India's Middle Class is breaking | ft. Saurabh Mukherjea

[00:00:00] On per capita income, we are one of the poorest nations in the world. We are amongst the 40 poorest nations in the world on per capita income. Yet our household debt to GDP ratio is far higher than any rich country in the world. If this Iran crisis doesn't abate quickly, if by June end oil prices and gas prices haven't subsided, I think no other poor country has anything as smooth, as powerful as the India stack. But the India stack...

[00:00:26] Do you think that we should let the Rupee slide for a bit? I don't think we have a choice. It will go. Jobs are going to be bloody hard to generate and that I think... Hey Saurabh, thank you so much for making the time. Always a pleasure speaking with you. My pleasure. Thank you for hosting me again on Bharatvaarta.

[00:00:44] Awesome. So Saurabh, the last time we spoke, I mean the first time we spoke, Behold the Leviathan, it was very optimistic. There were a lot of references to the tailwinds that India has and so on. But in this book, you are kind of sounding the alarm about the crisis that the middle class is facing. I want to understand what changed in this period of a year or year and half.

[00:01:08] Sure. So, late 2021, COVID ends and through COVID we decided we wanted to ride Leviathan but we couldn't do much about it. So, through 22 and 23, through 22 and 23, Roshan, we traveled around the country to ride Behold the Leviathan. And as we mentioned, when we published that in late 24, we said that there's a bunch of good things happening.

[00:01:35] Women, South India, a new elite. Formalization. Formalization. But even in that book, we said, what you're seeing is in a way a trifurcation of India. People earning one crore or more, they're rocking. And to be specific, the number of people, the number of people earning one crore or more is up 7x in the last 12, 13 years. Right. Those earning 5 lakhs or less, they're also doing pretty good because the government is being more generous. Direct benefit transfer is working.

[00:02:05] There's various times of cash transfer schemes from central government, state government, the road network build out, Ayushman Bharat, Pradhan Mantri, Garib Kalyani, Ojda. A bunch of things working for, really nicely working for those earning less than 5 lakhs, which is the vast, vast, vast majority of the country. And in Behold the Leviathan, we said you can see in the income tax data, the squeeze on those who are between these two categories, 5 lakhs to 1 crores.

[00:02:32] But for a bunch of reasons, not least maintaining the clarity of the book around those five themes, right? Vesco, Women, Education, South India, China plus one and outsourcing. To maintain the clarity, we said the middle class piece, we will come back to later. Let's focus on these five themes changing the country. So that was 22, 23. By the time 23 ended, I could see that many of my middle class relatives were losing their jobs to automation.

[00:03:00] So for example, I have an uncle, he's an accountant, and he's an accountant not very far away from where we are sitting in Andhiri. He's an accountant in a restaurant chain. And as the restaurant chain automated their accounts function, he lost his job. He got another job, but at a much lower pay. I have another cousin, he worked for a prominent TV channel for many years, right? Again, technology put paid to his job. Again, he got another job in a YouTube channel, but at lower pay.

[00:03:28] So by 23 end, I could see the impact of tech changes on my friends and family. And I could see by then in the income tax data that the people earning between five lakhs to a crore, they were really going nowhere. Right. So we said, let's now turn to this and understand why is this strata, right? Effectively, middle class India, my friends and family, people earning between five lakhs to a crore. Why is this strata getting jammed?

[00:03:54] Effectively, that's when the research began through 24, 25. We ran around the country, tore apart many data sets, nifty 50 companies, various government data sets, read up a ton of stuff on what's happening in the middle class. We spoke to bankers, not for profits, small business people, obviously people who are in wage related jobs.

[00:04:21] And we pulled together, we pulled together breakpoint over the course of, over the course of 25. Right. And then early months of 26, we edited it and it was published, right? So, the main difference between the previous book and this one is in the previous book, we looked at the themes which are working in the country. Right. And remember in any big economy, as big as ours, there are things which are going to work and there are things which are not going to work.

[00:04:47] So for clarity of exposition, we said the themes which are working, we will go with and behold the Leviathan. And there's a whole bunch of themes working, not least South India is doing well, women are doing well. But we said there's also stuff in India which is not working and specifically the middle class. Right. The lack of jobs that they face, the wage crunch that they face, the crazy impact, the catastrophic impact of social media that they face, specifically in terms of how much money they're borrowing and just the sheer amount of money they're losing in the stock market.

[00:05:17] We said let's pull it together and figure out how is this narrative stacking up. Is this narrative the same as what's being seen rest of the world or is there something specific to India? What are the, if there's something specific to India, why are these, why are these specific aspects? For example, these massive losses, $11 billion a year of retail losses by in the FNO market, retail investors losses in the FNO market. Why are they specific to India?

[00:05:42] What's happening to make our country peculiarly exposed to these sorts of losses by retail investors? Let's think it through, research it through, identify the challenges and then come up with how best as we can figure out. How best does the middle class go forward? How do they earn a living? How can they build better lives? Because in a large free market economy, you can't just sit back and say, government will do this or that. Then you go back to socialism. No.

[00:06:09] So if you want the upside of free market capitalism, then you also have, it behooves us to say, what can we do as, as a responsible citizens to, to, to, to highlight a problem and give constructive solutions that people can adopt by themselves. Right. Yeah. So one of the things I really love about your books is you're able to balance the hard quantitative stuff along with, you know, anecdotes and so on and so forth. Right. It makes it a lot more interesting and it makes it relatable as well. We try our best. We try our best.

[00:06:39] It is, it isn't easy because every time you write the anecdote, no, you feel that people are going to throw stones at you saying, you're making too much of it. Right. But if you just keep banging out data set after data set. Yeah. It becomes, I think, incredibly difficult for 99% of people to say, is this book really relevant for me? Yeah. Yeah. No, certainly was a case for me because I mean, I disagreed. I thought I disagreed with a bunch of things. Right.

