An $800M Investor on Market Bubbles, India’s Future & F.I.R.E. | ft. Ashish Dhawan

[00:00:00]I saw something where you said last year that this is India's moment. What went wrong >> globally? I feel that we are in the midst of overvaluation. SpaceX IPO is just a sign of that. America is the biggest bubble. AI is a huge trend. So was the internet. But I think we will see some tradeoff in global markets at some point. I mean to put in context, China has 6 million factories and we have about 300,000 factories. I don't think that this is a permanent issue. In the grand scheme of things, I say again it's a blip.

[00:00:28]It's been so much easier to make money in the stock market. You know, it just people got it in their head that I can make a 20% IRRa. I think that tide is turning. You've seen in the last 18 months, people have not compounded their money. It's not so easy to make money in equities. Equities if earlier it was 13 to 15%, I think it's more like 10 12% going forward.

[00:00:53]Welcome to the Growing India podcast.

[00:00:56]This is a joint initiative between Grow and Me, Monica Halen. I do these conversations so that the stories that shape our country can be told clearly and honestly. Today's guest is really special. He was financially free at 40 and now spends his time building institutions towards Vikasit Bharat. I am delighted to welcome Mr. Ashish Dhan on a Sunday morning. Here we are recording. Thank you for making time.

[00:01:24]>> Thank you. Thank you for having me.

[00:01:25]>> I'm going to start with the growth story. I think that's something which is really at the top of all our minds because I saw something where you said last year that this is India's moment.

[00:01:36]All of us thought that right every we had all our ducks in a row and it's taken one event to derail us. So we were deluded. There was a structural problem.

[00:01:48]What went wrong?

[00:01:50]Yeah, look, India obviously is dependent on the world for energy and there's an energy shock right now. So clearly it's a it's a hit to the economy and it's a difficult phase. But I think in a way it's a it's an opportunity also for to for us to accelerate reforms. I my own view is we did a bunch of macro reforms which accelerated growth but we haven't done a lot of micro reforms factor market reforms that would make India truly competitive. So this is an opportunity in a way to think about how we wean ourselves off the energy dependence. Now that's going to take a long long time. It's not easy to do it.

[00:02:27]Uh but for sure I think it's an impetus for us to look at how we can become more competitive. So I think the structural story is very much there. This is a cyclical shock. It may last 6 months, a year, 2 years, but in the great story of the next 20 years, I think it'll be a blip.

[00:02:45]So right now there's a lot of doom stories u every time you open anything to do with social media or news >> how much of that is really an issue like how worried should people be >> it is an issue I I mean there is it's going to be inflationary for sure the government has shielded us but I don't know how long that can last uh so yes there there is but I don't think it's a spiral that's a perpetual spiral I think it's one where there will be slightly greater inflation. I think at the same time I don't think we're going to see massive cut back in production because India's got a long ways to go in terms of building manufacturing capacity. We are have an opportunity to export much more with our upcoming FDAs. I think we are becoming more competitive. So I worry less about unlike China which has massive overcapacity. I don't think India will have over capacity. I mean to put in context, China has 6 million factories and we have about 300,000 factories. So I'm not saying we need to get to 6 million, but even that journey to a million uh if we're going to be a is is there. So I think the structural thing because we're so underpenetrated today.

[00:03:57]>> Um I I don't think that this is a permanent issue. It is a >> it's a in the grand scheme of things. I say again it's a blip.

[00:04:05]>> Right. And you mentioned earlier about the factor reforms >> which would obviously so labor the needle has moved because of the bills last year the act last year >> but the obvious ones are really land um agriculture >> fertilizer for example I mean there is a view that >> instead of doing this huge subsidy for everybody why not do cash transfers.

[00:04:31]Yeah, >> with with the sort of election results we've seen right now, shouldn't the government right now be taking these calls because they've got the momentum political. So you you need political will to do these reforms. So agriculture was tried, it failed. Okay.

[00:04:49]But it needs to be done.

[00:04:52]So >> yeah, so let's look at it sector by sector. Yeah. And look at what our disability is relative to China, Vietnam, and how we're closing the gap.

[00:05:00]So electronics is one sector where India's manufacturing was non-existent.

[00:05:04]We were just importing everything from China or elsewhere. I think thanks to the PLI, thanks to Apple coming here, we've got a production base at least for mobiles.

[00:05:13]>> Started with assembly, everybody did a lot of chuchu that it's only 15% value addition, >> but that's okay. You know, you you always start downstream and then go upstream. So now with the PLI for components, you've seen how many companies have applied and um we will have an ecosystem here and probably go to 35% value addition. By the way, because it's a global value chain in electronics even in China, they're at 40% value addition. They're not at 80%.

[00:05:44]It's never going to be an industry.

[00:05:46]You'll always be getting parts from Japan, Korea, Taiwan, America, elsewhere. So in electronics, we've become competitive now. We did a number of things not just the incentive but to lower import duties on components.

[00:06:00]Earlier we were at a 9% blended tariff rate. Vietnam was at 0.5%. Not in this budget but the prior one we lowered it dramatically and a number of other issues and now we've created three four clusters that I think are quite competitive. If you look at a sector like apparel, right, we have underperformed. Uh apparel, if I take out textile, our exports are 15 billion.

[00:06:24]They've stagnated for a decade.

[00:06:25]Bangladesh is at almost 50 billion.

[00:06:27]Vietnam 50 billion. China is still at 100 plus billion. Now the major disability there was raw material, not labor. Labor is quite cheap. In some cases against Bangladesh, labor may have been more expensive because of the minimum wages being raised in many states. But many states offer a wage subsidy to neutralize it.

[00:06:47]>> On the raw material, the issue was QCO >> non-tariff barriers.

