Skill the youth to become talent basket of the world, say top minds at ET CEO Roundable

Panellists at the ET CEO Roundtable discussed ways to make the most of India’s demographic dividend through skilling, ensuring women get their rightful place in India Inc and stepping up capital expenditure to unleash animal spirits and maintain the economy’s world-beating growth.

ET: Mr Kant, I want to come straight to you and start off by asking about the much-talked-about demographic dividend… technically, close to 70 crore are eligible young people. Will their survival instincts alone create enough momentum for the GDP to grow?
Amitabh Kant: To benefit from the demographic dividend is to grow at high rates. We’re growing at about 7%, which is the fastest among large countries of the world. But India needs to grow at about 9-10% year after year, for three decades or more. That can only happen on the back of two-three things. First, the huge digital transformation that India has done. We do 11x more payments than what the US and Europe do together. We do 3.5x more than what China does. We need to do the same thing for going green, because going green is going to attract value, attract capital. Next, we need to really drive capital expenditure. The higher the growth, the greater your per capita income. You may be $3 trillion, you may be the fastestgrowing large economy, but your per capita income is still just $2,100. We need to take that to $15,000 for every single Indian individual.


The demographic dividend of the young and the restless that we keep talking about… How can technology help harness this restless energy?
Arundhati Bhattacharya: It is actually technology that’s going to help us solve this enormous problem that cannot be solved in any other way. If you look at, for instance, the financial inclusion drive that we started at the public sector banks and subsequent riding on that, the way we have been able to leverage the India Stack, based on Aadhaar, based on the bank accounts that were opened, it shows that technology can take care of problems which cannot be taken care of in any other manner. Having said that, I don’t think industry is up to speed. Industry in India is still in the laggard quadrant, but if you’re looking at the population, it isn’t. We can really unleash the power of demography by ensuring the right kind of skilling. I think there is a gap there too, and that’s where we really need to work.


Mr Subramanian, we are talking of subsidising semiconductors. But as per our own education ministry’s assessment, dropout rates at the primary level have doubled. Are we somewhat missing the wood for the trees?
K Subramanian: Today, in an environment where all the advanced economies are having 2.5-4x inflation along with recession or maybe very-very low growth, India registering 7% growth together with inflation that is 70% of its historical average is something we have to note first. On the one hand (we have) manufacturing (for) which PLI (production-linked incentive scheme) is an enabler… (and on the other hand, we have) human capital. Both are extremely important… Human capital for the services sector. And if we really need to provide jobs for all the youth, we do need the manufacturing sector. I think we have to certainly enable manufacturing sector growth. If you look at the numbers, it is growing, but there is a lot of potential (left) to tap. We need to focus on all the five elements — each of which actually add to costs — which are capital, labour, logistics, power, and the economies of scale, and really make it competitive for our firms. PLI is something that is actually a stopgap, but eventually these (manufacturing companies) have to be really enabled. At the same time, on the human capital front, education and healthcare, digitisation — that is happening … That is what will enable a lot of service sector growth because when manufacturing grows, services will follow.
Right. Mr Bikhchandani, do we need to invest and focus much more on human capital than what we are doing now?
Sanjeev Bikhchandani: We do need to invest much more. But what we are seeing right now, the regression is perhaps an impact of two years of Covid. Where will we be five years from now, is the question. There is enough cognisance by the central government, there is enough cognisance of the importance of human capital and education, and I think that NEP (National Education Policy) is a step forward.

Mr Damodaran, would I be wrong to say that no country has actually grown without education and, secondly, increased participation of women in the workforce?
M Damodaran: There is absolutely no doubt that you need increased participation of women in the workforce. I think we have not done enough. I believe in the next few years, we will do much more than we have done in the past several years. Education is important. Healthcare is important. What is most important is what we have neglected for a very long time, which is skill development. You use the expression demographic dividend. It will be a dividend only if you can skill that part of the population, otherwise, it will be a liability. So, skilling ought to be given very high priority, if that does not happen, nothing else will. One last thing we need to do, I know I might be stealing from Haigreve’s book, we need to make our legal systems far-far simpler than they are at this point of time. Now we are all trapped in the process, we will never get to see justice at the end of it unless we discard these outdated processes.

