A conversation with the Chairman of Wipro.

Question: What motivated your decision to give most of your fortune to charity? 

Azim Premji: I think it is basically fundamental in terms of when much is given, much is expected to be given back in return. And there is so much people can consume in terms of wealth and require in terms of wealth. If one has been blessed or have been fortunate enough to have got much more than normal wealth, it is but natural that one expects a certain fiduciary responsibility in terms of how that wealth is applied, used and leveraged for purposes of society. 

Question: Why is philanthropy not as developed in India as it is in North America? 

Azim Premji: The concept of the strong linkage to the family is breaking down in Western nations. So the obligations which I think to an extent, not only Indian, but many people feel toward their families is much less in terms of Western people and particularly American people. So, when you take a philosophy approach that you do not have to leave wealth to your families, you are going to have to tell yourself, "Do you take it to the grave, or do you donate it for some more worthwhile purpose?" And this also reflects in the way that families get structured. You know, children live separately; children put old parents into homes instead of putting them into their homes. What the children expect from the parents, what the parents expect from their children. 

Question: What is your philosophy when it comes to philanthropy? 

Azim Premji: We’ve been focusing on primary education in India for the past nine years, both in Wipro, Ltd., as well as in the foundation that I set up. You have to make a bet to where you think you can really make a contribution, where you could really build an depth of understanding. So it was really very clear from day one that we had to have focus. Two, it had to be a cause which was relevant to the country in terms of need. A critical cause in terms of need where you saw a gap between what could be and what it was. And three, it should be an area where it should have an access beyond just a specific educating of a child. We concluded that if we could educate children better in our country, you would have better citizens. But importantly, we also realized that if you educate the girl child, when she grows up and starts a family, she has a smaller family, which is a huge requirement in terms of the growth of our population, which is more manageable. And three, again, if you educate the girl child, when she grows up and she starts a family, or looks after a household, she has much higher consciousness on primary health care. 

Question: What are the best methods for improving education in India? 

Azim Premji: I think, you know, what you must understand is the state of education in India. You have one side, the cities, which have very good schools, average schools, and not so good schools. The level of education in these cities is fairly good. They get fairly good teachers. On the other side, you have the villages of India, where 65% to 70% of the people of India live. And there we have education, which is in the villages, and 90% of that education is run by the state governments, partly funded by the central government. Where the state government does not charge any fees, gives free uniforms, gives a free mid-day meal, which is very often the best meal the child gets, and where there are six million unionized teachers in the states' governments, multiple state governments that we have across the country. Standards of education there are very, very low. The commitment of the teachers is very, very low. The quality of the teacher, the training of the teacher, is very, very low. So, there is an enormous amount one can do to upgrade the quality of teaching, the quality of the teachers, the way the curricula is actually learned, the way it is facilitated to learn, the way you can community intervene to get community pressures building up on the education system to demand certain standards. The way you can train the teacher-training institute. 

There are 600 districts in India. Every district in India has a teacher-training institute. And every teacher in the state government school requires spending 15 days of retraining in these institutes. Most of these institutes are in shambles and many of them have teachers who are worse than the teacher they are supposed to teach. So, there’s an enormous amount of leverage one can do in terms of upgrading this entire infrastructure. 

Always the government spends a lot of money, there’s an enormous amount one can do in training and upgrading the quality of the state function. That’s precisely what we do in our foundation. And we have been successful now because we have been working for nine years in this. We're involved now with over 2.5 million children. 

Question: What will be necessary for India to sustain the current rate of growth? 

Azim Premji: I think the most important thing is we have to maintain fiscal discipline. Whether it be in our fiscal deficit, whether it be in terms of focusing, in terms of development, in areas which can generate scarce resources and therefore back inflation rates, and in terms of integrity in our leadership. 

Question: Is there any truth to the concept that India is a bubble? 

Azim Premji: Oh, that’s completely irrelevant, frankly. I wouldn’t even think of it. It’s a mature democracy of 1.11 billion people. We’ve had a tradition of successful democracy since '46, '47. We are probably one of the only democratic governments in the world which for more than 10 years has successfully led and managed coalition governments, alliance governments. Britain is facing it now and they’re panicked. Whereas we have done it successfully for 10 years; three governments, and done it... and the job has gotten done. The job of nation building, the job of nation leadership in a difficult, complex coalition has worked. What more maturity can you expect from a democracy? 

Question: As India becomes richer and salaries rise, will outsourcing still make financial sense for Western countries? 

Azim Premji: It will make sense because the companies are going up the value chain. And as the international companies are trying to learn our business model, we are learning their business model probably faster than they are learning our business model. So cost arbitrage will always be there because the cost arbitrage is not determined by two million engineers in the country who are working on a job, or three million engineers in a country who are working on a job. The cost arbitrage is determined by the standard of living of four billion people, which is still much, much lower than the rest of the developed world; much, much lower. And when the developed world escalates even at 3% on salary levels a year, they escalate on a base of 100, where even if you escalate at 7% a year on a salary level, or 10% a year on a salary level, we escalate not on a base of 100, but we escalate on a base of somewhere between 10 and 20. You just run mathematics and you will find that even at high inflation rates, the gap continues to be there, if not increased. 

Question: Is China a bubble? 

Azim Premji: I think the Chinese government is realizing that the economy is overheating. So, I think they will take proactive steps to slow it down. The last quarter I understand the growths are running at rates of 12% a year GDP. And two, I think the Chinese government is seriously considering whether they should firm the Chinese currency because of international pressure, but also because the economy is heating up too much in terms of flow through exports. 

Question: What does the U.S. need to do to maintain its status as the leading economy? 

Azim Premji: One is very obviously, which every economist will tell you it’s got to fix its problem of the fiscal deficit. It’s getting out of control. Two, I think the American consumer must learn to live within his or her means. You cannot have a society where you spend more than you earn. I mean, it’s just fundamentally not viable in the long run. I think the corrective steps which are taking place now should lead in the right direction. 

I think one is that the American consumer is learning to save. Right? The savings which were running negative now are running between 4% and 5%. Insofar as the fiscal deficit is concerned, I think the President and his team are addressing issues which are economic to see to it that they contain the fiscal deficit and the President is making tough decisions, which is why he is getting unpopular with some of the commercial leadership. 

Question: Are you optimistic or pessimistic about the way the world is headed? 

Azim Premji: I’m a supreme optimist. My big concern is that this period of reset of the world, too much protectionism is building up among the developed world. Now, that protectionism is very dangerous, and that protectionism is also building among services, which is the next emerging flow of trade because 60% of the world is services, 40% of the world is products and agriculture, or industry and agriculture. If the developed world starts putting restrictions on flow of services, the developing world which has power of economics and power of consumption will put restrictions on flow of products. And that’s very simple to me. All you have to do is raise import tariffs, which have fallen on a systematic basis over the past 10-15 years. So you’ll trigger a wall of less trade. I think that will be the most regressive thing that the developed world could be doing.