N.R. Narayana Murthy, mentor and cofounder of IT major Infosys, feels that the ongoing economic crisis is a cyclical phenomenon, which is not unique to India. Speaking exclusively with THE WEEK, Murthy says the crisis will disappear as the country moves forward. He is presently reading the book Good Economics for Hard Times by Nobel laureates Abhijit Banerjee and Esther Duflo. “I am greatly impressed by this book,” says Murthy. “It lays down principles of economics that we have to follow in these hard times.” Excerpts from the interview:
What are the reasons behind the current economic slowdown?
Like every economy, the Indian economy, too, goes through a cycle, where there will be peaks and troughs. This is very natural and not unique to India. Despite the best efforts of the government and the industry, the country is going through a trough. This is the time to work hard and to bring in innovations and to be positive about the future. We need to work together with the government in trying to find solutions. I am positive that this, too, will disappear as we move forward. I have seen various countries going through this cycle of peaks and troughs. Hence, it does not worry me too much. This is the time to work harder, come out with good ideas and work with the government as one and enhance the fortunes of the country. We need to work harder than before. If our sales are not going up, then we have to come up with new ideas and innovations and make sure that those problems are solved.
Many industrialists have complained about policy flip-flops. Will it spoil India’s economic prospects?
The free market mechanism with a good regulator is a good idea as long as there is very low friction to business. As long as the government becomes a catalyst for entrepreneurs, I believe that the industry will grow and we will be able to create more and more jobs with more income.
What are the challenges facing the Indian IT services industry?
Many IT services companies in India are growing bigger and bigger, but are experiencing growth that is slower than before. As the base increases, the percentage of growth automatically tends to become lower and lower. This is a normal phenomenon and nothing new to India—it happens in the US, Europe and Japan. The norm for Indian IT services companies during the early part of this century was 30 to 40 per cent growth. From 2006 to 2008, the growth rate was about 25 per cent. In 2015, it became 5 to 8 per cent. Presently, it is between 8 and 10 per cent.
Several new ideas are coming up in the market. You are now looking at artificial intelligence, machine learning, big data and cloud computing. All these technologies are very promising. It is, however, very important for the Indian software industry—basically a services industry—to remember that our strength comes from developing customised software based on these new technologies. So, the primary instruments we have in these technologies are around software development and maintenance. We have to prepare ourselves as to how to develop software in all these different technologies. To do all these, we have to invest in improving our activities in all these areas. If we develop expertise in these technologies, then Indian software will be a world leader.
Of late, there have been complaints about slack corporate governance. What can be done to tackle this?
I do not know of any company anywhere in the world that has shown consistency of existence without adhering to good principles of good corporate governance—fairness, transparency and accountability with respect to all stakeholders including customers, investors and venture partners. We must realise that the best way to enhance the longevity of our companies is to adhere to good corporate governance in order to embrace transparency. Compared with the pre-liberalisation era of the 1980s, the standard of corporate governance in India has largely improved thanks to the entry of foreign institutional investors. However, there will always be some outliers who do not demonstrate good corporate governance. The regulator has to hold such companies accountable and ensure that they do not become role models for the entire industry. I think good corporate governance depends on the chairman of the board and the board of directors. As long as companies and shareholders elect good chairpersons and board members, they will be enhancing the probability of good corporate governance. There have been many committees to look at corporate governance and they have suggested improvements. In addition, the Securities and Exchange Board of India has become quite strict in identifying companies that have not demonstrated good governance. However, we need to move further in this direction.
India is always confronted with the challenge of employability of engineering graduates. What can be done to solve the situation and what steps could be taken to improve technical education in India?
I do talk to the principals of engineering colleges, especially in Tier-II and Tier-III cities and most of them tell me that there is considerable unemployment among passing out engineering graduates. McKinsey has also done a study and has said that hardly 25 per cent of our engineering graduates are employable. This is a major problem and we need to make sure our engineers are made employable. It requires us to improve the curriculum and to improve the method of teaching, to improve the examination system and to move towards learning ability and to focus on the ability to apply what you learn in the classroom in the real world. Once we do these things I believe that we would be in a position to make our youngsters much more employable. Besides this our examination system has to change and test students less on memory and more on reasoning and learning abilities.
