 Good morning everybody. On behalf of the World Economic Forum, the Confederation of the Indian Industry, and also CNBC, my honor, also my pleasure to be here with you this morning for this panel. First of all, I'd like a show of hands. You know, a lot of people talk about Davos about the World Economic Forum as sort of like the UN, but actually even better. It's the UN with rock stars, right, which has been the experience. In Delhi, it's slightly different, but also has star power. How many of you have availed yourselves of the opportunity to either meet, talk to, press the flesh, get autographs from, even take Wii fees with selfies with some of the Bollywood royalty that's been here, the esteemed director Karan Johar, the it star, let's understand, Alia Bhatt, Deepika Padukone as well. Just a show of hands. Oh, come on. That's all? I met Karan. You met Karan. Excellent. Good, good. Well, I tell you what, we have our own stars, our own luminaries on stage with us here. I'd like to introduce them to you in no particular order, but ladies first, of course. Chopra Kamineni is president and the first woman president of the CII Confederation of Indian Industry. She also was another hat as the head of Apollo Pharma. Next to her is Adi Godred, chairman of the Godred Group, a giant and a legend in Indian business who actually needs a introduction. Sanjith Bajaj is next. MD of Bajaj Thinserve. And last but not least, of course, a good friend of CNBC and somebody I used to talk to regularly. Sanjith Sanyal, now principal economic advisor at the Ministry of Finance, Government of India in a previous life at DB Deutsche Bank. We used to have some great conversations and I'm sure it will be the same today. So, we've met the panel. Let me frame today's discussion. For me, the central question hanging over this entire summit has been India, the economy. What's happened, right? Because a year ago, the big headline was India, the fastest growing big economy in the world. At some points in time, faster even than China. And then, well, what a difference 12 months or a year makes because we've gone through now five straight quarters of slowing growth. We've seen inflation more than double. So, what happened and why? So, a lot of people like to finger point as the culprits, okay, was it GST in July? Was it demonetization back last November? I think there's a consensus that in both cases, the shocks to the system bit harder and deeper than a lot of people had ever imagined or expected, including, might be fair to say, the planners themselves. But that, the Indian economy is resilient enough to get over this. So, okay, that's fine. What about the banking system? I've seen some stats that are staggering. Credit growth in India is the weakest, lowest, lowest since independence. That's not good. Credit cycle is not working. Capric cycle, obviously, is not working. Companies are screaming, especially SMEs. They can't get the money they need to operate to continue to do so. So, that's the stage. I want to talk about the why's, but more importantly, look forward and talk about the, how do you fix it? What do you do? What should the government do? What should the private sector do? What do they actually need from the government? What should they be doing themselves? I'd like to start with the government side first, Sanjeev, and ask about the twin shocks first, GST as well as demonetization. Fair to say that the impact, especially the negative impact, has been deeper, harder than even the government had anticipated? Actually, you need to see this. I mean, of course, we acknowledge that there's been a slowdown, but you need to see it in the context. I mean, a large number of very major reforms have been rolled out very, very quickly. I mean, whether you like demonetization or not, that was a very bold step. You have had GST on top of that and a major cleanup of the banking sector using a brand new bankruptcy law, which is somewhat argue a harsh way of doing it. But the point is, if you want an entrepreneurial economy, you do need a clear exit system. So all of these things have been introduced pretty much one after the other. And yes, some degree of disruption happens as a result of it. Did we expect it? Yes, we did expect some degree of downturn from introducing all this. This much? This bad? Well, when you are dealing with so many steps like this, unprecedented measures, you have to expect unintended consequences. So there was a wide array of outcomes that were expected. Would you can see, though, that the timing, November and July, as well as, more importantly, I think, the execution, there's been a little bit of fall down on both fronts. So I think you have to understand that when you're introducing radical changes like this, you, as I said, you have to expect unintended consequences of all kinds. And I think I have spoken about this in past, that the only way you could have introduced something like the huge cleanup of the banking system or GST for that matter was to not keep thinking about it, as we did with GST for 20 odd years, but to actually do it and fix it along the way. Sort of a feedback loop-based approach. Now, this may look sort of awkward in the short run, but this is the only real way you can introduce major changes in a country like India. So it was a huge, I mean, political step to step into the water and then learn to swim. So there was no quote-unquote good way to do this. There was bound to be pain in any case. Absolutely. Clean up the banking system, for example. We had a long culture of keeping ever-gaining loans forever. Now, we suddenly stalled that whole culture of doing business. We began cleaning up the banking system. You actually use liquidation as a possible root of resolution, never being done before. So, of course, you have essentially you're shifting the paradigm on which India's economic activity is done. The whole culture of doing business is being changed. And, yes, it will be painful for a short period of time. But I think you need to also see the other thing in context that don't just look at the growth loadout. By the way, it's not 2.7. It's 5.7. It's pretty strong growth rates. Indeed, yes. Secondly, all our macro stability numbers are dramatically improved. I mean, just look at we are sitting on more than 400 billion worth of foreign exchange reserves. The current account deficit for the last financial year was below 1%. Maybe you'll drift up a little bit this year. The inflation, which has been a perennial problem in India, was double digits a few years ago, is now, for this financial year, has averaged 2.5%, unprecedented again. So, the