[00:06:51]>> So now that that is being removed, I think that'll make us competitive in synthetics, in man-made etc. >> If you look at other sectors that where metal is an input like say can we be competitive making washing machines. So if you talk to a company like amber today, we have almost 80% value addition in India. Okay, >> significant value addition which didn't exist earlier. We're still not competitive from an export standpoint because the input cost is too high.

[00:07:19]Metal is a very high component in a in a washing machine. So I think we have to look at this at a micro level. What is our disability sector by sector? How do we improve it? If there are certain parts that are critical like say in IT hardware laptops, >> unless we we do the display unit here, we're not going to be competitive. So because we have about a 10 to 15% disability versus China today and unless we get an anchor tenant like Dell or HP to come like an Apple, >> we're not going to be able to build the supply chain and so we need to make it attractive.

[00:07:51]>> So I I actually look at this sort of at a micro level. I think the agriculture one >> I mean fertilizer subsidies and all I'm sure the government is looking at. I mean you look at something like agriculture our exports by the way about 50 billion.

[00:08:04]>> Yeah. and they've been increasing and I think we have a chance to get to like 100 billion. A small country like Vietnam already does almost 70 billion of agree exports.

[00:08:14]>> So I think India has very fertile land has uh lowcost labor. There's no reason why we can't be competitive even in that sector. But of course it's a sector we need to protect also because so many livelihoods depend on that sector.

[00:08:28]>> Right. And also agriculture. I think we've done very well in those uh especially things like shrimp export.

[00:08:33]Yes, seafood has done very well >> which is such a uh it's so counterintuitive that uh something so delicate, something so perishable >> we are actually doing uh we are exporting to I think Europe now and um >> globally >> globally so after that US tariffs >> we've we've actually opened up correct correct >> I I think shows I mean look at Vietnam category by category in agricultural exports they've become competitive and they built a global base. So I think we should be looking at these examples and the reforms are you know by sector because there's some broad reforms like cross cutting like labor code achieving that there's some broad reforms around land use broad reforms on deregulation which government is working on and faster environmental clearances on creating better industrial parks so it's easier for you to do plug and play like the PMitra parks for textiles and apparel. So these things are the enabling conditions very very important and we need those to be competitive and then sectorally we need to look at it and see are there some nuances in each sector that make us uncompetitive and how do we reduce that disability. Uh I think incentives can only work for a period of time.

[00:09:49]>> Um they provide a philip and initial kickstart but ultimately industry has to stand on its own feet and be competitive.

[00:09:55]>> Right.

[00:09:57]You are obviously interacting a lot with the government. Um you see the political will right now that this is if we lose this 30 years we we are in a middle income trap. Is that is that palpable in the corridors?

[00:10:14]>> Look I think action is being taken.

[00:10:16]>> Okay.

[00:10:17]>> We always wish it would faster. Uh because I do think we like you said we have a narrow window. M >> it's not just our demographic uh dividend or the cliff we'll hit but it's also I've been to China twice in the last 6 months the Chinese dominate in every manufacturing sector that 35% of world manufacturing output we used to think I mean the economic theory is that labor costs in China have gone up and that in sectors like apparel that are labor intensive it'll just go now to Bangladesh India Africa wherever else labor cost is cheaper But the Chinese are automating very rapidly >> and they want to hold on to every industry. So even if you look at apparel, China's export today is seven, eight times that of India. So I think we have to move at lightning speed because that window right now apparel is still done by hand.

[00:11:11]>> Yeah.

[00:11:12]>> But as the robot has the dexterity to be able to do it, you'll see robotization creep in. in electronics assembly. You know, Apple has created so many jobs in India and and through the value chain, you know, again once a robot has the dexterity. The robots right now are these big arms you see in auto factories and things like that, you know, >> but they they are going to be much more dextrous >> going forward. So I think the window is 5 to 10 years. Okay.

[00:11:38]>> And so I really feel we need to move fast because once if you don't have the knowhow >> then you can't move up the value chain in that sector.

[00:11:46]>> Right. Right.

[00:11:47]The other thing which I always question is that like right now we've seen um I think a Vietnamese company come in with the electric cars.

[00:11:54]>> Yeah. Winfast.

[00:11:55]>> Yeah. So we see a lot of the um you know into the country but our strength is really the services sector whether it is uh like we were discussing the instant delivery or um I think the financial sector has done exceedingly well. So if you want to open a bank account, it's it's just not a problem. You try doing that in Europe, you try doing that in other parts of the world, it's so clunky.

[00:12:24]Why are we not expanding out? Is it regulation? How are there like why don't we go and do in banking and financial services what we see here?

[00:12:36]>> Yeah. So it's a good question. I think that um Indian banks did try to expand you know ICICI set up this UK operation Canada operation it ended up being a failure to be honest so they retrenched I think the home market has been so good and for private sector banks they were ekking out more market share versus public sector banks for a long period of time over the last two decades >> that there was possibility to grow at earlier 18 20% now 13 to 15% very good roe in the Indian market because in a way you the public sector banks were more inefficient. So they in a way allowed you to make high net income margin because you were always more efficient whether it was CASA whether it was the high yielding assets you know efficiency technology all of that. I think public sector banks have become more efficient. I think now in the next few years is the time when these banks have now garnered some critical mass >> uh for them to go and go outside India.

[00:13:39]They will largely need to do it through acquisitions versus denovo.

[00:13:43]>> Uh so there's a chance in services beyond the typical knowledge services where India has played like IT services, GCCs etc. I mean the other big categories are categories like financial services, transport etc >> where we need to go global but I I wouldn't say that services is our forte.

[00:14:03]I think India has demonstrated that in areas in manufacturing we can be very competitive >> and like in two wheelers >> we have been competitive >> so that that should say there's no reason why we can't be competitive in other sectors as well and um I think without a manufacturing economy >> we will not be able to achieve our big bat goals >> okay um I want to segue into the markets at a not at a small at an individual level.

[00:14:34]But there is this story that our markets are overvalued. The PE ratios, the price to earning ratio is very high. Now, one way that it goes down is that the prices go down. The other way is that the earnings go up. Corporate earnings profits which happens first.