[00:07:05] And then I saw the data and it seemed to kind of add up in a few, few different ways. So the first chapter deals with, you know, who is the middle class? Right. And you have, you know, you talk about various ways of how people or experts have defined it. And then for the, for sake of this book, you say between 5 lakhs to 1 crore, anyone earning between 5 lakhs to 1 crore, right? Comprice the middle class.

[00:07:28] Now, you know, when I very anecdotally think about this data, person earning 5 lakhs versus person earning 1 crore, or even someone in between, their lifestyles are entirely different. Their anxieties are different. Their opportunities are different. The things they spend on, on a daily monthly basis is different. So how can we compare these people? Sure. So let's step back and see, let's define the middle class.

[00:07:53] Historically, historically, the way the middle class has been defined Roshan is people have said, let's go for people in the middle, right? By middle class, they literally mean the middle. Right. So the classical definition has been start from people earning as little as 5 lakhs a year and go say up to 30 lakhs a year. Some people have stopped to 25 lakhs, some people have gone to 30 lakhs, but 5 lakhs to 30 lakhs has been historically been seen as the middle of the income distribution curve, right? And initially we were saying, okay, we'll go with that as well.

[00:08:23] Then I said, hang on, let's think this through. We've got the government's income tax data in front of us. And, and I said, let's, let's be a little bit more demanding on ourselves. The middle class shouldn't just be in the middle. They should also account for at least half the income earned in the country. Otherwise, what's this point of running around the country for two years and identifying the middle class and researching them unless they're the engine of our consumption engine, unless they're the engine of India's consumption thrust, right?

[00:08:53] It's pointless to write a book on the middle class by saying 5 lakhs to 30 lakhs. So using the income tax data, we said, let's figure out if you want to get half of India's income into the, into the definition of the middle class, how much further up do we have to go? Right. So we started 5 lakhs that I think there's a lot of consensus on, but if you really want to get 50% of it, at least 50% of India's income under, under the definition of middle class, you have to go all the way to one crore. Why do you have to do that?

[00:09:22] Because we have a whole bunch of super rich people in our country, roughly 3 lakh people to be precise, who are as per IT data, earning more than a crore. Because you got these 3 lakhs super earners, remember that some of these super earners include some of the richest people in the world. Right. Right. That means to get to half the income, you have to drag the definition up. Right. So we did it.

[00:09:43] And then we asked the question you said, does it really make sense to compare, say the security guard sitting outside guarding Marsalis with an investment banker in Mumbai or the vice president of a tech company in Bangalore? And initially we had misgivings and then we looked at the income tax data and, and, and it was a moment of stunning revelation.

[00:10:06] When we looked at the government's IT data and realized that all the way up to 5 lakhs on a decadal basis, you're seeing decent income growth, 7, 7, 8, 9%. I got it, annualized income growth, all the way up to 5 lakhs income. So, you're seeing decent income growth above 1 crore. You're seeing solid income growth, right?

[00:10:26] Because the elite are, but between 5 lakhs to a crore, there are around 10 to 15 income categories in the income tax buckets between 5 lakhs to a crore. Hardly anything is moving, right? Hardly anything is moving. And then by that time, by the time we were writing this, there was a whole bunch of media articles say in India today did a whole bunch of stuff on this subject. Some of the, some of the not for profits had started doing work on the subject.

[00:10:55] And they were also started saying the same thing that the dude earning 5, 10 lakhs, he's, he's jammed, but hey, people earning 50, 60, 70 lakhs are jammed as well. So we then commissioned a survey. We hired Dun and Bradstreet. We said, can you go and survey at least 500 firms in India's big cities earning minimum 20 lakhs post tax and come back and tell us what are you seeing?

[00:11:18] And they came back and told us that even on those 500 surveys, you can see the salary, the income getting jammed and savings being a serious issue. Right? So majority of those families were saving less than 20% of their income. 14% of those families were saving nothing, zero. Right? So, so that's when we said there is a, there is a commonality of interest here between 5 lakhs to a crore.

[00:11:42] Um, the investment banker earning a crore isn't as different from the security guard outside as he fancies. They're both subject to the same free market forces with this relentless new entry, um, very little bargaining power vis-a-vis wages. Um, and, and thus a diminution of, diminution of real incomes. Right? You can see this very visibly in, in, in tech salaries in, in, in the city you belong to.

[00:12:11] Uh, in Bangalore tech salaries today versus say four, five years ago. And say the, say what's happening to people who are joining the labor force in the tech companies or indeed as security guard. In fact, in fact, the entry level tech jobs across the country, entry level tech jobs or entry level, uh, uh, banking jobs pay less than what you would get. If you were an entry level JCB operator in a big city in our country. Right?

[00:12:38] So the world has changed in the last five to 10 years, um, in a way that, that I think a lot of people haven't quite mapped and, and going through government data sets, comparing it to private data sets, comparing it to nifty 50 companies, employee salaries. Right. Gave us a fairly good picture that whether you're earning five 50 or one crore. Right. You're all, all of us are in a boat where the boat is barely moving in terms of, in terms of income.

[00:13:07] Right. But when you look at India, right. And you look at let's say income tax data or employment data or, you know, other such formal sources of record. Right. We tend to ignore the informal sector, which is soon formalizing, but that's a significant part of the economy as well. Right. I mean, you have your like small and medium businesses. You have your traders, you have your proprietors and so on and so forth, who also can contribute a significant, uh, part of consumption, uh, part of, uh, you know, everything that comprises the economy assets.

[00:13:38] So how do we budget for those folks in the bracket that you mentioned? So, so this is where the second leg of work became very interesting. We started, you know, the RBI publishes excellent reports called the financial stability review every six months. Take care. I don't know why, but very few people will read it. It's easy to access and it's outstanding data because RBI has data obviously that nobody else has. So, so over the last couple of years, we started noticing in the RBI is FSRs and explosion in, in household debt. Right.

[00:14:06] And as we dug deeper and deeper into that, and this is where travel helps when we were in places say like Trichirapalli or, uh, uh, Bijnor in North India or Sholapur in Southern Maharashtra. We started noticing that even in the informal sector debt was exploding. Right. And, and, and specifically personal loans, personal loans were exploding, gold loans were exploding. The lenders are listed. Many of the lenders are listed.

[00:14:34] So you could see the loan books growing at, uh, the NBFC's loan books going at 20, 25% if they were doing personal loans or, or gold loans. Um, and then the, we took the RBI. Can I just push back there for one bit? Uh, I mean, I have a question on this anyway on, on credit demand and so on, but considering the kind of attractive personal loans that you're getting, right. And considering how gold has been behaving over the last like year or so, I mean, wouldn't you expect that that is the case?

[00:15:02] True, but the levels of indebtedness are now the highest in the world. We are now the most indebted middle class by a country mind. Right. So, so, uh, we left, we said, let's ignore home loans because I think home loans are healthy things. Right. You buy a house, you know, I know there's argument saying house prices are too high, but even then in the context of a poor country, if you buy a house, it's an asset. You don't have to pay rent and over time you pay off the home loan. You have, you know, especially by retirement, you've built a property in which you can live in.

[00:15:32] Ironically, home loan demand hasn't taken off. It's one of the paradoxes of the last 10 years. Home loan demand hasn't taken off. Uh, um, and therefore excluding home loans, excluding home loans, the ratio of household debt to GDP, which was around 20% during COVID in line with other countries and now has now jumped to 32, 33. There's no other country in the world remotely close to us. And by our own standards, we've never had this much money.

[00:15:57] Now, remember the, the poorer you are, the poorer you are, the less debt you should take because the poorer you are, the lower your buffer. Right. And therefore you should take on less debt on per capita income. We are one of the poorest nations in the world amongst the 40 poorest nations in the world on per capita income. Yet our household debt to GDP ratio is far higher than any rich country in the world. Right. America is at 20. Europe is at less than 20. Europe is at 15, 16. We are at 32, 33.

[00:16:28] Right. And, and, and then we went through a raft of data on the crazy amount of loans. Now, because this is a country where even our employees are vulnerable, we ended up encountering a whole bunch of our employees, many of whom I had to ask them to get jobs elsewhere, who had the same problem. They'd taken on more loans than they could repay. And they got themselves into various forms of trouble.

[00:16:50] Um, and, and I think this is going to be, uh, if these, if this Iran crisis doesn't abate quickly, if, if by June end oil, oil prices and gas prices haven't subsided. I think the April, May, June, uh, results will not be fun to look at when they're published in the month of July. So we've built on a ton of debt and that ton of debt is not just confined to the salaried class. The self-employed classes also participated in that debt.

[00:17:18] So that was the first, that was the second piece, which told me that why is the big part of the challenge is the salaried class because the wage pressures and the lack of employment opportunities are specific to them. This, uh, tendency to borrow money because loans are now ubiquitous, uh, is now a generic problem. Uh, in this context, right around a year ago, one of the owners of one of the largest auto companies in the country and I was having a chat.

[00:17:44] And he said to me, sort of, I can't find a, this guy, this, uh, auto company owner, he also has a financing company. Right. So he said to me, sort of, I can't find a single credit worthy customer, right? Whoever I lend money to within six months, he defaults. So, you know, I partly deliberately and partly stupidly, I said, uh, you should use civil. That will help you find credit for the customers. So naturally, you know, he got a little irritated and said, you think I'm stupid. Do you think I don't use civil? So I said, well, what's the problem?

[00:18:14] Then just lend to credit for the as per civil. He says, I'm doing that. So is every Tom, Dick and Harry. So as soon as say a new customer services say Mr. Curry Appa surfaces in the system as a credit for the customer, 10,000 people leave on him. And, and I think the civil data is updated every so often. I think it's every 10 to 15 days. The data is updated. So say today I lend to Mr. Curry Appa, but so do 20,000 other people, just to be specific, 10, 20 other people.

[00:18:41] I don't know that because by the time the update comes, I've already lent you the money. And so have 10 other people. They don't not knowing that you are simultaneously loading up on so many loans. And as a result, six months hence you're over leveraged. And one of your loans, you end up defaulting on. Right. So, so this construct, uh, so we were, I've seen the RBI's FSRs. We've done our own survey, uh, of 500 affluent families.

[00:19:07] Uh, then I heard this from the auto EM and as we were traveling around the country in small towns, bankers kept telling us, uh, aap loan leke chutti pe chale jau loan milta hai bhi chutti pe jane ke liye. So I said, what do you mean? Is that vacation pe jana chutti pe to ab banta hai? That's the, and data showed there's a survey by Paisa Bazaar, which showed that the most common use of personal loans is to go on holiday.

[00:19:33] The second most common is vacations, but the second most common is smartphones, but the most common use of personal loans is to take a holiday. Second is smartphones. And then a little bit down the list is to go and watch concerts. So we've now created a consumer economy where people are watching concerts by borrowing money. At one level, I don't blame them, right? Many of these global stars who are coming, the tickets are 10,000, 15,000 a pop, right?

[00:19:58] That's serious money even for, even for me, uh, even I would think many times before paying 10,000, 15,000 for a concert, but many people aren't because these concerts are all sellouts. We can see that there's sellouts. So what surprised me is that I thought, I mean, I knew of folks like this, but I thought that was a small base, right? Because again, I'm still old enough that we grew up, you know, hearing about how we have the highest household savings anywhere in the world.