macro stability numbers are radically improved. Yes, growth has slowed down. But on the other hand, we've introduced these major, major steps, which everybody tells us is a good thing in the long run. So, you know, the political leadership has taken the bold step of introducing them, maybe very quickly together, but is, again, willing to take some of the pain for it. So, government position, do you think the economy is resilient enough to get over both of these shocks? Well, of course it is. I mean, as I said, our macro stability indicators are dramatically improved. So growth will pick up in the succeeding countries? Well, we are hoping so, and I hope to hear from the others about this. But let me point out that it is not that the government is unaware of the problems created by introduction of all of this. So, as I said, since this is a feedback loop-based policy-making system, the problems created by the introduction of GST are well understood, particularly those relating to exporters, small exporters, SMEs, and they are being fixed. So, yes, first iteration, problems, feedback taken, and will be fixed. And it will be done in days, not weeks. Wow, days, not weeks. Okay, I'll hold you to that. Shobna, on the ground, if you can take off your CII hat and talk to us about, with your Apollo Pharma hat on, how bad has it been? The pinch or the impact from both demonetization as well as GST? Debonetization definitely created stress in the system, especially in the tier two, tier three towns. And I think it was widespread. We didn't realize the impact would go on for more than, you know, we thought it would just be one quarter. It went on. But, you know, we don't want to comment on demon that was done. It was done for reasons that are definitely some positive. If you see, we've got the largest inflow of retail funds that have come into mutual funds. This was never before. And that's, I think, really spurring our capital markets. So, there's some good, there's lots of bad too. But having said that, GST is a tax that industry wanted. GST is for industry. And so, we were prepared to understand what would be the impact of this. And if we can get it done in two quarters, that's outstanding. No one else in the world has been able to get over GST because long term, we knew and Adi, of course, is the greatest proponent within our confederation about GST. He's been championing it for the last 10 years. So, it's nothing new to us. And what GST has done is that it's formalized a lot of the network. So, for us, for instance, industries that already were kind of organized and their supply chain was organized, it was not too difficult to transition. For instance, the auto or some of that. But the smaller unorganized, it was a big challenge for them because they were never in a tax system. Suddenly, they're in there. And suddenly, you're in actually a fairly complex system because GST requires you to fill in so many more forms. So, the compliance has been an issue for everybody. We have to get over it. I think that it'll take, you know, so a lot of the big companies are struggling with the compliance and the number of forms. The smaller companies are just understanding the implications. But what's going to really happen is a reorganization of our entire supply chain network. You know, those are the opportunities that you'll see, the consolidation of formal retail, the movement of goods. So, this entire transition in India is for the future. And I think that's where the GDP will kick up almost two points if we can get it. Wow. Okay. For the future and for the good. Mr. Gondrich, because of, let's say, GST, do you expect your group companies to gain market share? Well, I'm not sure whether we will gain market share, but we will certainly gain sales and profits. We've already started seeing that from the July, September quarter. Now, I think we did have a slowdown, post demonetization, for obvious reasons, there was a shortage of cash, but we were recovering quite well. And I think we've been, this whole question mark about the Indian economy has come about because we showed a relatively slow growth rate, GDP growth rate of 5.7% in the April, June quarter. In my view, April and May, we don't have monthly GDP growth rates, were reasonably good. June growth rate was rather low. And the reason is, in the GST manufacturing sector, there were considerable number of items where the new GST rates is less than the combination of the earlier excise and VAT rates. So, obviously, there was a de-stocking of those items and lower production and clearance of those items, which would affect the GDP growth rate in that month. I think people don't seem to have gone into that detail, which I think will considerably recover in the July, September period. And I expect, like Shobna, I expect the second half to show a very good growth rate. So instead of de-stocking, we will eventually start to see restocking, is what you're saying? We're not restocking, just better sales, better off-take. Some restocking too, but generally good off-take. And I can't talk much about it now because we haven't declared our results for the July, September quarter, but all our companies have done quite well back to a good track with the GST. And Adi, we had an early festival season also, so that kicked up. Ah, right. Okay. And what is it meant for Bantaj Group businesses, the GST? You see, any such large step will have some initial difficulty and noise. Now, when you're going to change, what has probably been the biggest tax reform in any country globally? That pain exists for some period of time. And we are going through that pain and that's what we are reacting to. Whether it takes one quarter, three quarters, who knows. You know, people like Sanjeev could know that better, but we will see the impact or the net change of that is going to be significantly positive, as everybody else on the panel is saying as well. And we will see that. So I'm sure when we are sitting here, maybe a year down the line, we will be talking at a very different positive field than what we are today. And just where you started from Martin, see, we don't want governments that only talk. We want a government that acts. This government acts. It has taken a number of big steps and on financial services sites, Sanjeev has already referred to some of the big steps. Now some of them are not going to work. And let's be honest, demonetization has not worked. And there is a fallout of that. The intention was right. It partly will. Well, you're saying demonetization has not worked in what sense, though, fulfilling which of the government's promises. So, for