[00:14:54]>> So look, globally I feel that u that we are in the midst of overvaluation. I mean the SpaceX IPO is just a sign of that. I mean America is the biggest bubble and you know when the there's everything is AI focused right now. I AI is a huge trend so is the internet but I think we will see uh some tradeoff in global markets at some point in time. I don't know when. I think India is well positioned. See we were overvalued.

[00:15:26]There's no doubt and it is the reason why a lot of capital started to pull out of India starting in 2024 and then of course more recently it's the AI trade which has taken money away.

[00:15:40]We are still somewhat overvalued if you ask me because the cheap stocks are really old economy. Anything that's relatively new economy forward-looking has a huge multiple attached to it. So I I do think it'll be earnings growth that will eventually get us there. But if there's a global sell-off, you'll first see valuations come down and then you know but I long term I I look at things longterm, >> right?

[00:16:05]>> We never invest with a one or two or three year horizon in mind.

[00:16:08]>> I think if in India you have a 5year horizon, your earnings growth will more than compensate for any decline in PE.

[00:16:17]uh even if PE is 20% overvalued or 25% overvalued at this stage. So I don't worry about it as a long-term investor >> right because right now there is this sort of uh you know experts and the conversation is that it is really the Indian retail investor the SIP the guy who's putting 3,000 bucks every month.

[00:16:40]>> Yeah.

[00:16:41]um he she has caused this overvaluation because um the the valuations are too high and this person goes on investing at whatever value. So is the retail investors seeing something that for example the corporates are not seeing because I understand that corporate investment private corporate investment private investment is coming in at um steel cement I think we are seeing expansion of capacity >> but in the other areas I believe there is slack there's still like we are at 75% capacity China is dumping um lot of companies are waiting and watching to see where the AI acts false.

[00:17:25]Um, so who is right? The companies to wait and watch or this, you know, the SIP investor who's saying, "No, no, I think this will work."

[00:17:36]>> No, I think the companies make rational decisions. Um, that, you know, if you have slack, why would you put more capital to work? Mhm.

[00:17:45]>> So I think companies make rational decisions is my view which is why Indian entrepreneurs and companies have generated amongst the highest roles in the world because they're not willing to just throw capital around. They are very very good at capital allocation in general. Having said that I do think that our companies have become too conservative. If you look at R&D all of corporate R&D in India is $10 billion.

[00:18:08]It's a pittance.

[00:18:09]>> Yeah. work hard has happened like once that >> Glenmark had something but even that development happened mostly in Switzerland and the US >> um so innovation has to be big focus and R&D has to be big and that's where I feel companies are getting it wrong I think they're right in terms of the hard asset you know they'll put it up so I think one is just on R&D they need to invest much more and two is on exports I still think too many Indian companies were molly coddled you know we had higher tariff barriers. It was easy to make good money just in India and you never ventured abroad. But I think that now that our companies are competitive, they're larger, we must have global ambition and we must be more daring and that then takes away some of the slack, right? Then you need capital for that.

[00:18:58]So I think Indian companies also should be you know asking for more capital and that'll then absorb much more than the SIP money coming in. Right now it's really IPOs of new age companies. The older companies if they were more ambitious like Sunfarma I think has been very ambitious with their acquisition.

[00:19:17]We need to see many more of those going forward. So both on the R&D side and on the international expansion side >> but are you seeing any of this happening because we need more. So there is more.

[00:19:28]This is like one of those strange markets where you actually have retail money is coming in through various pipelines. Yes. Okay. It's direct. It's through funds, it's through insurance, it's through NPS, it's through PF incremental.

[00:19:41]>> Yes.

[00:19:41]>> Uh 15% goes into index funds. So you have fat pipelines of retail money coming in. So the supply of cash is there, but we are not seeing the supply of paper. So is so should it not be a great time for government to disinvest?

[00:19:59]>> It is a great time for government to disinvest. There's no doubt.

[00:20:02]>> But I think that's one part. I would hope that instead given we're lucky there are very few emerging markets that have such a large investor base >> right >> who invest through SIPs so you predictable >> and right now FBI have turned negative but they will come back someday so we're going to have massive inflow of capital coming into our markets and I think the way to absorb it is partly IPOs but partly our own companies raising their ambition that's why I was saying the acquisition part >> right right >> there's a big opportunity right >> to do that and if the world you know globally valuations change and by the way valuations are more skewed even in the western world towards the hot sectors uh there are a number of assets still available in developed countries at much lower valuation sort of like sun farmer buying an asset there's a clear multiple arbitrage where you trade in India is very different from where the asset trades now you need to manage it well it's not going to have the same growth you have to get synergies >> you all of that. I think our our entrepreneurs are capable of doing that.

[00:21:07]So, but they're just not daring enough >> when it comes to acquisitions, comes to R&D. So, I think that needs to change because we will have a wall of capital coming in.

[00:21:16]>> Right.

[00:21:16]>> And it cannot get absorbed just through IPOs.

[00:21:19]>> Right. Right. Okay. So again because there is so much noise around it um it is okay for somebody to go on investing uh at a retail level if you have that allocation in equity it's it's a good idea to continue >> I think generally in the broader market it's okay because it's very hard for people to time the market >> that's right >> and I think globally what has happened is if you don't do this >> you tend to invest when the market is an all-time high and you tend to divest, >> you know, at the absolute long wrong time when markets at low.

[00:21:58]>> So, I think the nice thing with SIPs is it's it's almost automatic, right?

[00:22:02]>> And I think for the retail investor, that's a good thing >> as long as it's diversified. You're putting it into correct >> the broader index through a product, it's it's okay. If you're starting to punt on just the small caps or just on some hot sectors, then you run a real risk even if you do this systemic uh investing.

[00:22:25]>> So when I look at a market or a country like the US, the productivity gains will come through very high investments which we are seeing in sectors like AI.

[00:22:37]>> Yes.

[00:22:38]All that I need here is drinking water, roads, electricity, um, healthcare. This is very lowhanging fruit in terms of a productivity gain. I mean, the productivity gain that I get from having cooking gas instead of firewood is huge. Or through electricity in a room in a village minus no electricity, I'm immediately getting a huge productivity gain.

[00:23:06]>> Yes. to be able to travel from my house in a metro rather than you know which any so these are all very lowhanging fruit what do you think what is a what can we do right now what can the government do to increase this productivity today in India because AI of course is a story but we don't have the capital we don't have the chips we don't have that so it's happening but we have to address our problems at the level that we are Yes, >> just I just feel it's lowhanging fruit.

[00:23:39]>> Completely agree with you.

[00:23:41]>> One of the best books I read I I wish I could remember the name of the author but is a fat book on America's productivity over a long period of time.

[00:23:51]And um basically the highest productivity in the US was between 1870 and 1940. very high productivity because those innovations were fundamental. You know, electricity coming into every home, um the cars, you know, widespread adoption of transport, uh rail connectivity cutting down time, so logistics costs coming down, communication with Alexander Graham Bell's innovation, these were so fundamental that even innovations like mobile technology, the internet, etc. pale in comparison when you look at the productivity data right so I completely agree with you for for India we have a huge productivity unlock through very basic stuff >> so in my mind I think um I'm a believer in not just consumption-led growth but in more hard infrastructure capexdriven growth so I think India needs to keep investing much more in hard assets government already has stepped up to 3% % plus of GDP from the center. The states then put in money. I think government needs to keep doing more and particularly areas like urban are completely neglected which is where all the incremental growth is. We're putting right now a lot of money into rail and road those are the two biggest ticket items on the capex side.

[00:25:14]>> I think we really need to increase urban in a significant way. And then of course so I think on the productivity side basic stuff you know AI we should be a fast follower. There's no reason for us to be at the frontier right now.

[00:25:30]>> I think we will be able to take open models distill them create small models like we're doing. We'll be able to develop lower the token cost. We'll develop applications at scale. I think that's what India ought to be doing on the AI side. There's no point putting the hundreds of billions of dollars.

[00:25:47]They're better spent in the real economy for India.

[00:25:51]>> Uh building more highways, putting into rail, putting into our urban look at the transformation of Mumbai >> with the you know billions of dollars that have gone in that is a much higher ROI than building you know cutting edge frontier models from an India perspective.

[00:26:11]>> One area which you think they should really focus on. So one of course is roads infrastructure but you mentioned this urban renewal. This is a state subject. What is it that the center can do? Because a lot I believe a lot of political will is coming from the center and there are some state states which are very aggressive. I would put Uttar Pradesh right at the center of that.

[00:26:32]Tamil Nadu has done exceedingly well.

[00:26:34]>> Yeah.

[00:26:35]>> Um Orisa has some stories you know. So you see the you see few of the states getting the idea that this needs to be done.

[00:26:44]>> I still think we're way underinvesting.

[00:26:47]I think the center has a role to play because there's no money at the local level. Right? Municipalities in India have no other than Bombay or they have no money at all because property taxes are negligible and they have no revenue mobilization capability. The money is all at the center and at state level.

[00:27:04]and we put in into urban infra something like 0.5% of GDP and we need to put in something closer to 1 to two 2% of GDP so I think we need a massive philillip I think you see Bombay is a classic case where you know the hardware building the atul setu the coastal road building the metro is a gamecher for Bombay so firstly I think we need to look at cities through the lens of economic development you know earlier if I asked someone 5 years ago what's the GDP of a city what's the GDP of Surat nobody knows the answer what is the economic vision for Surat what should be doing what transport in building a unified transport plan unlocking land much higher FSI in our cities which will lead to more vertical development ease of doing business in our cities attracting more investment into our cities I think that's what will drive our growth but the hardware putting in some basic infrastructure structure is a key starting point and the center can provide a massive philillip and so should state government should co-invest along with the center in making that happen >> right any example which comes to mind Mumbai you have said but other than those roads the minute you step 5 minutes into the rest of the city you don't want to be there because of the mess that has been created with the builders and the the whole nexus there are no roads the traffic is terrible so is there maybe even at a smaller scale something which comes to mind as to what an Indian urban center should look like because again out of that central Delhi area the rest of the Delhi is very chaotic you come back from abroad and you you know it really the contrast is so sharp there's no pavement there's it's just a mess everyone every vehicle is coming in every direction at you so this is just it's just failure of governance where as a law-abiding citizen you feel overwhelmed by the by what comes at you.

[00:29:08]>> Yeah. No, I I don't disagree which is why I think we need to invest much more.

[00:29:12]Look, I think the governance changes are harder in our context because the political economy. I don't think states will want to give the power that was envisioned in the 73rd 74th amendment to have strong mayors in cities. If you did that, the mayor of Hyderabad would be more powerful than the chief minister of Telangana. Right. I don't think that's happening. Having said that, Hyderabad has been transformed. How was it transformed? Because one is they had unlimited FSI and uh they really Hyderabad did vertical development. Two is you had a chief minister who went and brought the initial >> Microsoft and you know ISB and those investments into >> Yeah. Exactly. And then GC it's become the GCC capital >> of India and it's reasonably well planned if you look at Hyderabad today.

[00:30:03]I mean Indian cities will never be as well planned but it's a mega city today.

[00:30:07]Greater Hyderabad probably 12 to 15 million people.

[00:30:11]>> Much lower cost of living and much lower cost of office rent than Bangalore.

[00:30:16]>> Um so I think that's a good model if you ask me. I mean even NCR I know you were saying that there's lots of issues but I think with the RRTs coming in you know and now more of these RRTS this suburban rail kicking in KMP EP this new UEE2 it really if we need 5x of this you do 5x of this you'll see the difference you know our metro system today in Delhi is now almost 400 km >> 7 million people ride it daily. Imagine if we didn't have a metro system, what would happen, you know? So, I I really think if you go to China, they may have overdone it. Uh but it it requires massive investment. Or even if you go to Bangkok, which was a chaotic, terrible city 20 30 years ago has really through massive investment and better planning really it's become a nicer city today.

[00:31:11]Go to Koala Lumpur which is 8 9 million people greater to Koala Lumpur. It's a fantastic city today. So I don't think there's any reason why we can't make it happen but it'll take time. It'll require massive investment.

[00:31:23]>> Okay.

[00:31:26]A lot of this audience is fairly young as most of India is. Um and every sort of generation has a story in terms of the investment opportunity that they see.

[00:31:37]>> Yes.

[00:31:38]>> For my generation it was that 91 reform.

[00:31:41]It just sort of if you were educated, willing to work and you showed up, you did well. Okay, that's all that you didn't have to be super bright. You just like you showed up and you did well. So then there was that it boom. So every generation has something which works for them. This 25 to 30 year old today in India what is it that's fueling them? What should be fueling them?

[00:32:08]>> So I think there are three distinct opportunities which are big ones going forward. So one is I think India's deep tech moment has arrived.

[00:32:17]>> We have the ANRF, RDIF, we have a few deep tech funds. You see these sparks of innovation like Walkard you talked about or Glenmark.

[00:32:26]>> You see now in the space sector some interesting things are happening. I think this is the beginning. We're just scratching the surface and with more money coming in, more specialized funds um and more Indians coming back from the US and elsewhere we're going to see in the next 10 20 years the way China moved up very dramatically. So big boost to R&D in the corporate world but startups the genuine deep tech startups this is the moment. So I think that's a mega trend for the next 20 years and we will see a flourishing of the biotech sector.

[00:33:02]we'll see a flourishing of you know chip design companies etc. I think a second mega trend is exports. I think we have Indians now who've gone abroad, they've been educated, they've come back even in these business families you see now, they've been trained outside, they have a global exposure. I think they need to have the ambition now to go out and so the the way you know in Japan and Korea, you really bet on the exporters and that's where you made your money, right?

[00:33:30]Because they were globally competitive and they had a world market which is so much larger than the whole market. So I think that is the next big opportunity for India. And a third one is always the consumer because as India grows as we go from a 4 trillion to a 10 trillion to a 20 trillion particularly consumer discretionary staples will not grow so fast only so much food you can eat but the discretionary stuff is going to grow at a much faster pace. So I think those three mega trends are very much there and young people should start businesses in these areas. So we are seeing this new generation uh setting up these businesses and you mentioned um you know children of the businessmen who've gone out and they've come back but they're opening family offices. Mr. Ud Kotak has been from every stage saying that please invest. So the story of it's so much easier to preserve the money than get into opening a factory. Why?

[00:34:30]>> Yeah. Look, I think also it's partly the timing. The last few years post um it's been so much easier to make money in the stock market.

[00:34:39]>> You know, it just people got in their head that I can make a 20% IRRa just on my own or giving it to a mutual fund or giving to my wealth manager. The expectations that was set and it's really hard to generate a 20% return in hard assets and there's more risk and you know etc. I think that tide is turning. You've seen in the last 18 months people have not compounded their money.

[00:35:03]>> Uh it's going to be hard. I think people will realize that it's not so easy to make money in equities. And by the way in equities if earlier it was 13 to 15% was a long-term trend for India. I think it's more like 10 12% going forward. So I think that as reality sets in uh this will change and there'll always be a next generation of you know some of the this this is a trend everywhere. Some of the next gen of business people will do family offices but that capital will then flow into the real economy. It'll be a next generation of entrepreneurs or someone coming out of Nagpur or you know some smaller town who's more ambitious who wants to do the hard work. And I think the the other thing is India deregulates we make it easier maybe people won't be as daunted by setting up a factory anymore. I think part of the problem was we did the license r was removed but the inspector raj never was >> right >> you know you had the heavy hand of the state >> so as we give the entrepreneur more freedom hopefully more people get excited about starting businesses uh as well so I'm I'm optimistic I think >> it's okay if some people set up family offices as long as that capital stays in India and comes back into the stock market into startups into private equity and that's where the money actually is going if you look at it.

[00:36:24]>> Right. Right. Um and I'll pick up on that point where you said that uh it's daunting to um set up a factory. And I will segue into corruption. Very near where we are sitting. We've had one building collapse.

[00:36:38]>> Yeah.

[00:36:39]>> We've had one fire. Lives have been lost. Um the police beat constable and the MCD uh employee he's able to see some mosquito LE on a third floor terrace cooler but he couldn't see the unauthorized floor he couldn't ask for the fire NCO. So there is endemic corruption and the owner of this place saying and we know all you have to do is bribe.

[00:37:08]So the owner of the building is in jail but we don't know the name of the beat constable who might have got >> definitely would have got something >> or the MCD who's who who who's who's responsible. So we never see the faces of the people who have allowed this to happen. So there is endemic corruption.

[00:37:28]Now I don't want to complain about it.

[00:37:31]You are now an institution builder. How do you think at a policy level? What do we do? Because it's not just them, it is also us.

[00:37:41]I will build an authorized balcony. I will cover it up.

[00:37:45]>> Yeah.

[00:37:45]>> I will turn the shaft into my kitchen. I will I will do all sorts of nonsense.

[00:37:50]And when the guy comes, I will give him 500. Like not me, but like we are the swords. We'll stand on a red light on an empty road. But you know that's how Delhi works or everywhere works.

[00:38:03]How do you It's a I don't I don't even know if it's a policy solution. How do you change the character of a people?

[00:38:09]>> No, it's very hard. There's no doubt. I think um you know there are these there's a big push for deregulation and there's two big efforts by the government. Yeah.

[00:38:18]>> The high level committee and then the caps committee or caps group that's working on it group of secretaries.

[00:38:25]>> I think they're really working very fast on in terms of the stroke of pen changes. Yes, >> I think the mindset culture change is much harder.

[00:38:34]>> Now, one way to get around it is in many areas what they proposed and what's happening is self-certification. So, in some areas, now when you're making a building, obviously it's it's not possible, but in certain areas when you're starting a business or something, anything that's low risk, you should be able to self-certify because there's again a money-making opportunity.

[00:38:54]Somebody comes to you, medium risk, third party certification. So in progressive states like Andra now instead of uh a government person certifying they've got a third party certifier and they've empanelled the certifier >> okay >> for buildings up to a certain height um and and third is creating greater transparency you know but having said that the corruption is endemic and I don't think it's going away in with a jutka >> it's a gradual process through greater digitization through greater you know moves like third party certification we can break the back of this nexus it's a nexus you know it's also with the pollution control boards we know that companies are non-compliant these guys are taking money to their hand and glove but to say that companies should somehow wake up and become more honest is not going to happen >> you know it's um >> so I think it's it's a it's a gradual process is my sense unfortunately Monica I I don't think it's going to change because we can make the stroke of pen changes >> but the culture change is very hard and it'll only happen over a period of time.

[00:40:05]>> Any examples of a country which was able to do it because from where we sit right now also in its infinite wisdom the Supreme Court did not allow the election bond.

[00:40:15]So there's a whole channel of uh election funding which could have been brought into the light which has now gone back into dark. So somewhere I feel it sort of leads from there as well that the parties do need money.

[00:40:31]>> Yeah.

[00:40:31]>> If you've moved that back to cash. So despite UPI cash levels have gone up. If you look at RBI data this is where is that money?

[00:40:40]>> Yeah.

[00:40:40]>> We know where that money is. It's sitting somewhere.

[00:40:44]>> So I think one way people have solved for this is is do it in certain zones because you can't solve for the problem endemic. I mean at an overall scale. So I'll give you an example say in manufacturing right we know it's very hard everybody asks you for money it's very hard to start a business you have to run around to different departments to get approvals there's a time issue it's not predict it's can be unpredictable at times you know you and every so if you look at China the way they did it apart from single window and all they said in certain zones the sezs they empowered a single authority to have all the powers and and just streamline and give you approvals In a way that was one way to in Vietnam what they've done is the industrial park owners are actually mostly private government has given them an IP license industrial park license and given them a lot of authority to work with the state to make things happen much faster. So in manufacturing at least in certain zones in certain clusters you can do this and I think this idea government is actually coming around to that look I may not be able to bend my everything in everywhere but at least in doera I can do it differently at least in shri city and 100 such industrial zones I can do it differently um in our cities I think it's going to take longer the the kind of issue that you were talking about there I think This third party certification is the only way to break the back you know like with the boiler certification in a couple of states because there's anyway very few boiler inspectors they move to third party certification >> and um and that helped because again you break the nexus between the two now there could be a nexus formed between the third party certifier and uh but we got to hope that at least if you're moving to third party >> the state can hold them more accountable than its own people >> right we can I'll move to um a dream that almost every 30-year-old, 20-year-old has right now, which is early retirement. They have this vision of uh making it big, five-star life, traveling the world, chilling on the beach.

[00:42:56]Um you were financially free at 40 and uh you did not sort of retire. You sort of segueed into something else and here we are on a Sunday morning recording a podcast. you're working.

[00:43:11]Um I think explain to this young audience what retirement really means.

[00:43:19]It's not stopping work because if you know you have 40 50 years ahead at age 40 and I think work sort of defines who we are in a lot of ways and if there is so when you go to school college work it gives you a structure. people underestimate the benefits of that structure because then there is lawlessness if you don't have that imposed structure. I think just take them through this idea that retiring doesn't mean a holiday on the beach.

[00:43:52]>> Yeah. So firstly I I would say um I I have a lot of hope and for the young generation and and I think I I really admire I see it through a show because I go there once a week and amazing youngsters you know I'm not the Indian uncle who wags his finger you know and uh I I I I think they are much better than our generation honestly I I think the aspirations are different I'm all for throughout my life I've also believed in having fun and working hard together. So I don't think they're orthogonal, right, >> completely. Um and and a lot of u so I would say for younger people definitely look at saving some money because it'll >> financial freedom is something that's amazing if you can achieve it. So but to do that you do need to save and invest wisely. So that's at the core. And then beyond that, of course, by all means, go to the beach, go to Goa if that's what makes you happy. If you want to go live in Goa, do that. But I I don't think you'll be satisfied if you're going to lead just a hedonistic life. I think some purpose beyond that. And the purpose may be whatever you're helping with the creative economy, you're doing something for society because at a certain stage you want to give back, you want to build a new enterprise because it excites you. there's you want to be a gig worker, a knowledge gig worker, you know, a nomad, uh you can do that today.

[00:45:24]Uh but I I would say there's no reason you can't it's hard to relax on the beach 24 hours a day.

[00:45:31]>> Yeah, that's exactly what I tell.

[00:45:32]>> By all means, go to the beach.

[00:45:34]>> Yeah.

[00:45:34]>> But also keep yourself engaged and think of yourself as a producer and a consumer.

[00:45:40]>> Okay. And then how much is enough? I know it's very subjective but how much is enough?

[00:45:48]>> Yeah, it's hard to say. Um I always believe in the formula that sort of H equals R minus E.

[00:45:57]>> Happiness equals reality minus expectations.

[00:46:01]>> So I think it starts with >> keeping your expectations reasonable. I wouldn't say low. Obviously one should enjoy one's life. If you like going on holiday, please go on holiday. You like consuming spirits, consume your spirits.

[00:46:15]Whatever gives you joy. But at the same time, if your expectations, if you're trying to keep up with the Joneses and you know, at every stage when you make more money, you're always, you know, raising your expectations, your expenditure, everything. That's a very difficult. It's keeping up with the Joneses is really what I think hurts. So my own sense is once your basic needs are met and and by basic I don't mean the Indian uncle who says your basic needs should not in in include a nice holiday and having fun and >> whatever you define as a certain set >> don't let it creep up as your >> income goes up I think that's the let that let the jaw open up as it were let the jaws >> I think if one can decide that early on I decided fairly early when I was 30, what would make me happy?

[00:47:08]What kind of car I needed to own? You know, how much time I needed on holiday, whatever. And that's your main Kart. Did it go up relative to when I was 30? Yes, for sure. But did it go up relative to my income? No.

[00:47:20]>> No. Right. Yeah. So, you mentioned this thing about keeping up with the Joneses and the Jens. Um when I talk to the young people I will also tell them that you know don't uh don't cop like don't try and match life lifestyle and just stay where stay in what you can do. But don't you think that this FOMO is also a fire in the belly? So sometimes I think I'm conflicted that am I telling them the right thing? Cuz unless they have this desire to go out and conquer the world, they are not going to do these big audacious things. So what is this balance between this fire in the belly probably caused by FOMO that I want that life?

[00:48:06]>> Yeah. and having the maturity to say this much is for myself and the rest is extra.

[00:48:16]>> Yeah, it's a good good point. I think you know maybe some of us in our generation were too conservative because you know for us we when we started to accumulate we were always worried about the downside and you know things like that. I think the younger generation is more liberated in that sense. Uh, and so there's a certain degree of daringness that I see in this as well. I mean, I'm not one for overconumption. I think America may have overdone it, but America's strength also was that >> people didn't think too much about these things. They were just >> cowboyish in their nature, >> you know, and they were willing to spend money, enjoy themselves, but they also great producers.

[00:48:58]>> Uh, they were liberated in a sense. So yeah, I do see a big positive in that also >> is that they travel the world.

[00:49:04]>> Yes.

[00:49:05]>> They see what's happening. They learn >> and um >> yeah, I mean I we shouldn't criticize that I think >> right >> and I think also we shouldn't always judge. I mean who are we to know? I think um I just have a lot of hope. I think I see them as better than >> than we were. They're a liberated generation.

[00:49:23]>> Definitely. They have an abundance mindset. Yes.

[00:49:26]>> Whereas I think our generation we just we live we grew up in fear and less. So I think >> rather than their mindset than our mindset >> they will create much more >> yes >> than we ever were able to.

[00:49:39]>> Yeah. I want to move to a slightly philosophical question around money.

[00:49:45]Most spiritual traditions tell you to discard money and power both. So it's like an aesthetic life is prescribed so that these two forces don't control you.

[00:49:58]These are very powerful forces, money and power.

[00:50:03]Uh you are supposed to let it go because it will control you. The idea is that you should control it. It should not control you. Now when I see the story of your life obviously a lot of wealth was made where you uh were able to retire at a certain age and your uh decisions to work on institution building subsequent to that you know on education and now with the convergence foundation you've incubated uh what 32 32 >> no 20 some >> 20ome okay institutions which the audience should know is aimed towards uh building that institutional framework in India which helps us go towards Vikasid Bharat even in personal choices I mean in sort of the car that you have driven in here with let me not mention the brand but it's very clear to me that money doesn't have you you have the money so you have that choice to decide what you want to do with it a lot of the audience which is right now in their 20s and 30s I believe is going to be super affluent because you they've got that moment in I think the economic history of India where through just sheer hard work and building something they are poised to be super affluent.

[00:51:25]Take them through this journey of yours where there must have been a time where you would have decided that this is what I will do with it. It doesn't influence your behavior because with a lot of money comes crassness.

[00:51:40]um h what made you this?

[00:51:44]>> I think I had some good influences. So one is being a an investor and early in my life um I read a lot of Warren Buffett.

[00:51:54]>> Yes.

[00:51:54]>> And he's a role model. I mean person who despite all the wealth drove his own car to work every day and lived in the same house and and as he says he tap danced to work, you know. So he's a role model.

[00:52:08]He he never really overdid it. I think the only indul indulgence eventually is he flew in a private jet or whatever because of this but other than that he had no indulgence and then my own parents who I think are very grounded and I I I live close to them and so there's a watchful eye in a way which is good. I think also in my own head I somehow have this attached detachment.

[00:52:33]You know this concept that material things are important. You want to enjoy it but never get too attached to them.

[00:52:39]Some things I did which I hindsight one may look at and say are stupid. I mean I just said I never want a really fancy car for myself. My wife may have whatever but for myself I don't. Um that I I love beer. I I only drink beer. I like the fact that it's egalitarian. The the cheapest bottle is a dollar a bottle. the most expensive is $2. With wine, it's $10 to >> whatever >> whatever $10,000. Uh and so I never became a wine officionado.

[00:53:08]Uh and so I managed to curb myself by just doing these simple things, you know, of saying that you can enjoy certain things without spending a lot of money. And I think once that idea gets in your head. Um when I was younger, we only always as a family through economy, then premium economy. Now we walk by and and most of my friends were in business class and my kids would be like, you know, it's a little odd that but they accepted it. There was no big deal. And then eventually I caved in and said we but I I think that I've always managed to to me I get no joy. I mean today if you ask me put me in the back of a plane it I'll have no problem with it at all or or so I think being a little detached from the I never counted my money you know what what exactly I was making my carry or whatever when I was in private equity you know people always doing the math to see how much it is I was not so I was I think just building that mindset early on inspired by people like Buffett uh to say that look it it really doesn't matter but enjoy it still it's not like I didn't enjoy my life the last 30 years I think kept me in check on the power side I mean I don't know I think I humble enough to know that ultimately we all move on I think the part of the problem is we all think that I mean when I ran Chris Capital it's nice to be in a certain position but then I like the idea of fading away into the sunset and let the institution take over and of honestly my colleagues who took over better than me Um, and the same with all the work I do today. I think as long as I I convince myself that look, I'm lucky to be doing what I'm doing. I'm not the greatest thing, you know, ever. There are many other people. And so, I think that keeps me humbled and I I attribute a lot to, yes, there's hard work and ambition and all that, but a lot of it is luck. And I think when you have that perspective, you don't let it get to your head.

