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Infosys is boring again, and that’s a good thing: Chairman Nilekani

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Mumbai : Infosys Ltd. has returned to stability, almost a year after the appointment of a new chief executive ended a tumultuous period at the Indian software and services company.

Chairman Nandan Nilekani, speaking on the sidelines of Bloomberg’s New Economy Forum in Singapore, said that the turnaround is complete. “This is all very much from the past,” he said of the board turmoil that engulfed the company last year. “I’ve been chairman now over a year. We have an excellent CEO in Salil Parekh. Infosys is really on a very stable and forward-looking path.”

Investors seem to agree. The Bangalore-based company’s shares are up almost 30 percent this year, compared with a 3.1 percent gain in 2017. In the latest quarter, Infosys booked more than $2 billion in deals and net income topped projections. Parekh, who formally took over in January, has focused on stabilizing the company after public wrangles between its board and co-founders culminated in the dramatic exit of the well-regarded Vishal Sikka.

“The future of India’s IT services is bright because all over the world, the businesses and even governments are going through a huge digital transformation,” Nilekani said. “Be it automobile, retail, financial services, in every industry there is massive reinvention going on.”

The same is true for Tata Consultancy Services Ltd., Infosys’s bigger rival, which in April became India’s first company to top $100 billion in market value in more than a decade. Both are adjusting to the adoption of automation in key areas such as financial services, while immigration curbs hamper its ability to move workers into its largest market of the U.S. India’s $167 billion-IT services industry is now investing in cloud computing and artificial intelligence to jump-start growth.

Nilekani also pointed to Aadhaar, India’s biometric national ID system, as an opportunity for companies like Infosys as well as a tool of empowerment for individuals.

Using iris-scanning technology, the database lets people identify themselves, while private companies have embraced it as a way to authenticate job seekers, blood donors and loan applicants.

“Historically, data has benefited companies and governments,” the Infosys chairman said. “India’s unique infrastructure, thanks to Aadhaar, thanks to its regulations, has the ability for every individual to access his own data and put it to good use. We call that data empowerment, which means a person can use his own data to get a loan, better health care, better education.”

The New Economy Forum is being organized by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News.


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Praising notes ban, RBI’s Gurumurthy says economy would have collapsed

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New Delhi: Ahead of next week’s crucial board meeting of RBI, the central bank’s independent director and RSS ideologue S Gurumurthy made a case for calibration of its massive Rs 9.6 lakh crore reserves, saying no central bank in the world maintains such high levels of surplus.

Gurumurthy, who was appointed to the board of RBI a few months back, said the capital adequacy ratio prescribed in India is 1 per cent higher than the global Basel norms. He also pitched for easing lending norms for small and medium enterprises, which account for 50 per cent of the country’s GDP.

In his first public comments since the spat between the RBI and the Finance Ministry over a range of issues came out in the open, Gurumurthy said the stand-off “is not a happy thing at all”.

The RBI’s board meeting is scheduled to take place on Monday where the issues raised by the government, including easing of PCA norms, cutting size of reserves and enhancing credit to MSMEs, are likely to come up for discussion.

Praising the shock demonetisation of old Rs 500 and Rs 1,000 notes in November 2016, he said the Indian economy would have collapsed under the weight of high denomination currency notes which had risen to Rs 4.8 lakh crore in just 18 months and was being funnelled to real estate and gold. On the issue of capital framework for RBI, he said two different studies have put the adequate size of reserve that the central bank must maintain to guard against default risk at 12 per cent and 18.76 per cent. However, the RBI currently has reserve of 27-28 per cent, which may have further gone up due to the recent depreciation in the value of rupee.

“The appreciation in the value of the dollar is the reserve of the Reserve Bank. You bought dollar at 42-45, and it is now 70. Just like when you buy some shares and the share values go up, and you take the appreciation as your reserve, this is the reserve.

“You cannot say, come on it has appreciated so much, give me that money. I don’t think the government is asking for that. As my understanding goes, the government is only asking for a formulation of a policy as to how much reserve the central bank must have. Most central banks don’t have reserves of this kind at all, only RBI has these kinds of reserves,” he said.

Gurumurthy was delivering a lecture on ‘State of the Economy: India and the World’ at the Vivekananda International Foundation (VIF) here.

Stating that the stand-off between the RBI and government “is not a happy thing at all”, he indicated that differences could be a result of considering only the American system as the perfect ecosystem.

“But I think an alternative is necessary and exists also. That is part of an overall correction of the Indian mind,” he said.

On easing of Prompt Corrective Action (PCA) framework, he said there has been certain revisions of norms recently.

“If capital adequacy is the only ground, then much of this problem won’t be there. But there is capital adequacy-plus grounds on which this issue is there. That is the matter of dispute between the government and RBI,” he said.

The PCA framework kicks in when banks breach any of the three key regulatory trigger points — namely capital to risk weighted assets ratio, net non-performing assets (NPA) and return on assets (RoA).

Of the 21 state-owned banks, 11 are under the PCA framework. These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra. With regard to Basel III norms on capital adequacy, he said the BIS prescribes these for only internationally active banks.