example, when you talked about demonetization, what are we trying to do? One, you're trying to uncover black money. We still have to see that. Maybe we'll see evidence of that later. We've not seen much of that. The second what we were trying to do was to push the entire system to go more digital, to go cashless. That move has started. But see, we can't expect it to happen overnight. So we can see, especially in my industry, how digitization is starting to make a very big difference, especially when you go outside the top 100, 150 cities where it was difficult to reach money efficiently. That's changing now. Third was the overall mood. It did create a negative mood. But the flip side of that is GST. I think it's a very positive step. And we must be critical where we need to be critical. But we must also encourage with the last thing we want is a government or a country that does not take those big steps. Incremental steps will not take us back to 99 and a half percent GDP. Sanjeev, back to you. Demandization hasn't really, jury's still out, I think is what Sanjeev is trying to say. Some people might say that it's backfired in the sense that if the government had been hoping to kill or start to kill the black economy, it's not working. You take a look at what's been happening with gold, what's been happening with, let's say, luxury watches. Smuggling is on the rise. I think you need to see it in a wider context. First of all, what happened is that the cash to GDP ratio has distinctly, the trajectory of that has distinctly changed. So I think, of course, only with time will we be able to show that there has that trajectory continued down that line. So let's hold up horses on that one. But I think you need to take this demonetization in the context of many other things that are being done. So what is being attempted? What is being attempted by Prime Minister Modi is to create a high trust rule based society and move it away from a rent seeking patronage based society. This is the wider idea which he keeps repeating. You know, he'll talk about the new India. What is this new India? It's this shift from a rent seeking patronage based economy to this rule based entrepreneurship based economy. So what he's doing is he's creating the framework for this. So various frameworks. One is, of course, the attempt to squeeze out black money. But at the same time, he's introducing bankruptcy laws, i.e. exits. He's cleaning up the banking system, introducing a GST based taxation system, which creates an internal market. Remember, didn't have a proper internal market. He's creating an internal market, but also simultaneously lots of paperwork, paper trails that can be used to keep track of the transactions and the circulation of money. So what is being attempted here is a much wider thing than just a random attack at one point and then something else somewhere else. You have to see the wider sort of model of economic management that is being fundamentally changed. So in that context, demonetization was one part of it. So is GST. So is the cleanup of the banks. So is bankruptcy. So is, you know, we had a real estate sector with all kinds of problems, accusations of robber baron behavior and so on. So we have a new. Where will real estate be brought into the tax net? So there is something called RERA. I don't know if you are aware, Real Estate Regulation Act, which has come through. So there are many, many other things that are being done. So if you see it only in, you know, each of these in silos, then they may or may not work. But if you look at the wider context of shifting India fundamentally to a different kind of economy, a rule based, trust based economy, then you will see how all of these pieces fit together. I want to connect the dots and look much, much further down. Shobha brought in the idea of portfolio inflows, foreign money coming into India. The flows are looking pretty strong, pretty good. And from your previous life at DB, I think you'd have a lot to say about this as well. For many, many years, for decades, in fact, the attraction of Indian equities listed entities was ROE. ROEs are still actually stunning compared to developed market averages, compared to even emerging market averages, right? But over time, as Indian economy opens up, cost of business goes down, etc., there is a more than good likelihood that on average ROEs will come down. And it'll be taken out of the ROEs of some of the big companies, which we have represented right here. Is that fair? It's a possibility. I mean, we will see. I return on equity. Also remember, this economy is usually capital-starved. Hopefully, the idea is that once you get the economy, the banking system cleaned up and expanding again, foreign capital coming in, the enforcement of contracts, etc., improve, the use of capital will also go up. So even naturally, the equity will fall much faster growing economy and so on. So they are pros and cons. It's very difficult to generalize on this. Sanjeev, are you concerned that your ROE, that your listed entities will become, over time, less attractive to foreign investors, ironically because of some of these structural reforms we've been talking about? So Martin, very simplistically, when I think about it, why are ROEs disproportionately higher? One, our cost of capital is significantly higher than developed markets. Second, there is a cost of doing business. There is significant inefficiency in the entire system. So the few companies or the many companies that manage to break through that, get a much larger pie to share. Including Bajaj, yes. And including us, in the good times, in the bad times unnecessarily. So the third is, as Sanjeev said, we are still a huge growth economy. We have a huge underserved market so that additional profit is required to reinvest. And if I'm in a developed market where essentially for my products and services, we've reached by a large saturation point, my incremental investment only goes into innovation, into technology, doesn't go into fixed investment for more capacity. And I think India is a far way away before we reach saturation in these levels. So you will see those higher ROEs but it's also a reflection of a higher level of risk that we companies are taking compared to the developed market. So what you've been describing basically is what investors call the India premium. Are you concerned that it could fall though? If it falls? Yes. I think that's good because it will then mean that our basic processes, our foundation blocks of doing business over here, have got much stronger. The whole processes have become smoother than you don't