[00:55:12]A lot of successful people attribute it to luck but obviously they're not talking about the sheer hard work which goes in right >> you need both but I think when you consider because so many people also work hard and just don't I've seen it with so many friends of mine >> uh so I I do think you have to keep reminding yourself that look you're privileged you are lucky and so there's no reason to behave a certain way I mean be nice even even when you have the money and the power. Be nice to the person who we carries your bags for you in a hotel to your hotel room or or to your own driver or to your staff or whoever it is, you know, just it just don't let be watchful that it shouldn't it does get to your head >> and the truth is it does uh whether it's the money or the fame or the power. So one has to keep reminding oneself it's very important and I felt that maybe having my parents around was a good check because uh not that they had to say to me but there was a lot of unsaid stuff >> which tells me that there's probably some time set out for introspection because >> yes >> there is unless you question yourself and allow that time for the discomfort to bubble in.

[00:56:31]>> Yeah. If you've if something has happened which is you're not proud of if you don't give that time for that to bubble up and tell you that wasn't very nice. So is that is there a time in the day that you sort of set aside just or is it now a process like moment to moment?

[00:56:49]>> No I think I don't do it every day. I think it's more reflection from time to time >> to look back and see are you happy with what you're doing in your life as you and honestly I've also become more flexible. I think being too rigid, applying my rules to everybody in my family is not fair also. I mean, my wife shouldn't suffer because of me. So, I become a little bit more liberal, but it's not like she's going, >> you know, there are certain guard rails and I think we're all responsible people.

[00:57:18]>> So, I think it's um >> yeah, I think we all talk about it and we reflect upon it. We feel guilty if we've done something wrong. M >> I think that's very important to feel a little bit of guilt if you've either gone overboard with spending money or with misusing your power etc. And to reflect upon that and see how you can course correct is probably none of us are perfect but we >> No, that's fine. We are not we are not we are we are transitional beings. We are >> we transition. You keep and and for each it's a personal thing at the end of the day. It's for you to decide what the way you want to live and be be happy at looking at the man in the mirror or the woman in the mirror. You know that's the most important test for me.

[00:57:59]>> When I stand in that in front of that that's in a way a daily reflection. when I stand in front of the mirror and brushing my teeth, I look at myself and I say, you know, I'm I'm proud of who I am or who I'm becoming.

[00:58:09]>> Right. Right. I'll just move to the last question and this is really again I'm continuing on this whole philosophical journey. Um, a lot of things that we do will get automated. So AI I believe will cause a change in the nature of jobs.

[00:58:26]It'll obviously generate far more than what we can see today. But I think it'll also leave a lot of time for this thing called human agency. What is it that I want to do with my time? And I referred to earlier that these are ironclad structures that we are used to for generations of humanity of schools, college, job.

[00:58:50]But with this suddenly you're out in the open. There can be a time where there is some basic stuff coming in.

[00:58:59]And I and human agency when I see today is a lot of sort of doom scrolling and uh just stuff which is this monkey in the brain makes you do things which may not be what the highest point of evolution should be doing.

[00:59:20]Um I also worry that when this does happen when you're left with resources and no structure.

[00:59:28]Have you seen that movie Mad Max?

[00:59:30]>> No.

[00:59:30]>> Okay. Okay. So, it's a dystopian future world.

[00:59:33]>> Yeah.

[00:59:34]>> Like >> we're like a generation away sometimes, you know, if if this sort of spreads.

[00:59:42]>> So, what is human agency in the future as we go into it? What happens to us?

[00:59:50]>> Yeah. I don't have the answer, but I I I somehow feel that the AI that's the antidote to this AI is what I call ancient intelligence.

[01:00:01]>> Mhm.

[01:00:01]>> See, knowing how to live a meaningful life, um discovering your own humanity, your role in society, you know, it it hopefully will free up time. I think that'll I I do worry about AI safety and autonomous beings being going off the rails. That's a different issue. But I think otherwise I look forward to AI. I think it's going to in a way make us more productive, free up some of our time to do things that we really enjoy doing. But then you got to know how to spend that time. Well, um so and I think that comes from ancient intelligence knowing how to what does it take to live a meaningful life. You know I don't think our ancestors I mean once they settled down on farms were working all the time. I mean they they did have to tend to the crops and things like that but they found their own thing in ter most of my work if you ask me today is not really work. Most of my reading that I do is for my own personal entertainment reading some world bank report on industrial policy or reading this or reading that. It's really entertainment. I do a lot of meetings.

[01:01:10]Is it real work? I mean, somebody looking at it a 100 years ago would have said, "This isn't work. You're just I mean, even this is this work on a Sunday?"

[01:01:21]>> Just having a conversation. People wouldn't have classified that as work >> during the industrial revolution.

[01:01:27]>> So, I think we'll fill our time up with stuff. The real question to is that it gives you the chance to be more human, I think. And for that, looking inward is very important. And the ancient scriptures I think are the best guide and so I think that uh in a way India has a lot to offer the world as we go into this AI era.

[01:01:49]>> Right. So on that note thank you very much and I think thank you for what you do for the country.

[01:01:54]>> Thank you.

[01:01:54]>> Thank you.

[01:01:55]>> Thank you. Thanks for having me.

[01:01:57]>> Thank you for watching. This was a conversation which went from growth to philosophy. Tell me what you liked and what you would like me to talk about again.

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