We have two prominent women professionals on the panel. Ms Bhattacharya, it seems that Indian boards do not have enough women members. Is it that difficult to get top women leaders to populate our boards?
Arundhati Bhattacharya: It is absolutely not true. And in fact, I have recommended various very capable ladies to boards and very often the leaders of the boards, the chairmen of the boards have come back and told me that these are not C-suite people, they may be just below the C-suite and all the rest of my board members are C-suite people and therefore, you know, either the women may feel out of place or the other board members may not be accepting of it.


Now the fact of the matter remains that it is the truth that there are not that many women in the C-suite. Does that mean that till they get to the C-suite, they do not get a seat on the board? I have known, for instance, one other lady of similar sort and I somehow or the other managed to convince this conglomerate to put her on one of the boards. Today I know that she is on three of their company boards. When I asked them how come this happened, he said that she is the best prepared and brings the best inputs to the board. Now we have to get past this mentality. Today there are various initiatives being taken by various nongovernmental agencies to actually prepare women for boards but the current board members need to have that openness to be able to accept non-Csuite, ex-C-suite people into their boards in order to improve that number. It is not difficult to come by extremely competent women for boards.

Correct. Preetha, it is not just the board or the C-suite, the participation of women in the workforce in India has gone further down post-pandemic. So how do we get them back to the offices and if you have, what are your top three points?
Preetha Reddy: On the boards part, I have to say that in our company even if you exclude four of us who are on the board, we have two very competent independent lady members and all of us are on the board, so people are available, number one. Getting women back to the workplace has been a challenge because women have also understood that they can work from home and do very well and be productive. So in terms of company policy, we might have to rethink ourselves. We might have to reinvent and say that may be work from home or work different hours.

preetha reddy

Do lawyers need to come to work?
Haigreve Khaitan: So many of the lawyers actually can work digitally and if the courts have also gone digital, obviously, you know, it becomes very easy.

K Subramanian: I just want to make a factual correction here. I think what you quoted on the decline in the female labour force is from the CMIE data. If you look at the official PLFS data that is put up by NSSO, the facts are actually different, so just a factual correction on the macro numbers.

Preetha Reddy: I just want to make one point here that during Covid, it was the women workforce who were your frontline workers, so you need to give them credit for that.

Haigreve Khaitan: Also, for lawyers, I would add that the pandemic has gotten more women lawyers back to the workforce because they can actually work from home and be as effective and productive.

M Damodaran: When you talk in terms of the number of women on boards, the real problem is no one is looking hard enough. The universe on which they focus is existing women directors. Outside that number, there are a whole lot of other people who are fit but if you do not look in that direction, you will never find them.

N Venkatram: There are 400 million people who are below the age of 30, 50% women. Even if we say you get 100 million women into the workforce, we have done our jobs and you are looking at a period of growth for the economy. In a period of growth, you will have a lot more employment and all of us as organisations have to make sure that you at least take 50% (women) into the workforce. I think we are at a point where we as India can set the path for the rest of the world. I do not think we should say that the highlight of one’s career is only being on a board.

Harsh Mariwala: It is not really the women’s issues. The quality of boards in India is not good at all. The board is a source of competitive advantage and unless the quality of boards improves, the way boards function, it will have a huge impact.

What is the story in Serum in terms of women in the factories?
Adar Poonawalla: Certain sectors are very suited for women (to work from home). We have actually made a lot of strides to bring women in and stop this working from home. I know there are a lot of diverse views on it. I hope a lot of my competitors encourage working from home because then I will become a monopoly. Yes, during Covid, it was fine (to work from home) in certain areas. But I mean, how can you really work from home, your children will come running through the door on a Zoom call and interrupt. It looks very unprofessional. And, you know, you want to be able to be creative, you want to be able to interact with your colleagues at work.


Mr Subramanian, should India be leveraging low growth which would also lead to low commodity prices? Is this not the time to break away from the shackles of fiscal deficit targets and use domestic borrowings to invest in physical and social infrastructure to spur domestic consumption and growth?
K Subramanian: Absolutely! You would recall that in the 2021 Economic Survey, there was a chapter that debt sustainability is all about the difference between the nominal rate of borrowing and the nominal rate of growth. If we take this year, for instance, the nominal rate of growth is 15.4%. If you take 10-year borrowing, it is about 7.3%. Even looking forward, over the next 10 years, India should be able to grow between 11% and 12% at least, and if the bond index inclusion and other things happen, the cost of borrowing should be 7% or maybe lower. So, the difference is clearly 5%. Therefore, rather than going by norms that actually have no grounds in economics, things like the Maastricht Treaty, which (advocated) 3% fiscal deficit and 66% debt-to-GDP — by the way I must mention that the Maastricht Treaty was not an economic document but a political one to bring the EU together — we have to think for ourselves. And I completely agree, it (spending) should not be for revenue expenditure. It should be for capital expenditure, as has been done in the last three-four years because capital expenditure essentially creates assets and when you have assets in the economy, supply increases, that also means that you don’t have as much inflation.