I feel that from 1995 to 2015 considerable work was done to improve the technical curriculum. We at Infosys also created several experiments in improving the way engineering is taught. We enrolled 600-700 engineering college teachers and made them participate in new methods of teaching. We also had many experts come down from the US to brief the engineering teachers about better teaching methodologies.
What about your venture fund Catamaran Ventures? What are the areas you feel interests your venture fund and why?
Catamaran Ventures focuses on many areas of our economy and is not restricted to only technology. We have supported health care, education supported even soft drinks, and medical diagnostics. Our belief is that the only way India can solve the problem of poverty is by creating more and more jobs with good income. The only people that can do this are the entrepreneurs. Therefore, we are committed to supporting good entrepreneurs who have extraordinary ideas and who can convert those ideas into jobs and wealth.
What are your views on the startup ecosystem in the country?
I am happy that the startup ecosystem and the entrepreneurial ecosystem in the country have picked up speed. Today, it is a badge of honour to become an entrepreneur and it is a positive move in the country. Our youngsters want to embrace new ideas and they want to create wealth through those ideas. They want to create jobs through those ideas and this is good for the country. By definition, entrepreneurship has risks and it is to be accepted that the percentage of success in entrepreneurship is pretty small. It is that every idea may not be embraced by the ecosystem as enthusiastically as we think it should be. Whenever you come up with an idea you must conduct an inexpensive test marketing to access the market size for that idea. If you are going to have an idea, for instance, it should be suitable for that population and that area. For instance, you want to start a taxi service in a small village you should know whether it will succeed or not as to whether there are people in the village who can afford to take a taxi. So, a taxi service will have to start in an urban area or a metropolitan area. So, certain ideas succeed in an urban setup whereas certain ideas succeed in rural areas etc. The idea will succeed in a setup where the need for that idea is and where there is money to pay for that idea.
Will new technologies and automation take away jobs in the IT sector?
I think technology and automation have actually created more jobs. When automation was introduced in the banking sector in the form of core banking solutions, banks expanded. Similarly when ATMs came, everyone thought that the banks will shrink, but they have not shrunk. They have become bigger, instead. Technology and automation have the ability to create more jobs as long as the leaders of society have the ability to retrain people for new jobs. Developed countries have much larger technology adoption, but the level of unemployment there is much lower than in India. Technology does not take away jobs, rather it enhances productivity and comfort and creates new jobs as long as thought leaders apply their minds.
Will Indian IT continue to attract new talent?
Indian IT industry is recruiting new people every year. Look at the figures of TCS and Infosys, you will find that they are recruiting between 15,000 to 25,000 people every year and this is not a small number. As long as we work hard and adopt to new changes and technologies and as long as we have respect for the customer and have good work ethic, the future will reward us.
Your views on the Indian work culture? You felt that it needs to change.
We have to learn to work hard and put in an honest day's work. We should not waste our time in the office and we have to dedicate a full eight hours in our work place. At the same time we have to be disciplined in our work habit because discipline is extremely important if we want to become a nation as we all want it to be. Discipline requires that our work habits are efficient. We Indians need to embrace a good work culture and have to become disciplined and that is the only way we can make our country better and remove poverty.
Your hobbies and interests. How do you spend your free time?
I read books and take part in conversations regularly. I am reading 'Good Economics for Hard Times' co-authored by the Nobel laureate Abhijit Banerjee and Esther Duflo. It is an excellent book and considers various myths that we all have on economy and then it shows with data and facts how those are wrong. It also lays down principles of economics that we have to follow for these hard times.
I also like listening to western classical music. I read mostly technical books in Physics and Computer Science. I am happy with what my wife Sudha writes and there are other excellent writers such as Ramachandra Guha and Shashi Tharoor.