need that as premium. Okay. Mr. Godrich? I think the Indian equity markets should grow quite well. I think one problem is, one of the problems we are facing is that large Indian companies, especially in the infrastructure space, were depending too much on debt in the past. There has caused some of the problems. We need to be more equity oriented. This calendar year, for example, the raising of equity capital by new companies is at record levels, which is a good sign. And I think that will help our future progress a lot. But the opportunities in India are huge, not just things like consumer durables like autos or appliances, etc., where penetration is still very low in India. And the opportunity for increased penetration as incomes increase is very high. Even in fast moving consumer goods, the penetration is very low in India. And the opportunity for growth is a lot. If you look at packaged branded products, there are only three packaged branded products which are fully penetrated, which means every household uses. One is toilet soap, the other is some form of detergent, and the third is matchsticks. Everything else is under penetrated, including toothpaste, shampoo. Food products are very under penetrated. A lot of loose food is bought. So the growth potential in all these fairs in India is huge, which will add to returns. And I think the foreign investors who are putting a lot of faith in the future of India are going to do extremely well, because India is on a path of growth. And I don't think we should be diverted by the fact that because of the major reforms, which are needed for strong future growth, we have temporarily been stymied a little bit. Okay, temporary, these recent shocks to the system, what about Mr. Gardner, it's the banking system in India. It's not functioning, really. That is a problem. And I think that needs to be rectified. I think if this insolvency procedure works out, maybe in a while it will get solved. In the meanwhile, that's one of the reasons why a lot of companies are raising more equity capital. And I think we've got to get used to the fact that this has happened all over the world in all the developed countries. A lot of businesses start as family run businesses. So the families are reluctant to dilute control. But in the long run, you have to dilute control by raising more equity. And now if you look at the western world, a lot of the companies are very broadly held. So I don't think it should be a problem. People will raise equity. And I think we are seeing it grow in India. It's natural what happens. It's a natural evolution, I understand. Back to the banks themselves. Should the government not be budgeting more to recapitalize banks? I think the first part of the cleanup, which is recognizing the bad assets, beginning to provision them, taking some of them through the bankruptcy and insolvency process, that part of it is now well undone. Now, step two consequently, which you just alluded to, which is the recapitalization and getting these banks running again, that is something that will be done in the next few months. The government is fully aware that we need a much larger banking system by a factor of multiples of what it is today. I mean, India's banking system is way too small for our economy today and certainly too small for our future. So we understand that our banking system needs to expand significantly by a factor of multiples from where it is now. So we will have to recapitalize it, absolutely. And there are many options that are there on the table, which range from creating recapitalization bonds, i.e. taking out money from the banks themselves and putting it back. There is the option, of course, of diluting down the government to, say, something like 52%, which will still be public sector banks, but the shareholding will decline, some of it will come from the budget itself. There are many options, by the way, and all of them will be explored in combination, but this recapitalization issue is well understood and will be done. In terms of number of institutions, is India overbanked? Does consolidation make sense? So this is somewhat different issue from cleaning up the banks. I think many people confuse the two. There are something like 21-22 public sector banks. There is a case for reducing that number for commercial reasons. By the way, however, adding two inefficient banks does not lead to a bigger efficient bank. So this cleaning up the banking issue is the first priority. We also need to consolidate some of these large number of banks, but be clear, we are not going to reduce these down to, you know, some people think like four or five national champions. That is not at all the case. We recognize that that would lead to too many, too big to fail banks. Right now we have one really big bank, which is a state bank of India, and then the others are much, much smaller. We do not want to create a large number of them, then we would have a real problem in terms of concentration of risk. So the numbers will be reduced in terms of consolidation, but somewhere to the 10 to 15 range from 22, we are not going to take it too far down that road. But do not confuse the consolidation issue, which is a somewhat longer term commercial decision from the cleaning up the banks and recapitalization, which is a much more urgent issue in order to get that banking system running again. You mentioned the government considering selling out stakes in some banks and becoming a minority shareholder, but still... Not necessarily a minority. That's why I said 52%. They will still be a public sector banks. They may be specific instance where we may go all the way, but generally as things stand, what is being considered is selling down the stake to around about 52%. So controversial, 52, but no less, right? For the time being. Should the government be in banking? Because if you take a look back, the reason the banking system is so choked and clogged with NPAs as you call them here, or NPLs as they're known elsewhere, is the fact that in terms of risk management, things didn't work so well, did they? This is the legacy of mainly infrastructure loans gone wrong, where the projects didn't quite play out the way that people had expected. I think we have a somewhat different view on this. You see there are risks to private banking and there are two public banking. There are different kinds of risks. After all, the rest of the world had private banks and you had a crisis in 2007 and 2008. And so it's not as if private banks do not have their own problems. Now in India, it may be... I think it's a fair point that maybe 70% of the banking sector