Creation of Wealth

By

DR T.H. CHOWDARY

Director: Center for Telecom Management and StudiesFellow: Tata Consultancy Services

Chairman: Pragna Bharati (intellect India )Former: Chairman & Managing Director

Videsh Sanchar Nigam Limited &Information Technology Advisor, Government of Andhra Pradesh

T: +91(40) 6667-1191(O) 2784-3121®F: +91 (40) 6667-1111

hanuman.chowdary@tcs.comTalk@ GNITC, Hyd:

27 Dec 2012

Wealth is of two kinds

• Intellectual• Material, economic• Intellectual wealth does not diminish. The more you share, the more it grows• Material wealth has limits. We may be satiated but not satisfied.• Material/economic wealth diminishes on consumption• Intellectual wealth can’t be diminished or destroyed. eg. Germany, Japan, after the wars

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Source of all wealth

• Nature• Whatever is in the Sun is on earth- 110

elements थो असाक्सौ पुरुषः सो अहमस्मि�म• Intellect can create wealth even without

natural material resources eg: Singapore, Taiwan, South Korea, Japan

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Land & Sea• Adam Smith: Land labour & capital Unless there is a great land mass, there cannot be natural

wealth- ores, coal, oil & gas, forests, rivers, mountains Russia, Canada, USA, Brazil, China, India – vast lands• Urbanisation –masses of population • Pressure on land-• Density of population high to reduce commutation costs• Suburban land holders become wealthy by sale of land to

Realtors!• Skyscrapers and sub terraneons (Japan & Netherlands)

structures

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Factors for wealth creation

Labour - Diminishing role Electricity, motor, machines, Robots Eg: Toyota Factory near Tokyo;• 360 Robots, 60 men 1000 cars/day Intellectual “labour” Innovation, invention• Scandinavia Now China too ( to be competitive)• USA- Robotizing to bring back manufacture

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Capital is crucial

• Comes from savings• Savings in Banks• Banks lend & invest (Commercial & Investment

Banks)• Public Limited company –Great invention – limited

liability ; millions of investors - not dividends but capital appreciation

• Stock exchanges • Regulators (RBI; SEBI)

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Vision, entrepreneurship, risk & rewards (1)

We will make electricity so cheap that only the rich can afford to burn candles.

-Thomas Alva Edison(1978) Ghar Ghar Mein Radio Gaon Gaon Mein Telephone -THC(1997) Hath Hath Mein Telephone; Gaon Gaon Mein Internet - THC

Vision, entrepreneurship, risk & rewards (2)

• “Genius is one per cent inspiration and ninety nine percent perspiration

• “When Sir M.Visveswaraiah saw the Cauvery water falls at Jog ( 1920s) he exclaimed “what a waste?”

• When Jamshetji Tata saw the waters of Roha river Roha cascading down he wondered , “All this water from the Western Ghats is wanted. We should harness it to produce hydro electric power”.

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Wealth Creators

• Risk-takers• Entrepreneurs• Failures don’t deter• Leaders- Integrators of talents• Andrew Carnegie’s Tomb-stone “Here lies buried a man who knew how to hire

people better than himself”• Lee Iacocca: Chrysler Revival

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Tatas & Wealth Creation (1)

• Cotton Textile Mills• Nagpur Swadesi• Tata Steel, Sakchi becomes Jemshedpur • Vivekananda Inspires Indian Institute of Sciences (IISc, Bglr)• Steam locomotives for Railways• Trucks• Tata Hydro• Tata Shipping • Tomco –Coconuts (Kerala)• Tata Chemicals

– Sea water• Indica & Nano

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Tatas & Wealth Creation (2)

• Andhra valley• Western Ghats• Artificial Lake• Air India• Intelligent Grid• Tata Tea• TCS• Taj Hotel

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Some Modern Indian Wealth Creators

• Birlas• Mahindra• Godrej• KCP (1930)• Andhra Sugars (Mullapudi Harischandra Prasad)• Amara Raja (Galla Ramachandra Naidu) • Ambanis• Munjal• Infosys, Wipro, HCL, Infotech….

