Watch the theme address of #LeadingEdge2018 by V Vaidyanathan, CEO of IDFC First Bank.
#VVidyanathan #IDFCFirstBank #IDFC #ThemeAddress #Business #OutlookBusiness #OutlookMagazine #OutlookGroup
#VVidyanathan #IDFCFirstBank #IDFC #ThemeAddress #Business #OutlookBusiness #OutlookMagazine #OutlookGroup
Category
đ
NewsTranscript
00:00 Good afternoon ladies and gentlemen, Mr. Stuart Diamond who spoke just wonderfully before
00:04 me, Mr. Ruben Banerjee, Indranil Chatterjee, Mahalakshmi, Shri Piyush Goyal, Honorable
00:13 Minister with us, members of the press, ladies and gentlemen.
00:18 Thank you, it's just a wonderful pleasure being here with all of you and being on this
00:22 very wonderful function which we call the Outlook Business Leading Edge 2019.
00:30 I'm in the midst of the merger between Capital First and IDFC Bank and the merger went through
00:36 about 20 days ago and yesterday was the listing of a new bank and therefore I was just very
00:42 busy dealing with that but I asked Mahalakshmi before coming here, what do you really want
00:47 me to speak about?
00:49 And she told me, can you speak about resilient India, whether you want to come from the role
00:54 of a leadership or you want to come from the role of economy and how it can build towards
01:00 a resilient India.
01:02 I thought, I asked her who's in the audience, she said, okay, a couple of ministers will
01:05 be there and Mr. Goyal could be there, so I just thought to myself, why don't I come
01:08 from the role of what is the role a government can play in that process of building, let
01:13 me call a developed India or a resilient India, whichever way we put it.
01:19 When we, all of us, when we travel to UK, we travel to US, Singapore, Australia, Canada,
01:27 Switzerland, we always tend to see beautiful, neat and clean roads, wide roads, infrastructure,
01:36 excellent institutions, educational institutions, lush green educational institutions I must
01:42 say and just all things looking so pretty and perfect.
01:47 And then we ask ourselves, when is it that we can get there?
01:51 I certainly think that and I ask myself this question all the time.
01:55 So when we say resilient India or a developed India, we mean all that which affects all
02:00 of us, not just as for our feelings and the ego, but also in the life of the common person
02:05 of the country.
02:06 Now the first theme when we come to this discussion is that almost all these countries are private
02:24 sector economies and one significant fact of private sector economies, it just makes
02:31 the nation and the resources that much more efficient.
02:36 Now if private sector economies are going to create the kind of countries we talked
02:39 about, developed economies, and in fact is, let me say, one of the causal factors for
02:45 making a developed economy, then what is the role of the government and what can the government
02:50 do to enable such a development of the country?
02:55 Now on this front I must say that one of the significant roles of the government is to
03:02 play, is to create a facilitative environment, a facilitative environment for developing
03:09 businesses, build businesses, maybe facilitative environment for setting up hospitals, a facilitative
03:14 environment for setting up schools, a facilitative environment and not just get into the act
03:19 of doing it itself.
03:21 I think we all experimented, maybe many countries of the world experimented with the concept
03:25 of the government doing many of these businesses themselves.
03:27 I think pretty much disastrous effect and those very few countries which are still stuck
03:32 with that model, we just know where they are.
03:35 And Venezuela and the inflation of over one lakh percent, it is still a telling story
03:40 of even today's times of where those countries can, on those economic models can take us.
03:46 Now on this role I must say that our government has done an absolutely wonderful job in implementing
03:54 and creating a facilitative environment for us.
03:58 We all of us should be very happy that right in our generation we got one government which
04:05 had an absolute majority which actually pulled off the GST.
04:11 Now GST undoubtedly is an extraordinary reform and certainly a very facilitative environment.
04:19 It showed a sort of entrepreneurial spirit and of course if the GST had not been implemented
04:25 at that point of time, we just never know how many lobbies could have worked on the
04:30 ecosystem and even if it had been installed for maybe three or four years, then we never
04:35 know again when we would have that sort of an opportunity within our lifetime.