In fact, in 2020, our debt-to-GDP ratio was in excess of 90% and at that time we have done the projections that the debt-to-GDP ratio will go down because of this growth R minus G differential, the nominal rate of borrowing versus the normal rate of growth. If you look at 2022, it is actually about 80% and it will continue going down. I would expand that to also go into health and education. Those are equally important, and I think outlays there, for instance, we should be targeting about 3% of GDP.


Correct. Mr Kant, are we too obsessed about rating agencies? Is that why we get trapped into this fiscal deficit debate?
Amitabh Kant: India as a country needs to be fiscally responsible. There are 75 countries in the world which are facing a global debt crisis. It is also important to say that the government debt-to-GDP ratio is high in India but the private debt-to-GDP ratio is extremely low. Therefore, if you compare, India’s private debt-to-GDP ratio is at 56 or 57, in America it is 256, in China it is 226. So what we need to do is to get the animal spirits of the private sector back to drive India’s growth and this would require a huge technological leapfrogging. It would require them to get into completely new sunrise areas of growth — electric mobility, battery storage, green hydrogen, mobile manufacturing… these are the areas which are going to give you 10x more growth than the normal areas of manufacturing.


Correct. What is holding India Inc back?
Sanjiv Mehta:
Capex depends on a few things. One is, of course, the capacity utilisation and there was a period when it was below 70% but now it is inching up. The second important thing, we often forget there were a lot of dormant assets which were locked in NCLT (bankruptcy). They are equivalent to something like Rs 8.5 lakh crore of capex. Capacity has now been released so you need to add that before you come to a conclusion that private capex is not happening. I do not think the animal spirits in the private sector have gone down. I do not think the risk-taking ability of Indian entrepreneurs is low. At the opportune moment, you will see the capacity building happening. We should not be building capacities which will significantly bring down your return on capital assets because that makes you uncompetitive.

N Venkatram: I would tend to agree. Today, the inflection point is how do we bring more investment in and from a company perspective, from what we see, everybody has their investment plans in place. It is just a question of time. Because of the Covid-19 pandemic, people did slow down. I agree completely with Mr Kant that we should look at the new sunrise areas but then again you have to look at the gestation period. In addition to what he said, we can also add space, drones and satellites. We have to look at the potential of 5G. Look at financial inclusion. Look at the fact that the point where India will manufacture $100 phones is not very far away. Our own research says that we can come up with a $99 smartphone.

n venkatram

Somebody has got to put their hand up and say I want to make the investment. So I will just leave it with another point, not really core to what you are asking me, and that is the question of trust. We should not forget that India has built a lot of trust over the last few years. We have become far more credible than what we were perceived to be. We have also been good ambassadors, whether it is on technology, not only for the ubiquity of technology, but also sharing it with the rest of the world. We also shared our pharma with the rest of the world. We have become much more credible in terms of legislation… if I look at the decriminalisation of laws, the intent of the government is to say that we will make it easier for you to do business. So I certainly think the conversation now is to move more into how do we get more money in for business… certainly the banks have loosened on credit.

Ms Bhattacharya, some say there is concentration of powers within just a few business groups. Is that part of capitalism or is there something deeper here?
Arundhati Bhattacharya:
…the fact of the matter is that at certain times, there may be concentration in certain areas but you will see competition come up. I do not think concentration in any industry is going to last long in any hands because better solutions will come up, better different ways of doing the same things might come into being. You have seen the number of people that are getting employed by startups.

But they are also losing jobs by the thousands.
Arundhati Bhattacharya: Every company goes through reshaping, reorganisation, and every time they go through that, they actually work out stronger. The fact of the matter is people might be getting laid off but they are also getting recruited at the same time. India will be the talent basket of the world. In the next decade, 25% of the skills required globally will come from India… we have 67% of our population in the working age space.