being public sector may be overdoing it, but there is a space for public sector banks. They serve certain kinds of social roles, but also from a purely commercial or economic perspective, the fact is that they have the risks that they run are somewhat different from those that the private sector runs. Now if you want to spread your risk as an economy, then it is a good idea to have a mix of various kinds of banking institutions because while they will all have different kinds of problems, the fact that they do not have the same kind of problem at the same point in time means that in a sense you've diversified the risk of the system. So it's fair enough to say that maybe the private sector banking should play a greater role. I think that's... I think most people will accept that, but to say that public sector banking has no role at all is perhaps unrealistic. Yeah, but it's very different like from, say, airlines industry or some other places where right now one could say that the government shouldn't perhaps be running airlines or hotels or something. The banking system is a... and the financial system generally is a specific and very specialized part of the economy with very special role to play and the public sector and regulation has an important role to play in it. Okay, fair enough. So we've talked about the banking system. We've talked about the twin shocks recently, the big government reforms, GST, demonetization, and I've been having a go at you for far too long, I think. Let's bring the rest of the panel in on this. Pshoda, what would you like to see the government do more of to help CII, Indian industry, as well as your own business Apollo? The big thing, big ticket if we... is easy doing business and policy clarity. I think that the government has been... they change frequently some of these... some of their policies that have been taken off late and more than pricing, like for instance, they've started to regulate and put caps on health care and things, you know, that are detrimental to the extreme need that is required, that private sector comes in 70%. What we should do is to encourage growth and see where you can move the needle because India requires many things, whether it's... whether it's more... whether it's more food or health care, education, all these are aspects and infrastructure. If you see the stress in the telecom and the power sectors, so I think that we need to take a look at how this is being done. And then the ease of doing business, states have started moving, but it's not really... if you look at it, the defense sector that was supposed to be the big one, that will create jobs, that will open up the economy, how far have we moved on that? And many of these areas, if you look at it, you know, like... I think that it's important that we... that the government looks at this very critically and these are things that will actually help. All the other things of demonetization, GSD, banking that we spoke about are important, but now companies need to look inward and the big ticket that we can never, never ignore is jobs. How many jobs are we creating? How many jobs does India need? And this is the kind of... this is the need that we constantly have to push and it's together. It's government and private have that priority. And unless we make it easier for us to do business, it's going to be tougher for us to create jobs. Okay, let's take us back and talk about this whole issue of jobs and how it's related to growth, because I was talking to... I can't remember who it was, but I was having a fascinating conversation with them. Let's say China, for example. Back in the day, not too long ago, the magic number for China was 8%. That was how fast they had to grow the economy in order to create enough jobs to absorb, I think it was 10 million new entrants into the workforce every year. Otherwise, you get social stability problems, better known in their most extreme as riots and you've got political instability, which is what the Communists don't want. In India's case, my question is at 5.7% growth, if I'm not mistaken, I think about a million people join the workforce every month, which works out to 10 to 12 million a year. The government's number crunching at 5.7, are you creating enough jobs to absorb this number of people? So this is an area of major debate, partly because we don't have good employment data in India, something that we've been working on trying to collect this data. So there is a lot of anecdotal data floating around. It's an issue of major concern to us to make sure that jobs are created quickly and on a sustained basis, but it is also the case that frankly, the statistics for this are very poor and it's something that we are concerned about and trying to fix. Okay, another way to approach this might be to look at CAPEX. As far as I know, the CAPEX cycle has not started. It's kind of dead because the credit cycle is going nowhere. The Bajaj group, how does your CAPEX look? Because CAPEX, part of that is creating jobs that would have to be, right? So again, the two significant businesses that end up using additional capital on a regular basis. One is the manufacturing business, the automobile business and there again, we are only now starting to see higher growth. So there's greater consumer demand coming in and this will follow. As you know, there's a lag effect there. So it will follow a CAPEX cycle, follow this down the line. The second big user is our lending business and we've just gone and raised about $800 million last month to take care of the next two to three years growth because here we are financing so we are enabling sales. Now, as we've seen in the last, I would say six, eight, nine months, consumer demand on the ground has been muted. It is starting to improve now and we have a big festival season coming up. So we all geared up for again, record volumes over there. But just rewinding back a little bit, Martin, of all the big moves, I think this government has made. If we have to really start creating jobs for 12 million people every year and many more who don't have jobs today, the one large challenge still left is labor reform. And this is something that the central government tried, but as we know, this is for states to execute. This is a big move and there are unions, there are pressures, but if we are able to cut through the whole set of issues relating to it and go ahead and do this, there will be some pain again. But I think this will be the single biggest additional driver for employment. So bluntly you're talking about giving companies, private companies greater discretion and flexibility to