04:40 So that is one significant reform that is now going to affect our lives now and forever.
04:49 And the number two significant reform that has happened which will in fact improve our
04:54 lives for many, many years to come is the impact on digitization.
04:58 Well, Aadhaar for example was founded sometime in 2010 and between the last five years we
05:05 have seen significant development of the digital ecosystem and on that digital ecosystem many
05:13 businesses and ecosystems have pinged into it and therefore multiplied the effect of
05:19 the digital economy in fact supported by Aadhaar.
05:22 Now I must say just in the last few years we had UPI in 2016, we had Bharat Bill Pay
05:29 Service in 2017, we had UPI too in 2018.
05:33 Such is the pace of this development on this front.
05:35 And just to tell you three or four very significant changes that this electronic platform India
05:42 has developed has done to our life.
05:44 E-NAM which is a government enabled marketplace, a very significant initiative.
05:49 TREADS which is an MSME bill discounting portal on which there are close to about 30,000 buyers
05:55 and 120,000 sellers.
05:57 Then there is the E-Way Bill which is a very significant development.
06:01 Then there is 11 million businesses or more now coming on the platform of GSTN.
06:07 And then of course there is Bharat Bill Payment Service.
06:09 The point I'm trying to point out to you is that once the foundation of a new digital
06:14 India has been laid, just so many services of the examples I told you are now pinging
06:19 into it and are now making digitization of the country really happen.
06:24 Now this has very profound impact on our lives if not immediately in the next few years but
06:29 certainly by the time our next generation comes up and lives in this new India we will
06:34 see a very significant development.
06:37 In fact, in the last few years alone the amount of cleanup that has been done in terms of
06:44 the NPA recognition of the banks and in terms of being able to recognize the losses as they
06:51 are, take it into the balance sheet and therefore and also implement the IBC, the bankruptcy
06:59 code, all of these factors come together to say that the next five years within our just
07:06 immediate purview is going to be far better and is probably going to grow at a much faster
07:12 pace than we saw in the last five years because the platform has been built for the next five
07:18 years.
07:19 Therefore, no matter which way this goes, we should be genuinely very optimistic over
07:25 the next five to seven years.
07:27 Now talking of five to seven years, I took some numbers for you which certainly inspired
07:32 me and I hope it inspires every one of you.
07:36 Just five numbers for you.
07:38 We say in 2025 India's GDP will be $5 trillion.
07:45 Indian private consumption will grow from $1.3 trillion today to $3 trillion in 2025
07:54 which is just eight years from now.
07:56 The investments in the economy will increase from $700 billion to $1.8 trillion in 2025
08:05 which is just eight years from today.
08:08 Gross household financial savings, 10% of GDP is about $250 or $260 billion today.
08:16 In the next eight years, gross financial savings will go to 14 to 15% of a $5 trillion economy
08:25 which would be $750 billion and imagine growing from $250 billion.
08:30 So to all the entrepreneurs assembled here and all looking forward as to what is around
08:35 the corner for all of us and so on, definitely there is a very big story coming to all of
08:44 us and of course it is our role, just as we talked of the role of government, to encourage
08:49 private enterprise and to encourage ease of doing business as this government has shown
08:54 to us over the last many years.
08:57 What we can not only participate in this growth but also contribute to the kind of numbers
09:03 we talked about is going to be some of our significant opportunities.
09:08 Lastly, since we have the opportunity of the Honorable Minister with us, I have a proposition
09:17 which I have been wishing for a very long time and in fact have spoken at a couple of
09:21 forums where I got an opportunity.
09:24 When we talk of a resilient India or a developed India, we'd almost like always wish to see
09:30 a resilient or a developed India at the lower end of the pyramid.
09:35 Right now, in the last five years, let me say the government has done a lot of those
09:39 initiatives starting with the Mudra loans and the facilitative environment and the GST
09:45 to enable the ecosystem bottom of the pyramid in the financial sector or in the business
09:50 sector.
09:51 We know there are close to about 50 million enterprises creating jobs for 110 million
09:56 people but having credit for only 25% of the Indian lending is both those enterprises.
10:03 One comment which I'd have is that can we have a tax structure which is progressive
10:09 and not flat 30%.
10:12 What that would mean is that small entrepreneurs will get to pay a lower tax and larger enterprises
10:20 like ours or any of the large corporates, maybe the top 2,000 of them in the list in
10:25 the Bombay Stock Exchange, can probably pay the P tax rate whether it's 30 or 32 or 35.
10:29 It is what it is and it comes down over time.
10:32 I have one proposition, for example, to drive home.
10:35 It's only an illustration and it is not meant as a real number.
10:39 But in a way, I actually mean the number but it's for the government to think.
10:42 For example, supposing we said that profit before tax of up to 5 lakhs, if an entrepreneur
10:49 had to pay only 5%, between 5 lakhs to 10 lakhs, if the entrepreneur had to pay only
10:57 10%, if between 10 lakhs to 50 lakhs, the progressive tax was only 15% and between 50
11:06 lakhs to 1 crore, if the entrepreneur had to pay only 20% and above 1 crore of profit
11:13 before tax, the entrepreneur pays, say, 30% as it is applicable today.
11:17 I can tell you none of the large corporates are going to get any benefit.
11:21 It will really be tiny and marginal in this mathematics.
11:25 But for an entrepreneur making only 1 crore of profit, the amount of tax being paid would
11:29 be really low.
11:31 That would be one fine way of genuinely giving some direct substantial benefit to these small
11:39 entrepreneurs so that they already have disadvantages facing up or squaring up with the large corporates.
11:47 And they have issues with terms of the unit cost being relatively higher.
11:52 They have issues with regard to being able to attract the best manpower.
11:56 And they just have so many issues.
11:57 And they have, in fact, they pay 16 to 18% rate of interest while a large entrepreneur
12:02 pays 8 or 9%.
12:04 So this would be some way of enabling the small entrepreneur giving an extra benefit
12:09 over the large.
12:11 And therefore, in due course of time, we can hope that many of these people go up the curve
12:15 and then they start paying their actual taxes.
12:17 So this would actually make millions and millions of small entrepreneurs very much happy.
12:23 And if we do not want to have an arbitrage between personal income tax and the corporate
12:28 income tax, we can actually merge the two around these rates.
12:32 Now, the point is therefore philosophical, whether we want to support them at the cost
12:37 of the larger, I would say yes.
12:39 And I would certainly say that this would cheer just so many millions of entrepreneurs
12:43 and traders.
12:44 And of course, it's not just for companies as we have today.
12:46 I would actually propose this comes for partnerships, proprietorship, just everybody.
12:51 If an entrepreneur, small guy, you pay less tax.
12:54 Now, it's marginal.
12:55 I suggested some numbers.
12:57 Let me say that starting at 5% and going up to 20% in a progressive way.
13:02 The point, therefore, is that when we say that we are talking or building this story
13:06 for a resilient India, there is a scope for the private sector.
13:12 Or not a scope, in fact, it's imperative for the private sector to play a very â to
13:17 play the whole role and the government to play the role of a neutral empire, an empire
13:22 which reduces the scope of crony capitalism, the empire that facilitates and for the small
13:31 entrepreneur to develop so that entire ecosystem develops.
13:34 And then we hope and look forward to be a resilient India and a developed India.
13:38 So thank you very much, ladies and gentlemen, for listening to me patiently on this subject.
13:43 And once again, I must close the discussion by saying that we are thrilled and excited
13:48 that our Honorable Minister, Shri Piyush Goyalji is here with us.
13:52 And I just hope that each one of us look forward to his speech today and pick a few thoughts
13:58 about many of the ideas he may have for us.
14:01 And for every one of you this afternoon, my very warm wishes and a very happy 2019.
14:09 Thank you very much, ladies and gentlemen.
14:10 (Applause)
14:10 [APPLAUSE]