Mr Mehta, if there is real income growth happening in rural India… what should we do to sustain this?
Sanjiv Mehta:
The important bit is that it is not that the headline growth is not happening in rural areas. It is there, albeit at a much lower level than what we would all like it to be. The second is the inflation in commodities has been unprecedented. In a business like ours you have a net material inflation of over 20%. This is not something I have seen in my 30-year career with Unilever. Despite this rise, the industry has taken a price increase of about 12%. The consumers in rural areas are still spending more. Understandably, they have cut back on volumes to manage their wallets, which is again very intuitive. I believe that once the commodity prices start tapering, the volumes will also come back. The rural per capita consumption is one-third of that of urban areas. So, rural consumption should be growing faster than urban consumption for years to come. It is at a very low base today and India’s per capita (consumption) of FMCG is about $45, which when you compare, forget with developed countries, with developing countries, say, Indonesia, it is 2x, the Philippines is 4x. What India needs is inclusive growth, more money in the hands of more people, and the consumption story of India will be the consumption story of the world, not just for the decade, but beyond.

Can a country really prosper if social tensions prevail?


Adar Poonawalla: No. The quality of life that everyone experiences is very important. What we are doing in our country is very important and the change in reforms that are coming about, even socially. But corporates can also do a lot more when it comes to the environment, skill building, and training. For example, we process half of Pune’s waste. Economic growth is of no value if the quality of life is low, and whether it is gender equality, social equality, financial equality, all that is taken into account.

Is the FMCG industry ready to recycle plastics and address a very critical aspect of climate change?
Harsh Mariwala:
You are absolutely right, 60% of plastics are used by the FMCG industry and we can be accused of harming the environment. But the problem is actually, as Adar was saying, the recyclability and creating the circular economy, how the waste is collected, and how it is sorted out. If the whole civil society, the government, the private sector… if we all pay attention to this, this can improve substantially.

Sanjiv Mehta: We have been collecting more plastic from the streets of India than we use in our packaging, which is about 125,000 tonnes. So just to give you a perspective, hamare desh mein newspaper ki raddi kabhi litter nahi hoti hai (in our country, newspapers are never a part of garbage) because you have got an economic model around it. Our job as manufacturers is to ensure that our plastic is recyclable, reusable or compostable, then we have to, together with the civic administration, create an ecosystem whereby the plastic remains outside the environment but within the loop of the business. Plastic has become, unfortunately, public enemy number one. But that is the wrong way to look at it, because without plastics neither our planes would fly nor our healthcare would be taken care of.

Preetha, what are companies like Apollo doing to make healthcare affordable for the wider mass?
Preetha Reddy
: There are two things — one is affordability. We have to understand the fact that healthcare in India, whatever we do, is at one-tenth the cost. One of the biggest answers to the problem is insurance. I think a lot of states have their own state insurance which is doing very well. PM-JAY is picking up momentum. Even in the western economies, it is the insurer that pays for healthcare. It is very expensive but people are insured. So it is a culture shift and makes it more accessible to people. The other is that, however much we build healthcare infrastructure, it is not going to be enough unless we take care of the problem of the non-communicable diseases. Covid taught us a huge lesson but we must remember that whether it is cancer, diabetes, heart issues, it is still a big problem. Within our organisation, we have said that the whole focus is to keep people out of hospitals and all healthcare providers — whether it is public sector or private — should shift focus.

Adar, as a country, do we invest enough on frontier technologies, biotech, vaccines?
ADAR POONAWALLA: No, we could do a lot more. Look, the government has announced very good PLI schemes. But beyond that, it is reforms in permissions and licences that reduce the duration of being able to develop a vaccine or a new drug and also the costs that go along with it. Now, in Covid times, we did it in one year. Earlier today, I launched the HPV vaccine, the first cervical cancer vaccine made in India, but that took us five to six years to develop. The funding is limited — the investors today and the capital usually go to the disruptors, the entrepreneurs but if that capital comes to the pharmaceutical sector, we can do more. Of course, the government is playing a very critical role in this and is very attentive and realises the power of what this industry can grow into and most importantly, innovate. The Indian pharmaceutical industry up till today is mainly focussed on manufacturing but now with self-reliance, take for example, the vaccine industry hardly depends on imports from China. The pharmaceutical industry now needs to follow that route and make its raw materials and supply chain in India as well to be truly self-reliant. So capital in supply chains, raw material and innovation has to happen. The pandemic has prompted this industry to make these investments and decisions and the government has been very supportive and so you are going to see a major change in the next three to five years.