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Patriot Industrialists

• Ogale Glass works• Dabur• Bengal Chemicals• Birlas, Dalmia’s• Bajaj• Verghese Kurein

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Corporate Social Responsibility (CSR)

• Indian Institute of Science• TISCO: Free Schools, Hospital, Insurance, Pensions• Tata Trusts• Tata Scholarships (ICS…)• All wealth (dividends) goes to various trusts• Tata Institute of Fundamental Research ( TIFR) • BARC and ISRO• Tata Institute of Social Sciences

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Sharing as an ideal• Saha yagna praja srushtva purovacha praja pathihi Anena prasavishyadhvam eshavaha tu ishtakamadhuk .

– BG 3.10• Devanbhavayathanena te deva bhavayanthu vah Parasparam bhavayanthaha sreya paramavapsyadaha.

-BG 3.11• Ishtanu bhogaan hi vo deva dasyanthe yagnabhavitaha Tairdatthana pradayaibhyo yo bhunkthesthena yeva saha

-BG 3.12• -------Bhunjathe thvagham papaye pachanthyathma karanaath .

-BG 3.13

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Sharing as an ideal• Eesavaasyamidam sarvam yatkincha jagatyaam jagat,• Tena tyaktema bhujithaah;• Maa grithah kasya swith-dhanam.• “Everything in the universe abides in the Supreme Being.

Realise this well; realising it cast off the desires that rise in the heart, for example, the thought of possessing what is enjoyed by another. Joy comes only by the giving up of desires and attachments.

• (Enjoy by renunciation of and sharing with others of what more is not needed by you; may you not accumulate; whose is this wealth?)

• -Isavaasya, Interpretation by Rajaji.• Let us all strive to live in the light of this wisdom.

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Wealth Destroyers• Export of ores• Welfare before wealth • (NREGA, Fee Reimbursement, paavala vaddi, no vaddi, loans

waivers…A.Ps profligacy; give –aways (Radios, TVs, grinders, bicycles, shoes, sanitary napkins, tablet PCs, mobile phones, Haj & Jerusalem subsidies; Urdu ghars, shadi khanas; one-Rupee /Kg ; No Rupee-Rice.

• Since fiscal 2004 G.O.I spent Rs. 9.12 tln on various subsidies• On NREGA cumulative spend Rs. 1.66 tln• A PURA Hub requires Rs. 600 mln; upgrades 10 to 50 villages• 7000 PURA hubs @ Rs. 4,20,000 cr would create R-Urban areas• Gram-IT is part of it.

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You cannot…“You cannot bring about prosperity by discouraging thrift.You cannot strengthen the weak by weakening the strong.You cannot help the poor by destroying the rich.You cannot establish sound security on borrowed money.You cannot keep out trouble by spending more than you earn.You cannot build character and courage

by taking away man’s initiative and independence.You cannot help men permanently by doing for themWhat they could do for themselves.”

-Abraham Lincoln (Source: Freedom First, May 1989)

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Tainted and tattered flag of Socialism (and “secularism”) (1)

• Sri Nani Palkhiwala• History will record that the greatest mistake of the Indian republic in the first

50 years of its existence was to make less investment in human resources- education, family planning, nutrition and public health- than in brick and motor dams and factories.

• We have too much government and too little administration; too many laws and too little justice; too many public servants and too little public service; too many controls and too little welfare.

• Indian liberalisation encounters formidable opposition from three quarters.• The top heavy bureaucracy reluctant to shed its enormous powers• Influential politicians who prefer to let socialism remain the opium of the

people and of whom it can be truly said that if ignorance is bliss, they should be the happiest men alive.

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Tainted and tattered flag of Socialism (and “secularism”) (2)

– Quite a few Indian businessmen men who are much interested in their own personal prosperity than in the future of the country and who preferred to flourish in the non competitive environment.