[00:20:24] And, you know, how Indian women are such diligent financial managers and so on and so forth. But that entire paradigm has kind of shifted. Yeah. And I think that was my big learning from this book from writing break point. Right. I realized many of my mental models of India are outdated models around thrift models around most people getting a job models around most people not wasting their time on social media. And in all of this, right?

[00:20:50] In the outdating, in the, in the irrelevance of our mental models, I think three factors and all three unsurprisingly relate to technology. Three factors have played a big role. I think the first piece is the speed at which the speed at which tech has taken away office jobs, I think has taken most of us certainly be by surprise. So we've given in the book in, in, in break point, we've used data from knockery knockery is a part of a company called info edge.

[00:21:20] Knockery is an employment classifieds business. So if firms like Marcellus, we subscribe to their CV database. We're also shareholders in info edge. So, so they're the largest generator of white collar jobs and CVs in the country. So in their data, you can see 2020 is a kind of break point. Till 2020 white collar jobs are doubling every six years. Post 2020, there's hardly any growth in white collar jobs, right? So there's some sort of break point around COVID. And is it AI?

[00:21:49] Is it not, you know, is a, is a debate I think we can have, but you can clearly see in the jobs data. And the same applies to the NASCOM data. NASCOM data briefly flowers after COVID after in the post COVID boom, but it was NASCOM data also tails off. And if you want to keep it even more rudimentary, you add up the annual reports of the IT services companies, the same trend emerges. So there's a break point around 2020 around office jobs. I submit to you that technology has something to do with it.

[00:22:16] We haven't even, we weren't able to nail down in the book exactly why 2020 seems to be such a break point. Right? That's the first aspect. The second is 2016 free mobile broadband, almost free mobile broadband appears in our country. Right? And as, and famously, famously Jandanaadhar mobile, right? Late Arun Jaitley coined this memorable term. Jandanaadhar mobile becomes a big driver of financial inclusion in our country.

[00:22:44] Everybody gets a bank account, an adhar number and the bank account of the mobile phone are joined together. That's used to, you know, memorably, world famously used to generate, get UPI going. And we become the, the, the darling of the world because of the runaway success of UPI. It's only wise writing break point realize boss, it cuts both ways. Because you've created such a effortless mechanism to distribute. So you've created such an effortless mechanism to pay money.

[00:23:12] It can all be used also be used to borrow money rapidly at scale, very fast. Right? So do you see, right? The Jandanaadhar mobile was the foundation of UPI. That's what allowed UPI to, to be used by everybody to pay for their auto rickshaw rides and for their Golgappa and their Sabji. But that same direction of money can go rather than spending money can also be used to borrow money. Right? And that vector is unique to India.

[00:23:40] No other poor country has anything as smooth, as powerful as the India stack. But the India stack is not just used for, for, you know, doing e-commerce transactions, digital transactions. The India stack is also used to borrow tons of money at high speed. And that piece is unique to our country. No other country, forget poor country. I don't think any other rich country has built such a mechanism.

[00:24:05] And, and I would submit to you, our credit scoring mechanism is not as powerful as our, as our stack. Right? So you've got a paradox going on here. The credit scoring mechanism is similar to what America has, which is, which is, and your, your, your dispersal mechanism is state of the art. That's the second thing that I think I hadn't mentally clocked until we joined the dots and breakpoint. And the third piece is this FNO business.

[00:24:33] And we are a peculiar country. We are a peculiar country. We are a peculiar country. No other country, $11 billion, three, four consecutive years of annual retail investor losses. Annual retail investor losses, 11 billion, 1.1 lakh crores every year. Three, I think three years in a row, retail investors have lost. 1.1 lakh crores is almost the government of India's education budget. $11 billion is what our retail investors are losing every year to FNO.

[00:25:02] Again, as I read the book, I realized social media has played a big role. This is where again, here the COVID breakpoint is relatively obvious, right? People sat at home for two years during COVID. Even if they had another job, they needed some other break. If they had no other job, then this was a seen as a source of employment. And people watched and got influenced and started punting and they couldn't stop it until they ran out of money.

[00:25:27] And in breakpoint, we give lots of stories of real incidents, real people who lost their life savings. The $11 billion data is from $11 billion retail investor losses is from SEBI. SEBI publishes big fat reports on how 9 million Indians are losing their shirts to FNO trading.

[00:25:45] So these three aspects of how technology has interplayed with demographic and economic forces to create challenging outcomes, I hadn't clocked. And that's when my mental model started changing. We are actually a high tech country, still very young, median age 28, 29, still very poor, unequal.

[00:26:11] The billionaires in Bombay and Bangalore versus the millions and millions, hundreds of millions of low income people, who on social media can see how the billionaires are living. The average Indian is spending five hours a day on social media being fed curated images, very cleverly curated, AI curated images of luxury. And five hours a day is enough to change anybody's brain, especially young people's brains.

[00:26:37] So that mental updating, right, took place for me while researching Breakpoint. And I submit to you that whoever was watching, reads the book, they will get that mental updating from that will emerge new business opportunities. Right. Remember, it's only from problem statement to get business opportunities. Right. So I would argue to you that Breakpoint will lead to more new business opportunities for readers than Behold the Leviathan. Because Behold the Leviathan, I focused on what's working in India. If it's working, it's difficult for an entrepreneur to fix it.

[00:27:07] Whereas Breakpoint is telling you what's not working, what's broken. And therefore, those entrepreneurs are watching can fix those problems and build very profitable businesses. Yeah. So as I was saying, you know, it was a very disconcerting read for a good part of the book. Right. Because it threw up all of these problems. And, you know, how much of this is just a painful transition, right? Because if I think of financialization and JAM itself now, you know, again, I'm old enough to think of the shit fund scams that used to happen.

