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.
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.