Haigreve, several MNCs are exiting India. Is that a worrying trend?
Haigreve Khaitan:
If you dig deep into why they are exiting, you will see they are not exiting for India reasons but for global reasons, global strategy. And a lot of those who exited are coming back in a different way.

One aspect that keeps recurring: MNC CEOs complain that the most pedigreed Indian corporate, even if they have an arbitration clause and dispute settlement, if they lose, they say that this arbitration order is not recognised in India.
Haigreve Khaitan: Well, this is truly unfortunate. And in spite of, you know, several amendments having been made to our law, giving finality to arbitration awards and recognising international awards as being final and binding, I think that there has been some sort of interpretational loophole by which awards have been challenged. But the government is very cognisant of this. And the good part is that every time a loophole like this is identified, there is an amendment which proposes to fix it. The law commission is already aware and is looking at it to see how the judicial process can be made more efficient.


Mr Mehta, companies are globalising and many of them are shifting their R&D bases to India. Therefore, do you think royalties are or will be needed to be justified going ahead?
Sanjiv Mehta
: You have to understand the business models. The first important bit is India should be open in a manner that we can access the best possible R&D and technology. We have to go up the innovation ladder. Now there are some business models where you set up an R&D centre like we have — 700 scientists, 200 PhDs, they are working on cutting edge research where we do not absorb the cost. The cost is absorbed by the centre. So, it comes back to us as technology fees. There is nothing wrong in it. So before we jump to a conclusion that royalty is good or bad or not in the interest, we should understand what the details of the transaction is rather than coming to a conclusion based on just hearsay.

But Mr Damodaran, companies are increasingly becoming more homegrown, buying brands, localising, so the dependence on the parent MNCs is reducing. So many would argue that royalties are not justified because it is anti-minority shareholders.
M Damodaran:
No. I think Sanjiv explained why they exist because when you do business, you need to protect the interest of all your stakeholders. If you focus exclusively on minority shareholders and ignore the interests of the others, clearly you do not get the game going. What is needed for minority shareholders is more investor education so that they make informed investment decisions. Here is where the securities regulator comes in-…if your regulations are complex, if your regulations are outdated, events have overtaken you, if your regulations do not keep pace with the needs of all categories of investors and you start looking at the interest of one set of stakeholders to the exclusion of the interest of the other set of stakeholders, clearly then you have a problem.

Mr Bikhchandani, one sector that should have gained with China cracking down on its tech companies is our consumer internet companies. But clearly our Unicorns seem to also have broken horns if you look at the last one-and-a-half years. A lot of money could have flowed into India and the Indian VC space if China is no longer a safe place to invest.
Sanjeev Bikhchandani: That has happened to some extent. Having said that, entrepreneurship is down again, startups are down again, many will fail, some will succeed and we are seeing that play out now as the tech market, tech valuations… public markets have corrected in the US and now in India. But those that will succeed will become huge. I think one of the best things this government has done is Startup India and that will pay off well over the next 20, 30, 40 years.

But do you feel that nobody is really talking about building institutions?
Sanjeev Bikhchandani:
Wo hota hai (that happens) when there is abundant capital, that is the nature of markets. But the ones that will succeed and thrive will not be following that model. They will be building real value, getting customers, getting revenue, making profit and making things happen.

Do you feel the next evolution of the information age will generate new models which instead of focussing on individual consumers will apply digital tech to industry, serving say healthcare, biotech, and manufacturing?
Sanjeev Bikhchandani: Look, it will all happen. It is not either or, both will happen and they are already happening. We have invested over the last 15 years in close to 60 or 65 startups and we are seeing all sorts of deals. We meet a thousand startups a quarter and invest in three or four.

Arundhati Bhattacharya: One of the biggest advantages that India has is the digital stack provided by the public sector, that is the government. And on the basis of that India stack, so many companies are innovating and this is going to extend to healthcare, to education, to all kinds of social welfare activities… this is a huge opportunity which no other country in the world has provided. The other is financial inclusion. Financial inclusion in turn allows many more companies or many more people to leverage their ability to actually launch these startups. That is why we have a huge opportunity that very few other countries can even hope to have.

The session was moderated by ET’s Arijit Barman

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *