First Murthy, now Premji sends SOS to govt on economy
The noise against so-called 'policy paralysis' of the United Progressive Alliance (UPA) government is now finding resonance across India Inc.
Two of India's most respected business leaders – Azim Premji and NR Narayana Murthy – have hit out at the condition of the Indian economy, stating their disappointment with the current state of affairs.
In a call with industry analysts, Premji, chairman of Wipro, one of India's largest IT and IT services provider, said on Monday that India is functioning without a leader", according to a report from Elara Capital. Murthy, co-founder and chairman emeritus of Infosys, said he was concerned about the setback to India's image in the past three to four months, according to a research report from Morgan Stanley.
"As an Indian, I feel sad we have come to this state," he told Morgan Stanley, a global bank, according to a research report dated 11 June 2012. The bank sent this report to its clients on Monday. (Read More)
Murthy criticized retrospective imposition of taxes and said that a high growth trajectory is not possible without the participation of foreign investors. They need to see India as a proactive, investor-friendly and stable governance model.
"This is where the government should not send the kind of signals that that it has recently sent by introducing tax laws on a retrospective basis. It does not matter what the intentions are. Nobody can understand intentions; people can only read the laws and then act," the report quoted Murthy.
Amid rising concerns over the country's economic growth prospects, HDFC chairman Deepak Parekh also said that the only thing holding India back at this juncture was "lack of political will" and investors could no longer be placated by talks of "long-term fundamentals".
The same day, credit ratings agency Standard and Poor's on Monday warned that India may become the first among the BRIC—Brazil, Russia, India and China—countries to lose its investment grade rating, citing slowing GDP growth and political roadblocks to economic policymaking among causes.
The political reaction to the comments has been quick. "They are representing a class interest, government is representing a national interest," said Congress party leader Mani Shankar Aiyar of Murthy and Premji's comments.
India's economic growth slowed to 6.5 per cent in fiscal 2012, while GDP growth for the March quarter fell to 5.3 per cent. Other economic indicators have also been slowing in the current fiscal: industrial output in April grew a meager 0.1 per cent after contracting minus 3.1 per cent in March.
Core sector growth, a leading indicator of factory output, grew at 2.2 per cent in April, only marginally higher than the 2 per cent in March. The core sector – which comprises the key infrastructure industries of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity – accounts for about 38 per cent of overall industrial output.
However, Murthy remains confident about India's growth prospects though. He does not think that 2012 is as bad as 1991 but is concerned about rising imports. He feels that the Indian economy would continue to grow at 6 per cent per annum without much effort.
"Even if the government continues to be a spectator rather than a driver, I think we can get 6% (GDP growth). If the government becomes a driver – becomes an active participant in the growth of the economy – then 8% growth is achievable," he said and the report quoted.
On Infosys, he said that the story of the company has been the story of its leaders who have led by example from the front.
"We realized that if we want junior people in the company to follow the values or do whatever is necessary in terms of customer satisfaction, in terms of investor transparency, in terms of focus on society, the company's leaders would have to come to the fore," he was quoted in the Morgan Stanley report.
When asked about his advice to young entrepreneurs, he said that they should be able to express the differentiated value proposition of their idea to the market in a simple sentence. Secondly, they must make sure that the market is ready for their idea. Thirdly, because, entrepreneurship is about deferred gratification – hard work today and, hopefully, success tomorrow – they need to have a good value system. Lastly, they must bring together a team that has mutually exclusive and collectively exhaustive set of skills, expertise and experience.