[00:27:37] Yeah, late nineties. Right. And so on and so forth. Right. That, you know, this formalization, this financialization was seen as an overwhelming net positive. Right. And again, for the last 10, 12 years with, you know, what you mentioned as well. Right. I mean, with this whole asset quality review and so on and so forth, the bad loans were cleared. Banks were restructured, so on and so forth. Right. That they could again become competitive to cater to demand. Right. Now, both these things came together.

[00:28:05] So how much of this is a painful transition in between? And how much of this is like a structural challenge? So I think, I certainly hope this is a transition. It's a painful transition. I agree with you. And I hope it's a transition. Because if this is the permanent state of affairs, life is tough. Now I'll tell you why I'm confident it will be a transition, not a permanent state of affairs.

[00:28:27] So there are two kind of overdeveloped parts of our economy. Right. Because of our legacy of a high quality university education system, there are two overdeveloped parts. One is the tech ecosystem. Right. And the second is the banking and financial services ecosystem. One is in the city you're based in. And one is the city I am based in. These are the two overdeveloped parts. And I would submit to you the reason you and I sitting here on a public holiday having this discussion is because we represent the two overdeveloped parts of our economy. Right.

[00:28:57] Because these two parts are overdeveloped, world class talent, smart people, hardworking people. We have basically, these two parts have run ahead of the rest of the country. Right. Which is why as we're discussing, you have jam, you have God knows how many digital lending businesses. You have everything available, including this book, which can be bought on EMI on a digital platform. Right.

[00:29:23] I doubt if we go to a sub-Saharan African country with similar per capita income, they'll have such an overdeveloped tech stack and a financial services stack laid on top of it. Right. So, so you overdeveloped these two. The rest of the country, however, hasn't developed so much. Right.

[00:29:41] Not just, not just employment opportunities, but even the maturity to understand that just because I can see an iPhone 17 available on EMI financing on a digital platform, I shouldn't be buying that phone. That maturity isn't there. So the overdeveloped parts of our economy, financial services and fintech coming together in a way.

[00:30:05] The overdeveloped part of our fintech ecosystem is disbursing these things to the underdeveloped rest of the country where jobs are few and the emotional maturity is probably not there. And the financial maturity is not there, but the money is available and the product is available on credit. Right. And I think these two are colliding. Now, there's another byproduct of the overdeveloped financial services and tech community, which is that things are getting automated far quicker than I think they get automated in most poor countries.

[00:30:34] So again, if I take, if I go to a sub-Saharan African country with similar per capita income to India, right? $2,700, $2,800. I doubt you'll see factories where everything is robotized. Most Indian factories, including the small SME run factories that we have cited, right? Everything that can be automated and robotized is getting automated and robotized.

[00:30:57] In fact, one of my most scary visits was one of the largest ice cream plants in the world in northern Telangana, right? Colossal plant, only 20 people employed. Gleaming machinery end to end, some Swedish, some German, no Chinese. Just all European gleaming machinery for making ice creams, lollies and cups. And it was a good ice cream.

[00:31:23] I had three of them in that two hours I was in the plant, but hardly any people, right? Spick and span factory and whacking out ice creams for the Bangalore market, for the Hyderabad market and so on, right? So because we're a financially evolved country, cost of capital for that listed business is relatively low. And because we're tech savvy, I remember going to the control room of that factory.

[00:31:46] The control room of the factory is two dudes sitting in front of a Star Trek type console, right? There's two dudes sitting in front of 20 screens and they're running the whole factory on touchpads, right? And there are 20 people. Most of those 20 people are women involved in packing the ice cream in Dubas. There's only five or six relatively well-paid workers running the whole factory, which are machines, basically robots.

[00:32:11] So our high tech, high financialization aspect means that capital costs lower than using labor. Cost of capital has dropped far more sharply than the cost of labor. And the result of that is we are replacing human beings with machines, both in the office and in the factory. In fact, let me just give one last example of how finance and tech come together.

[00:32:41] So we are shareholders in a firm which runs most of India's ATMs, right? So they initially used to replenish the ATMs with cash, right? That was the business. Then they said, well, we'll do more. They went to the banks and said, you guys have a security guard sitting at the ATM, one in the morning, one in the evening. So together that costs you 6-7 lakhs per ATM per year, just the security guard sitting there.

[00:33:08] We will create bots which will do the same work. You don't need the security guard there, right? So basically we will plant sensors and cameras in the bank branch. And then we'll have a central control room, in this case it's in Navi Mumbai, where say 400-500 operators will sit. And they can supervise tens of thousands of ATMs.

[00:33:32] They obviously don't have to look at every ATM because the bots and sensors will tell them whichever ATM is out of the normal activity detected. So if a dude has entered an ATM wearing a helmet in rural Bihar, then the bot will tell them he was in this ATM in Muzaffarpur district in Bihar. There's some dodgy thing happening.

[00:33:53] And through a microphone, the call center in Navi Mumbai will communicate to that helmet-wearing guy that you can't take out cash using a helmet. If he doesn't listen, they'll press a button and the local police station will get it alerted, right? Again, I would submit to you if we go to other countries with our per capita income, whether they're in Africa or Southeast Asia, you will not find this level of breathtaking automation.

[00:34:19] Effectively, 20,000, 30,000 security guards have lost their jobs because smart company has figured out how to look after ATMs and NBFC gold lenders car strong room. That's also served the pride. The gold lenders car strong room. They don't need a guard. They can have it centrally supervised.

[00:34:41] So we're good at certain things, so good at them that it runs ahead of the rest of the economy with adverse consequences. Yeah. This was the scary part, right? When I read about the security guards and so on, because, see, essentially what you're saying is someone who gets paid about 10, 12 grand a month. Let's say you're working two shifts. So that's like 20, 25 grand, you know, for a particular center.

[00:35:08] Now, I always thought that automation was going to be expensive, right? In a labor surplus country like India, you can always hire a person, right? And also, I mean, the last mile is going to be very difficult to sort of automate because there's just so much randomness here, right? I mean, there are cows on the road, you know, addresses are always random and so on and so forth, right?

[00:35:32] But the couple of examples that you gave, what you're essentially saying right now is the tech and the automation has caught up to a degree where I don't need to hire these people at the bottom of the pyramid. That's right. So let's just expand that into there are two ways in which technology can work, right?

[00:35:49] It can be labor substituting, the ATM example I gave you, where the tech in Navi Mumbai with a few operators sitting in front of screens are substituting tens of thousands of security guards. So that's the labor substituting role of tech. There's also a labor augmenting part of tech, right? So labor augmenting part of tech would be, say, a straightforward example would be, say, you're a podcaster and you want to do better podcasts.

[00:36:17] And you use AI to tell you, how do I do better podcasts? What are the questions I should ask? How should I ask them? Do Claude quickly do for me the background research on, say, Saurabh's book so that I can. So that's the labor augmenting tech, right? Now, one of the biggest debates in economics for centuries has been, is technology by and large labor substituting or is it labor augmenting?

[00:36:43] Now, what we've said in Breakpoint is our reading of human history is whenever big tech change comes, the first impact is the substitution impact, right? So example, 1880, Edison comes up with the light bulb. So the first impact is the dude making the candle. He's gone. And then the one more remove is the fellows putting up gas lights, gas lamps.

[00:37:09] Every evening, there were some dudes used to put the gas light on and in the morning, they lose their jobs, right? So that's the first effect, right? Substitution effect. Then around 1910, they figured out, This is a gramophone, it can be a nightlife, it can be a Hollywood, it can be a nightlife. So 1910 onwards, new jobs started being born because of electricity, right? So that's how most technological waves play out. First, you have the substitution effect. Then you have the complementarity effect. We're clearly living through the substitution effect, right?

[00:37:38] So two or three weeks ago, Oracle announced 25,000 job losses globally. Larry essentially said, Look, we don't need so many people, AI will do a bunch of work, right? And I think out of the 25,000, 12,000 were in India, right? So those guys are the victims of substitution. Now, a few years down the road, hopefully sooner rather than later, the complementarity effects will come. The labor complementarity effects will come.

[00:38:06] In the book, I say that those complementarity effects, usually it's very hard to foresee the complementarities, right? Because if you could, they'd be happening right now, right? Now, I'm not a techie, but I spoke to a bunch of techies. My colleague Nandita did a bunch of research on what complementarities are we seeing with AI. We looked at job posting boards. We looked at social media.

[00:38:26] And what we can already see is around the world, people are posting gig jobs related to AI, right? And whilst they're not explicitly aimed at Indians, we can see from those posts that more likely than not, it'll be Indians who'll end up doing those AI related gig jobs.

[00:38:45] So for example, we need people who can translate from German to English, label the data, clean up the data, label it, and then train bots. And, you know, we will pay say $1,000 a week, some such number, right? $50,000 a year. You can do this wherever you want sitting at your home. These sorts of AI gig jobs will come to India, right? Because I can't see any other country.

[00:39:12] We have the world's largest repository of AI engineers, or generally we have the world's largest repository of techies. And I think maybe we have the world's second largest repository of AI engineers. So I think those jobs will come to India. So at the very least, as the AI gig jobs come to India, hopefully they will more than make up for these Oracle type episodes that we are hearing. Right. Now, one of the other conventional ticket out for the middle class was education, right?

[00:39:42] I mean, they've all heard you study hard, get a degree, maybe a couple of degrees, right? You'll find a job and work like hell. And then, you know, marriage, house, car, maybe not in that particular order, but whatever, right? I mean, but what you also posit in this book is that that engine of social mobility is now jeopardized, right? Because of AI, you don't know what skills are relevant in this transition period, at least, right?

[00:40:10] The jobs that used to be available are no longer available, right? So what is that new engine that you foresee for social mobility per se? Right. So I think one of the things that's happening in our country, right, is the educational system by and large is socialist. It's run by state government, central government.

[00:40:30] And as a result, the graduates they're churning out don't seem to, don't seem, the qualifications of those graduates don't seem to have any relationship with what the economy demands, right? So in the book, we give you the case study of semiconductor engineers. So the country needs effectively 3 lakh semiconductor engineers a year. We're getting less than a lakh. Not only are we getting less than a lakh, not only is there a shortage. By the way, these are well-paid jobs.

[00:40:56] So if you're a semiconductor engineer in Bangalore or Hyderabad with five years of experience, you can earn the best part of a crore. So these are solidly well-paid jobs, right? But the supply response is not there. But I would also argue that these are harder jobs to do. So the cognitive load is greater. Yes. And that makes sense, right? Because if the easier stuff is done by AI, it's only the harder stuff. Right. Right.

[00:41:19] But the education system should respond by encouraging the students, look, we are now training you for, I think they call it VLSI, right? We are now training you for this harder stuff. Very large-scale integration. So we are training you. It will cost a little bit extra. So I even looked up the costs, right, of these courses, right? They charge around 15, 20, 30,000. But I spoke to them, they said, take up he not. People are offering courses which are supplementary to university education. There isn't take up.

[00:41:48] And yet there is, you know, lakhs of people want to go to engineering school for three years. But these vocational courses that you can do in VLSI, which can then lead to a good job, which can lead you to earning one CR by the time you're 30, they are not doing it. So there's a mismatch between the needs of a capitalist economy and the supply that a socialist education system provides.

[00:42:12] And because our students grew up in the socialist education system, they sort of remain somewhat impervious to what the actual demands of the economy are. That was one of the key motivations for writing Breakpoint. To tell people that you have to wake up and realize what the world wants, not whatever fantasy you have about studying engineering and then sitting in front of a laptop in an air-conditioned room. That's not going to happen, right? So that's the first aspect of, I think we will just have to make that change. I don't know.

[00:42:41] I don't know how we make that change. But I think free market forces will force that change upon us. The second aspect of what can be done, right? People who are doing manual trades are actually, their compensation, their earnings are growing much faster than those who are doing these white-collar job type professions. So for example, I migrated to Mumbai in 2008, right?

[00:43:05] 2009, my wife and I hired a guy to paint our, we bought a flat, so we hired a guy to refurb our house. I remember paying him, I think, the grand total of 20 lakhs then to do up our house. I bumped into him in the street two months ago. It's now almost 17, 18 years since I last met him. He's obviously older, but he's done well for himself. He now employs 10 other builders. They do up houses in suburban Mumbai.

[00:43:35] His son is a pilot. His daughter is a chartered accountant. So he's clearly done well for himself. And by and large, when I'm meeting people who do professions which are related to manual work, whether it is interior decoration, whether it is carpentry, plumbing, electrical work, JCB operators, four men, four women in factories.

[00:43:57] They are doing far better because they're producing, coming up with the sort of practical skills which are actually in short supply in the labor market. In fact, there was a brilliant LinkedIn post by a guy called Harshad Shah in July 25, which I've cited in the book. He points out that an entry-level graduate in Mumbai earns half as much as a construction worker in Bombay. Because the construction worker in Bombay ironically is in short supply.

[00:44:24] Whereas the entry-level graduate, there ain't no short supply there. So the second sort of takeaway for me was gradually if we heed the signals of the free market, we will increasingly go towards vocational roles. And they don't necessarily have to be pounding the pavement, pounding concrete in a highway in the country. Vocational roles can be go to an ITI rather than an IIT. Rather than an IIT, go to an ITI and learn vocational skills which you can apply in the factories of our country.

[00:44:52] This will become especially relevant as we discuss how India will have to transition from being a services export to a manufacturing export economy. And the third piece that I think will have to come to us, I don't think we have a choice is, given that there are very few jobs but there is a lot of work. There's lots of work but very few jobs. The entrepreneurial thrust will have to come through. Whether I like it or not, my Bengali cousins and friends will have to become entrepreneurial.

[00:45:21] Whether you like it or not, your Kurgi cousins and friends will have to become entrepreneurial. It's easier obviously for mercantile communities like the Gujaratis, the Sindhis and the Marwadis to do this. But hey, those who are not hailing from mercantile communities will have to become mercantile because there's plenty of work.

[00:45:39] An example I love citing because I think it gives me enormous optimism of the future is, during COVID, the high rise that I live in Bombay, there was instructions from the authorities that older people can't go out. So older people who had pets needed somebody to take their dogs and cats out for a walk. Into the void stepped in the dude who washes the cars in the building.

[00:46:04] He told his two sons, you guys step in, take the dogs and cats for walks. So twice a day, morning, evening, these guys would do the needful. And then when COVID ended, everybody was so comfortable chilling at home. They said, why don't you guys do this on a permanent basis? So these guys, I've known them since they were kids. They sit in the park in the middle of the day. So I speak to them, they earn between the two of them, they earn 4-5 lakhs a year. Right.

[00:46:30] And they're providing a useful service, especially for elderly people who are too old to take their pets out. Providing a useful service. But there was no vacancy advertised saying dog walker required in Powai. Right. These fellows or their father was entrepreneurial, spotted the gap, provided a service and they make a living. And I submit to you, you're also entrepreneurial. Nobody told you that it was Roshan launched Bharat Varta. You figured there's a gap for this sort of material.

[00:47:00] Right. You did the needful, you built a small business. And I think the future looks like what you are doing, what other entrepreneurial people are doing. Because there's plenty of work. This is a poor country. This is a country on the make. Right. There's so many things to do. We just have to get out of the mindset that there'll be a job for us to apply to. So, you know, just thinking about it, right. Do you think this is like a mindset shift, a market shift or a policy shift?

[00:47:26] You know, what is what will cause people to sort of orient themselves to this new economy, as you call it? Right. Because as you say, work is there. There's value to be created. Except that, you know, this is not going to flow down in that very centralized fashion as it has over the last 100, 200 years. So you've given me three lovely heads. I wish I had met you before writing the book because those are three super headings. Market, mindset and policy. So let's do that step by step.

[00:47:55] Let's do the market shift first, right? So I think the market shift that we inevitably face, I don't think we have a choice, is we will have to pivot from being a country which earns its forex from selling brains. When we sell IT, when we sell pharma, when we sell the remittances, right? We're selling brains to the rest of the world to earn dollars. With those dollars, we're buying this mic, your phone, the lovely camera here. So that's the trade we do with the world.

[00:48:20] We sell Indian brains to the world and the world says, okay, here you go, 400 billion dollars, roughly, roughly. The world gives us 400 billion dollars for selling our intellect to the world. And with those 400 billion, we buy the nice things which makes life worth living. That trade, I think, will unwind, right? Because I can't see why the Fortune 500 will pay us the best part of 400 billion. I'm using IT services plus remittances.

[00:48:48] I don't think the Fortune 500 companies will pay us 400 billion for using ChatGPT or Claude. Now, as that trade unwinds, we have a choice. Either we buy fewer mics and cameras and phones from abroad, or we say we will sell something else to the world. And I think the exchange rate will adjust fairly rapidly. It will depreciate fairly rapidly to make our manufactured exports competitive, right?

[00:49:15] So the T-shirts that we make in Tirupur and the footballs and cricket bats that we make in Meret and Ludhiana. And the chemicals that we produce in Surat and the precision engineering that we do in Coimbatore or various parts of Tamil Nadu. All of those, and the pharma from Hyderabad. All of those, I think, will become far more competitive at a hammered exchange rate.