hire and fire as they choose or need. Absolutely. Absolutely. And we're going to keep in mind the amount of investment effort and time that goes in training people. So once companies have trained and employed them, we're not just going to fire them for the sake of firing them. And look at it this way, look at a company like Bajaj Auto. In 1990, we made a million vehicles with 25,000 employees. We now make close to 4 million with 6,000 permanent employees. So of course there's tremendous productivity, but in the, with the current labor rules, most large companies are very careful about adding additional people. That will change dramatically. Plus, the protection that an employee gets by coming under a formal umbrella is not available to most people in the small-scale and mid-scale sector, because those are all the so-called contracted and official employment. Okay, Mr. Gondra, your businesses are fairly labor intensive as well. What is the issue? Is it lack of labor reform? Is it a government issue? Or is organized labor? Are unions too strong in India? Well, there's a little bit of all of it, but our companies have employed more people over the last couple of years. You've added more. And in particular, we've added a lot of women to our workforce. So that's a good thing. But one point I want to bring out, we talked of a lot of resources, etc. One resource India needs to pay a lot of attention to, to efficiently use is land. Not too many people realize we are among the larger countries of the world, the most densely populated, except for Bangladesh. We are more densely populated than Japan. And how we use our land efficiently is to my mind very important. In agriculture, it's important. Animal husbandry, for example, if we pay a lot of attention to, we can increase pharma incomes without increasing land requirements. Just for example, in housing, we are very inefficient in how much housing or real estate we build on unit land compared to most other countries in the world, despite being the most densely populated country. So we need to pay a lot of attention to use a resource which is so scarce, very well, and it'll get scarcer, we'll get more and more densely populated. We are three times as densely populated as China and 10 times as densely populated as the United States. What is the one thing you would like to see the government do on that? Well, there are many things, but all I'm saying is, because we are involved in real estate, we find that current policies, mainly by the state government because the state subject, are inefficient in the use of land, for example. I mean, he is absolutely right. In fact, we have building codes and city urban designs which are fundamentally flawed and we will hopefully soon have a national urbanization policy which will look into some of these issues. We have setback rules and so on which are completely outdated ideas about how to design cities. We mean densities, we need more efficient cities, walkable cities, rather than these somewhat theoretical ideas from the 1950s which have got somehow embedded into our building codes and urban design master plans. So absolutely agree, land use is critical. But Sanjeev and Adi, do you really see what happened in Mumbai? So first is fix the infrastructure of those cities before we can talk about bringing more people into them. And I think the exciting thing is that we're creating all the 500 more cities. So I agree with you on how we use land, but while we're doing that, we should also understand our infrastructure issues. Absolutely. And urban planning. It must be simultaneously. You can't say do this first and then do that. Sometimes I get scared when we think about these. No, so what, first of all, we need to have an honest discussion about the need for density. Once we have an honest discussion about the need for density, then we can say, okay, if we have this density, this is what is the required infrastructure. Unfortunately, what we do is we have this somewhat hypocritical view of the way we design our cities is that we have this low rise cities inspired by Lake Urbuzier and Chandigarh and so on. Frankly, those kinds of cities are completely inefficient. Chandigarh is totally the worst possible design for a country like India. So what it is beautiful. Well, the fact of the matter is it's not a city. It's a subsidy scheme for civil servants. So the thing is that you need a much tighter plan for cities. And once you have agreed to that, and then you can build the infrastructure necessary for it. I mean, Hong Kong is very, very dense, but it functions. I mean, Singapore on the ground doesn't feel like it is very densely populated, but just go to a tall building. In fact, it is unbelievable how tightly packed it is. So the point is, you can have actually, if you design for it and accept that this is going to be the way you're going to go, then you can design for all of these things. They're actually well known principles that can be used to work for density. Okay. All right. So you remember also, for example, with the sea link and the Eastern Freeway, once you do that, it's much, much better, much easier. I am able to travel faster in Mumbai today than 50 years ago. But the urban planning still, I think, needs to be coordinated. But having said that, the corollary of that is that it can bring in so many jobs in terms of construction. It's the construction jobs that went away during the monetization. And those, if we can get them back even to the level of, it used to be 30%. And if we can move that closer to 50, like China, most of the jobs were created in construction. So we need to do this. So it'll come from building these cities from infrastructure, denser packing. So there's a larger theme in whatever we're talking about. Is it really construction jobs, which are hard as tit because of demonetization, or my understanding is the farm sector, agriculture, farmers were hit far worse, no? From demonetization? No, I don't think demonetization had, in fact, there was enormous political support in rural areas for this move. Remember, in large parts of the country, these large notes are not widely used, especially in rural areas. So yes, there was some problem because many of them had to go into town in order to actually change their money. So there was a logistical problem. But in terms of popular support in rural areas for this move, it was quite widespread support for it. I mean, as I said, how many farmers have stacks of, you know, 1000 rupee notes in the, not many. Fair enough. All right. I'm trying to be very Swiss about timekeeping here. We've got, by my watch here, about 10 