– These three are the obstructionist forces…India continues to remain the only significant country in the free world to hold aloft the tainted and tattered flag of socialism.

• “ We shut our eyes to the fact that socialism is to social justice, what ritual is to religion and dogma is to truth”.

• Over taxation corrupted the national character overtly. The nation survived only because the tax system continued to breathe through loopholes and the economy used to breathe through window of tax evasion.

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Socialist’s service to the poor and aam aadmi ( one example)

Power bills (July 2012) of A.P MinistersMinister Galla Aruna M.Mukhesh

Goud DK Aruna

Danam Nagender

E.Pratap Reddy

Amount (Rs.)

62,657 33,188 25,013 17,231 11,021

N.Chandra Babu Naidu

Kiran Kumar Reddy

84,352 100,000•Some have 12 air conditioners in their house . Rule:2

•MLAs ( from allover the state) have private houses in government allotted sites in Jubilee/Banjara Hills.

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Books for Reading (1)

• The Reckoning• Vitality in a Business Enterprise: -Frederick R.

Kappel• Big Business & Human Values

-Theodore V. Houser: Chmn sears Roebuck • The Uncommon Man

- Crauford H. Greenwall, President E.Idu Pont de Nemoars & Co• Freeman & The Corporation

-Roger M. Blough: Chmn United States Steel Corpn• New Frontiers for Professional Managers -

Ralph J. Cardiner : President General Electric Company.

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Books for Reading (2)

•How to Win Friends & Influence people – Dale Carnegie •The Human side of Enterprises - Douglas Mcgregor• My years with General Motors – Alfred P Sloan•A Japan which can say “No” to America•Kautilya’s Artha Sastra•Are You Listening – Dr T H Chowdary •The Creation of Wealth – R M Lala (The Tatas from 19th to the 21st Century) •Vincent People•Peter Drucker•It Couldn’t be Done - Published by the USIS, New Delhi •Heidi & Alwyn Toffler–The Future Shock–The Third Wave–A new civilisation in the making

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Books for Reading (3)

• Shantiparva in Mahabharata• Sundara Kanda (Ramayana) – Hanuman to Sita• Gita Rahasya by Lokamanya Tilak• Bharthrihari’s Subhashitas• Sumathi & Vemana Satakas• Rama Charita Manas – Tulasi Das• Krishnavatara – KM Munshi• Women in the Bible• Life and Times of Jamshedji Tata (For the Love of India by R M Lala)• JRD Tata Letters

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Lives of great men…

Lives of great men all remind us we may make our lives sublime and departing leave behind us foot prints on the sands of time.

– Henry Wadsworth Longfellow

Innovation & Entrepreneurship• Innovations in production processes – Avoid rejects, re-engineering,

wastes• Entrepreneurship• Ideas, mentoring, incubation• Stanford – hundreds of companies incubated• Venture capital• How many succeed ? <10% in the USA• 15/20,000 companies fold up every year in Japan .• Institutional investors put less pressure on companies dividends; not so

retail investors.• Government must assist & stimulate R&D by direct support and

incentives ( tax, land, interest, researchers & teachers exempt from IT in Belgium)

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Technology & IPR for Wealth Creation

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Ten-Year Trend in Engineering and Technology Master’s Degrees in the United States, China and India (Actual and Estimated Data)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

Academic Year

Gra

duat

es

USA (Engr/Techl) China (Engr/Techl) India(Engr/Techl) India(MCA)

Source: The India Economy Review, 30 Sept 2007, Vol.4; www.iipm.thiktank.com

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Ten-Year Trend in Engineering and Technology PhD Degrees in the United States, China and India

-1,000.002,000.003,000.004,000.005,000.006,000.007,000.008,000.009,000.00

10,000.00

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

Academic Year

Gra

duat

es

USA China India

Source: The India Economy Review, 30 Sept 2007, Vol.4; www.iipm.thiktank.com

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25,000

20,000

15,000

10,000

5,000

01980 1990 2000

Number of Research Papers Published

India China South Korea Israel Brazil

Years

No.