“But banks which are not internationally active, need not conform to what (they) say. The universal banks need not conform to what (they) say. We don’t have any commercial banks. We have only universal banks because our banks do term lending. But still the same Basel norms are imposed,” he said. In India, for both internationally active and domestic banks it is 9 per cent, he said.

“We are doing more than what Basel wants and so the banks have less money to lend. These are all the things on which there is no discourse in India,” he noted. There are only four internationally active banks in India, he said, adding all others are domestic lenders. “They need not have 8 per cent capital. They are forced into having 9 per cent capital. Because some people think the IMF feels happy if we have 9 per cent capital,” he said.

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High growth necessary for poverty alleviation:Jaitley

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New Delhi: A high rate of growth is necessary to alleviate poverty and ensure that benefits of development reach the poor, Finance Minister Arun Jaitley said.

Addressing the 25th World Congress of Savings and Retail Banks here, he also said an aspirational society cannot wait indefinitely for the benefits of growth to improve the quality of life of the poor.

“Economies like ours all over the world need a high rate of growth. We want to use growth as a mechanism to pull the maximum number of people out of poverty, improve upon quality of life but we are conscious of the fact that dangers of development and progress benefiting a few and leaving many others out of inclusion system are also there,” he said.

Therefore, he said, “the penetration effect of growth will certainly take place but it will be a slow process and aspirational society is not willing to wait indefinitely.”

Talking about the financial inclusion drive of the Narendra Modi government since 2014, he said the ultimate objective was to bank the unbanked, secure the unsecured, fund the unfunded and service the unserviced areas.

Banks, especially public sector banks, opened 330 million accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) in a few months, he said. Initially, it was zero balance accounts and gradually people started putting in money.

To incentivise operational accounts, he said an overdraft facility was provided to them. Noting that India predominately is an uninsured and unpensioned society, he said the government offered insurance at very affordable premium as part of the social security system through the PMJDY account.

A total of 141 million people are enrolled under accident insurance while 55 million have availed life insurance under the scheme, he said. Besides, a low premium pension policy called Atal Pension Yojana was launched, targeted at providing sustenance pension after 60 years of age.

For funding the unfunded, the government introduced the Mudra scheme. Once these accounts became operational, he said the government moved towards formalising and digitising the economy.

“To formalise the economy, the government demonetised high value currency which compelled people to put all their cash into the banking system,” he said.

The government also introduced a new taxation regime — the Goods and Services Tax (GST) — where multiple taxes were combined into one, he said, adding the tax system became completely online and brought many activities into the formal system.

This is still work on progress, Jaitley added. Speaking at the occasion, Financial Services Secretary Rajiv Kumar said enthused by the success of PMJDY, the government recently launched its second phase with a target of providing bank accounts to all individuals and doubling overdraft facility to Rs 10,000.

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Agri sector needs long-term solutions, loan waiver temporary: Naidu

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Mumbai: Terming farm loan waiver and free power supply as mere “temporary and populist” steps, Vice-President Venkaiah Naidu made a pitch for long-term solutions like infrastructure support and cheap credit to improve the agriculture sector.

Delivering the Laxmanrao Inamdar Memorial Lecture here, Naidu also called for suitable changes in the laws governing the cooperative sector in view of changed techno-economic and business scenarios to make the cooperative institutions “viable and vibrant”.

The University of Mumbai had organised the lecture to mark the birth centenary late Laxmanrao Inamdar, who was instrumental in the formation of Sahakar Bharati in 1979.

“There are many challenges in the agriculture sector. You cannot have temporary solutions to agriculture. Loan waiver, free current … they are temporary,” he said.

“What is needed is remunerative price, infrastructure support for agriculture and cheap credits. Unfortunately for political reasons, we move to populistic, temporary measures,” Naidu said adding that the governments should rather focus on long-term solutions.

He said since agriculture was becoming unviable, people were moving to urban areas from rural parts.

“You cannot reverse urbanisation, even if you want to … Even today, 56 per cent people depend on agriculture.

“The best method of (improving) agriculture according to me is the strengthening of the cooperative movement. This has to be understood by all including the planners, NITI Aayog, political parties, Parliament, people and media,” he said.

“The prime minister promised to double farmers’ income by 2022. This is a noble idea, but it is not simple. The government has raised the MSP of most of the crops. Cooperatives can help small and marginal farmers in taking the benefits of higher MSPs,” he said.

Terming India’s cooperative movement as the “biggest” in the world, he said it has led to tremendous progress in several sectors of the Indian economy.

“I am told 75 per cent of rural households have been covered through a network of over 8.50 lakh cooperatives with a membership of well over 25 crore,” he said.

Naidu, however, lamented that in recent years, the cooperative sector has faced structural challenges like dormant membership, lack of active participation of members in the management, politicisation of cooperatives and bureaucratic control.

Similarly, low level of participation by women and youth is a challenge and needs to be addressed, he said.

“Mounting dues in cooperative credit institutions, inadequate mobilisation of own resources, over-dependence on governmental and institutional support, lack of professional management have proved harmful to their growth. There have been instances of mismanagement and absence of monitoring,” he said.

“Probably, the time has come to bring requisite changes in the relevant laws governing the cooperative sector in the context of changed techno-economic and business scenario to make the cooperatives viable and vibrant enterprises,” the vice president said.

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