minutes left, maybe a good time to try and bring the audience in. If anybody has a question, oh, there we go. That didn't take too long. If you could just tell us who you are, who you represent, and who your question is aimed for. I think ladies first, please. Is there a mic? There we go. Good morning, everyone. I'm Noor Rizvi. I'm a doctoral scholar from IIT Delhi. My question is for Mr. Sanyal. First of all, I would like to appreciate you for your view that two-week banks cannot make a good, big, efficient bank. But I have two questions here, your opinions, basically. First of all, you were talking about the macroeconomic numbers. Firstly, you said about the GDP growth, that is 5.7%. But there were speculations that probably the base year was changed while calculating the GDP number. So it was also mentioned in some reports that it was actually 3.7% if you actually look back at the previous formula. And secondly, you were mentioning about the inflation that you have tried to curb the inflation very well. Yes, definitely inflation has come down. But is it due to the decrease in the oil prices around the world that the inflation has come out, has come down, or is it because of the policies that India is having these days? Let's tackle GDP first, if we could. Okay, I'll take both. They are connected. First of all, on inflation, be very clear that now we have had low oil prices for quite some time. If anything, on a year-on-year basis, may be actually higher now than they were a year ago. So the point is that since inflation is compared to last year, that is by definition, so this effect of the low oil prices has rolled off long time ago. It may have accounted maybe in 2014-15 the decline, but by now it has fed through. So the inflation number that you are now seeing is genuinely low. And I think most sensible economists will agree with that. This is no longer oil price-led. If anything, oil going forward may have the other opposite effect. As far as the number and its credibility is concerned, there are very good reasons why it was upgraded because the structure of our economy keeps changing. You need to keep changing the way you calculate it. And this calculation to suggest that somehow this was beneficial, let me point out that let's take the same basis of calculation of GDP and take it from when it started, which is I think 2011-2012, something like that. And so if you take that entire period, this government came to power in the middle of May of 2016 out of the 13 quarters you've had, 10 of them at the growth rates were above 7%. Now you take the previous government was there, same calculation, out of the 8 quarters that you had, four of those numbers were below 6%. So even if you took the same GDP calculation, you would see that there is distinctly higher growth rate since this government if you want to use this as the basis of it. So this argument that this particular calculation leads to higher numbers is not at all correct. The growth rate performance of this government using this parameter is distinctly higher when compared to the same parameters used for the period 2012-2014. So like to like, this is not necessarily a 5.7 on this measurement is not like somehow over stating the growth rate. There is a slowdown, it clearly shows in the numbers and the same numbers were being, you know, you can use it over long periods of time. It'll give you a fair feel of the cycle. Let me steal a question for the audience if you guys don't mind here and pose a cheeky question to you, Sanjeev. I mean in your previous life at DB, you may have said something different but now with your government hat on, inflation, latest rate 3-4 roundabout there, okay, that's pushing the upper bound of the comfort level of the RBI which is at 4 even, correct? No, that's not actually true. The midpoint of the band is 4. The comfort is 2-6. So that is a fairly wide range. We are actually in the lower half of it even now and if you will be aware we... So do you think they should have eased interest rates? Well, it's a matter of some debate between the finance ministry economists and the RBI economists. I'm not going to go back into it and there are differences of opinions or well known. I asked because business, I mean Shobhna, CII, you guys were screaming for 100 basis points, one full percentage point off. Six to five should have done it. The finance ministry economists have a certain view on it which has been well expressed over time. And that is? Well, the rate should be lower and I'm not going to revisit that debate again. Fair enough. In the end, it is the RBI and the MPC is prerogative to set the interest rates. Actually, this is pretty... We can do no more than express an opinion. Indeed, independence of the RBI is still enshrined. Thank you. Sir. Hi, this is Srinivas from Deutsche Bank. Hi, Sanjeev. It's a question for you. We have a flexible inflation targeting framework right now. The nature of the framework is such that any proclivity of undertaking a fiscal expansion is usually met through an offsetting monetary policy response. That's the way the targeting framework is supposed to work. Now, the point is that we all know that real rates are pretty high right now. But on a forecasted basis, real rates might not actually be as low as they seem today. And we anyway know right now that growth is really so low. So, given this backdrop, is there a case for basically providing some monetary support, maybe not through the interest rate side, but really through the currency, ease monetary conditions by really having a much more competitive or basically a weaker currency, is that out of the fiscal monetary and the external the currencies part, if two of them seem to be constrained right now, could the currency actually be used to kind of give a fillip to exports and really give a push up to GDP? That's the question. It is the finance industry comfortable with the level of the rupee at this stage and the way it's... So, first of all, again, this is an area where the Reserve Bank prerogative, not ours. But let me point out that while obviously an exchange rate that keeps appreciating is not helpful, it is also the case that using the exchange rate by itself as a means to stimulate the economy has its limits in the sense that the purely pricing as the source of competitiveness in India may not be the only way to do it. There are many inefficiencies in India that need to be resolved. There are many things and ease of doing business that need to be resolved. So, yes, you can maybe a little bit, if the exchange rate was a little bit weaker, let's say, it would at best provide a temporary