of

Pape

rs

Sour

ce:

Bus

ines

s Wor

ld, 3

0 Ja

n 20

06

Quality of Education (1)

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4,000

3,000

2,000

1,000

500

0

Number of PHD Degrees in Engineering

India China South Korea Japan Taiwan

Sour

ce:

Bus

ines

s Wor

ld, 3

0 Ja

n 20

06

Years

No.

of

Deg

rees

Quality of Education (2)

Contribution to World’s Research Papers

India China USA

3.7% 10.6% 27.7%

(Source: UNESCO SC Report 2010)

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Patents applied and granted in the period

2004 to 2008

Country Applied Granted Japan 391,002 176,950USA 456,321 157,772China 289,838 93,706Korea 170,632 83,523Europe 146,150 59,819UK 59,819 23,379India 36,812 18,230

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Global PatentsIndia China USA

USPTO* 0.5 4.7 52.2Triadic+ 0.2 0.5 41.8(Source: UNESCO SC Report 2010)•United States Patents and Trademark Office+ Triadic patents are a series of corresponding patents filed at the European Patent Office (EPO), the United States Patent and Trademark Office (USPTO) and the Japan Patent Office (JPO), for the same invention, by the same applicant or inventor.[1] Triadic patents form a special type of patent family.@ The Trilateral Patent Offices, or simply the Trilateral Offices, are the European Patent Office (EPO), the Japan Patent Office (JPO) and the United States Patent and Trademark Office (USPTO). In 1983, these patent offices set up a programme of co-operation in an effort to "improve efficiency of the global patent system".[

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Patents

• In Y 2010, China filed for 400,000 patents; 75% were by Chinese companies; 25% by foreign companies working in China

• The total number of filings in India is yet to exceed 50,000 a year; only 19% are by Indian companies; foreign companies in India filed 81%

• India’s patent office has 250 patents examiners; China has 4,500; it would increase them to 9000 by 2015; by then India will have 1000 patent examiners

(Source: Page 106, Tata Review, Dec 2011)

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Scientific Publication2002 2008

India 18,911 36,261

China 38,206 1,04,968(Source : UNESCO Science Report 2010)

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Scientific Researchers in the World India Share – 2.2%

Researchers / 1000,000 Population

India China USA Japan

137 1070 4663 5573

(Source: Every Mans Science: June-July 2011)

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Civilian R&D Expenditure (2000-2005)

Source: The book, Start-up Nation- The Story of Israel’s Economic Miracle by Dan Senor and Saul SingerSource: UNDO (United Nations Development Programme) Report, 2007/2008

Perc

enta

ge(%

) of G

DP

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Venture Capital Investments per Capita$

US

Source: The book, Start-up Nation- The Story of Israel’s Economic Miracle by Dan Senor and Saul Singer(Source: Dow Jones, Venture Source: Thomson Reuters; U.S. Central Intelligence Agency, World Fact Book, 2007, 2008 ) S684_Dec2012

R&D Spending as % of GDPCountry %India 0.9Israel 4.86Sweden 3.75Finland 3.56Us 2.82Denmark 2.72China 1.4

(Source: Mint, 23-03-2012)

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From Developing to DevelopedGrowth of Population & GDP

GDP POP PCI PCI time to double

Nehruvian socialism

3.5 2.8 0.7 More than 50 Y

P.V Naraishma Rao & After

6 to 8.5 1.4 4.6 to 7.1 (10 to 15) years

With one child norm since 1978 China in the last 10 years alone•Increased PCI from $800 to $4000•Became the 4th largest economy•World’s largest exporter@3.2tln in 2011•Has the world’s largest foreign exchange reserves @ 3.3 tln (c.f India $ 295bln)

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Dhanyawad:Thank You