Modi made India business-friendly: Prem Watsa, Chairman, Fairfax Financial Holdings

Billionaire investor Prem Watsa believes India is undergoing an incredible transformation under the leadership of Prime Minister Narendra Modi. He believes that the current government’s welfare programs, their scale and scope have improved opportunities for the average Indian. He argues that there has also been a positive shift in attitudes towards business and wealth creators. Watsa is the chairman of the $90 billion financial giant Fairfax Financial Holdings, headquartered in Toronto. Fairfax has investments in 18 companies in India including Bangalore International Airport Limited, Digit and to name a few. Watsa spoke to ET’s Mohit Bhalla twice in the past three weeks. The first of these conversations took place in May when he was in India for a two-week visit to review his business interests and meet Prime Minister Narendra Modi. Edited excerpts…

Let’s talk about the current environment where inflation is a problem. What is your advice to the government on how to approach it?

First of all, you need to know what Mr. Modi did. You have to understand this because once you understand this you realize that Indian people trust him to solve India’s problems. Just in terms of pure economic policy for the average person, the average Indian, when he was elected there were about 18,000 villages without electricity. They all have electricity now. The scale of what he has done is unbelievable. 400 million bank accounts mainly to the rural poor. 100 million gas cylinders. Then they have the tap water project which is now underway. 50% of families have tap water. The magnitude of this achievement for a population the size of India is truly exceptional. In the next two and a half years, 100% will have tap water. You said inflation. It’s transitional and something the government needs to work on, but Mr Modi has solved some big problems in India.

If you were to predict the likelihood that inflation could lead to a period of uncertainty, how long could that last?

Inflation is there in the United States and elsewhere in the world. It is very high. In India, the demand is there, but there are supply constraints. There are no chips, for example. Inflation is a problem for the world. India has experienced significant inflation in the past. It won’t be one of those I think. RBI took care to watch him. Interest rates will rise a bit, but India is coming back in spades. Economic growth is significant even in Canada, the United States and Europe. But India has better significant upside potential. Inflation and higher interest rates are small factors compared to the ongoing economic growth and in my view the Modi government will strive to overcome these challenges.

There are people who think that the government has implemented the programs they have developed. There is also an opposing point of view. And it is a voice that plays out in terms of government initiatives like on digital India or on privatization and there is a view that the promises made have not been kept…

It is because it is a democracy. You have the freedom to say what you want without fear of reprisal. People who don’t like him (Modi) think he promotes nationalism and all that. But look at the facts. Try to electrify 18,000 villages, try to create 400 million bank accounts, try to create 100 million gas cylinders and offer free health insurance to the poorest 500 million people. These are incredible scale achievements. I was talking to Nandan (Nilekani) in Bangalore, and Nandan says India is the only country that has Aadhar. Payment transfers in India are free. They have a digital locker. Thus, all your information is locked and accessible. It is not available in the rest of the world. Tax collection in India is booming. It’s because everything is digitized now. There are very few places to hide. They will find out very quickly if you are trying to trick the system. Talking about stations and their privatization, I met Ashwini (Vaishnaw), who is a phenomenal guy. I mean the plans he shared, the architectural drawings. They actually plan to build fifteen, then fifty to start with. They will end up selling 450 of them to private developers.

What do you think is this government’s greatest success?

I left India in 1972 and went to IIT and couldn’t find a job. A socialist vision of development has killed India. Mr Modi’s greatest achievement has been to change that. Make it a friendly business. It used to be that being in business was not a good thing. You were not admired as an entrepreneur. You have been despised for doing well. Earning money was not a good thing. He changed that mindset. And he changed that because he himself is a huge success. Think about it. A son of tea sellers. It is the hope of a democracy. He gave economic freedom to the Indians. He allowed them to dream again. Your caste, your religion or your origins make no difference to do well. The 100 unicorns in India show that anything is possible in India, just like in North America! I think Mr. Modi will be known as the greatest statesman of our time, because of what he has done and is doing for India’s 1.4 billion people.

Now of course the other thing is about Fairfax and we were talking casually when you were in Delhi and you were talking about how much capital you have invested and how much you want to invest?

Sure. So we invested about $7 billion. We have invested approximately $5 billion through Fairfax India and in total we control approximately $7 billion in investments. And I think we will invest at least as much in the next five years. India is the best place to invest. We need to invest in a way that is good for everyone. Good for your employees, good for your customers, good for your shareholders. And you have to give back to the community here.

Do you have a timeline in mind for investing the additional $7 billion?

In the next five years. We think the opportunity is huge. Especially when the government welcomes businesses. Wherever business is welcome, business will come. Many companies from all over the world will invest in India.

Could that $7 billion go to companies that are about to be privatized?

That could be it. It could be some of the companies we are bringing from North America to India. There are privatizations in stations and in other sectors, we all look at them.

I read on the station front that Fairfax does a pilot?

I would like to tell you, but this is only the beginning. We study all the opportunities.

Any thoughts on the new logistics policy and shakti that aim to reduce logistics costs?

The only thing about it is that we are very close to Fedex and Fedex is watching India and we are watching it with them.

Could that include warehousing and storage and all that?

Yes, basically. India is a huge opportunity. So where does this make sense? We want to deal with top entrepreneurs, such as Madhavan Menon (Chairman of Thomas Cook), Kamesh Goyal who built Digit from scratch, Hari Marar (CEO of Bangalore International Airport Limited), Ajit Isaac who runs Quess. These are people who have built institutions.

Do you fear that the cries of protectionism of certain large local industrialists pose challenges to foreign investment?

This is exactly the wrong point of view to have. I am not worried about this. Mr. Modi believes in competition. In the past, guys who had big industrial companies didn’t want to compete with the outside world. Because it’s hard to compete. But competition is good because that’s how you get products at a competitive price, you get better products and innovation.

Where are the roads going? Where are the mining companies going?
They will all stay in India. There are almost no oil discoveries in India. I was just reading about the oil industry in America. It took one guy, George Mitchell, 25 years to discover shale oil. He had the audacity for 25 years to put money into it. And America has become the world’s largest oil producer. We must therefore encourage entrepreneurs wherever they are. Because the country benefits from it. If you go to Silicon Valley, you will see people from all over the world innovating and competing.

India does not have the capital. You need capital and you need entrepreneurs. As Mr. Modi says, make the environment conducive to business and invite everyone to come to India. But India is a democracy and in a democracy people can have different views but it is the government that sets policy and Prime Minister Modi has made India one of the best countries where invest.

Michael J. Chiaramonte