cushion during an adjustment process. But in the end, India has to be competitive in its own right. I don't think the exchange rate in itself is the major constraint. Having said that, yeah, sure. I mean, do you want the exchange rate to continuously appreciate from here on? Possibly not. I think we should be very careful about depreciating the Indian currency. That has been the major cause for inflation in the past. And we don't want an inflationary economy for various reasons. So, I think but depreciating currency has not worked in any economy. And we should rely on the strength of the Indian rupee, if at all. And our foreign exchange reserves are rising. Why do we need a depreciating currency? Export competitiveness should improve through other means, not through depreciating currency. Okay. Adi, there are many views as you agree. As both sides in that, but largely, I think. But already our currency has depreciated so much. I tell you what, let's work. Let's work this side of the room just so I don't ignore it. The gentleman in the spectacles. Hi, my name is Harish. I work in the education sector in a company called Pearson. My question is not related to education, but to the economy. A lot of what we want to drive in this country now rests with the states, from education to healthcare to a lot of items. But as we move into this journey of a more federal structure, we are seeing that the states are hamstrung by a lack of competence in various areas, right from managing cities to managing hospitals to managing schools. How can we propel the economic engine of this country without really making the states more competent to run the economy? And your question is directed at who would you like to respond? Sanjeev. Okay. Well, part of federalism is that the central government doesn't sit around telling the states what they should be doing. So the way that it has been done is that more resources have been allocated to the states, as per the new formulas for tax sharing, and they've been given a lot more autonomy. Now, the idea is that unlike the old system where there was a planning commission and it sort of had sort of centralized all the intellectual fire power in one place, here that you provide the resources out and hopefully some of the states will experiment and do a somewhat better job. And then we will have a competitive federalism in the sense that that will sort of inspire other states to improve themselves. Now, that takes a little bit of time, and I agree there are all kinds of competence issues. But you see, you can't have a central government acting like a headmaster forever and telling everybody, this is how you must go about it. The only way to get this going is to hand over resources, create transparency about what they are doing, and let them do it. And it is the case that some of the states, different states are doing better things than different things. And over a period of time, this process will build out. So give it a little bit of time to say that there is no competence at the state level. Yes, they will not be if you never let them do anything. So the only way you will get more competence is because they will do a few things, a few of them will discover that they can do something better than others. Those people will become famous and hopefully get asked by another state to come and do the same thing, and so on and so forth. Okay, so learn and better yourself by actually trying. We've got time for one last question. The gentleman in the center, thank you. I'm Sanjay Kedia from Marsh. I can ask the question to the private sector representatives on the panel that what would be one thing which government should not have done or done differently with so many reforms going on? What could be the view on the panel over here? What could be one thing? And if I was to ask supplementary to that, and what could be one thing you would like to see the government should do to put the economy back on high growth? Wow. Okay, Sanjay first. I'm in the firing line. So I already said the one thing, right, which was demonetization should have been done differently. Yes. The one thing that I think that they should do right now is, and there's a quick analogy there, a little extreme analogy, if you're a patient in an emergency room, you first need to be pumped with medicine to get you out of there. But the same medicines don't help you long term, so they can harm you. And we are not in NER, so I must say that, but we are in a slower economy. The reforms will always have a lag effect, right? So we'll see growth in a couple of years time. We need some short term stimulus, and Sanjay may disagree with that, because we know long term that doesn't help. But if I'm suffocating, give me some extra oxygen right now. Okay, Mr. Godfrey. Well, I think the GST is, to my mind, the biggest economic reform we've had since 1991. It'll be very good for the economy. It'll add very considerably to economic efficiency and economic growth. And now we should ensure that we don't try and bring in what we might call other reforms, which come in the way of its progress. There are many reforms that might be needed, but sometimes some of these small reforms keep impeding, proceeding growth. So I think we should go a little slow in taking any risky action and let GST play its course. I feel it'll play a good cause. All right, Shobana gets to the last word. I think I would like to see the states being more efficient with the capital that they've been allocated, not squandered it away. That's very important. A lot of the things that came in, if we look at the past, the government should have actually looked at the NPA resolved it earlier instead of all the everything coming home at once, GST, DEMON, all the banking system, all these. And I think that they have to start privatizing to get more capital. They have to be careful in terms of how they manage the fiscal deficit. So those are the important things. Opening up, I think the power, the infrastructure, all these sectors do need the oxygen that Sandiv is talking about. And the last thing, we have to get this education and training. Because if we don't have the right people to be trained for this future world, we're in deep trouble. Just educating them is not enough. It has to be the right skills for what's going to happen in this world and for India. Skilling, indeed. Totally agree, Shobana. Thank you very much. Ladies and gentlemen, we're just out of time. Thank you to our panelists, Shobana, Mr. Godridge, the two Sanjeevs as well. And thank you for being a part of this panel this year. We'll see you, I guess next year. Thank you.