a country that cares for every citizen in the land, a country that is with a heart of gold.

Thank you very much.

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