[00:49:40] Remember, if you're exporting IT services and knowledge at a rapid rate, that makes your currency stronger than it should be. That makes it very hard for the manufactured goods exported to compete with Vietnam, Bangladesh. But when the reverse dynamic kicks in, as we're describing in Breakpoint, then it becomes easier because the currency gives up its value quickly. As that reverse dynamic kicks in, your export-oriented sector gets a philip.

[00:50:06] And the philip is even more powerful because of the FTAs that India has negotiated successfully with Europe and UK. Even if the American FTA doesn't come through, these two FTAs are pretty good. The European, Europe and UK FTAs are pretty good. And finally, China plus one, right? As described in Behold the Leviathan in my previous book, China plus one is here to stay. There are serious issues between the West and China. And in a bunch of industries, we've been getting credible news for two to three years. In a bunch of industries, the Western world is clear.

[00:50:36] They want to reduce their dependence on China. In some cases, they want to entirely wipe out their dependence on China. So we have a nice place for us to slot in. So that's the market shift, right? So I have a question on that, right? I mean, sorry to slip into monetary policy and stuff. But do you think that we should let the rupee slide for a bit? I don't think we have a choice. It will go. You can see in front, you know, you can see we're doing this in the middle of April.

[00:51:03] You can see the RBI's, you know, other than draconian steps, which they can only occasionally take. Other than draconian steps, very difficult for the RBI to arrest the fall of the rupee, given the rate at which foreign exchange reserves are being depleted. That's the first piece. That's the market shift. This is free market intervention. As you're alluding to the RBI is trying to jam it, but they can't jam it beyond a point. Because if they do, then we basically get ejected from the global economy.

[00:51:27] So for long, I mean, we have talked about us leapfrogging from agriculture to services, right? That was a legacy of those years where we post-independence, we built up a world-class university system. There's no way we can go back to manufacturing as well because of the reasons that you described. A, I mean, there's a lot of automation. You need fewer people doing those jobs and so on. But at the same time, it is also something that's a lever, too big of a lever for us not to, like, you know.

[00:51:57] We'll have to go back to manufacturing because in a way, AI is jamming the services engine. Right. AI is jamming the services engine. I mean, that's why I put it in a very prosaic way. Because AI is jamming our services export engine, if we want to carry on buying the sorts of things which are routine for us, such as this imported watch and this imported shirt and the imported camera. If we want to carry on buying that, then we'll have to find some other way to earn forex. Right.

[00:52:24] And by definition, if you can't earn forex from services, you have to earn it from manufacturing. And we'll have to make it comparable. And the free market forces will adjust. The currency will adjust. And beyond the point, the RBI can't defend the rupee. The rupee will go to a place where our services, where our exports, manufacturing exports will become comparative. Okay? So that's the first point. That's the market shift. Now, the policy shift. Right?

[00:52:52] If we want to compete successfully with Vietnam and Bangladesh sooner rather than later, then beyond the FTAs and the depreciated rupee, there's two other things which I think we will need. Right? Right? The first is we will need cheaper, lower land prices. Right? So I'm not 100% on top of land prices in Karnataka.

[00:53:14] But in the state I-11 in Maharashtra, in this Western Maharashtra belt, land prices are comparable to Western Europe. Right? So at the current rates of land prices in Western Maharashtra, very difficult for anybody to set up a factory and make a reasonable return on capital. Industrial land has got so expensive in Western Maharashtra, very difficult to set up a brand new factory and make a return on capital above your cost of capital. Right?

[00:53:41] So if you now want to compete with other countries, Vietnam ka industrial land is half the price of our industrial land. Then land prices have to correct. Now, I'm not so sure our policy makers will let land prices correct. The other way to therefore deal with this is to increase the FSI. Right? Allow multi-storied factories to come up. Now, I've seen multi-storied factories in Europe. I've heard that there are multi-storied factories in China. And I've heard that there are multi-storied factories in Bangladesh.

[00:54:10] So if there can be multi-storied factories in economies as diverse as this, I don't see why we can't have multi-storied factories. But how much of this is a base infrastructure problem? Right? I mean, which is that if you had the roads, the connectivity and so on and so forth. So this development would be spread over a wider base of area. So to be fair, there's been fair decent work done on that and building out the roads. Just that you can build out as many roads as you want. So for example, I've traveled extensively in UP and Bihar. Roads are lovely. Yeah.

[00:54:40] But there is no industry because if you tell someone in Pune that industrial land is expensive in Pune, please go to Bihar and set up a factory. He's not going to do it. Because Bihar is far away. I don't have any contacts there. It's not near to port. It doesn't have a skilled manufacturing labor ecosystem. So there are reasons why people want to be close to ports like JNPT. Pune is just on the other side of the Western Ghats to JNPT.

[00:55:08] Pune has a well-developed manufacturing ecosystem. The Pune-Nashik-Bombay triangle is well-connected, safe, close to ports, close to national transport hubs, etc. So even though roads in Bihar are now pretty good, I wouldn't say world class, but they're on their way to being second world at least. Roads in Bihar are pretty good. It's difficult to set up a factory in Bihar or Eastern UP.

[00:55:38] So in Eastern UP, what is it? You'll have a Flipkart or Amazon distribution hub. You'll have some food processing, right? Juice making, biscuit making, that sort of factory. But if you want to do precision engineering, you won't be able to do that in a part of the country, which is remote and thus has cheap land. You still want to be in an industrial hub. Now industrial hub, like for like, our land prices are 50% higher than Vietnam.

[00:56:05] Therefore, if our politicians don't want our land prices to correct, then FSI would be logical. And I think those will happen. I think it's hopefully a few years, hopefully not more than that away from FSI being jacked up so that multi-storied factories can come up in the industrial belts of our country. Dousera cost of capital will have to, cost of working capital will have to come down, right?

[00:56:30] Equity capital has become cheap courtesy widespread availability of private equity, venture capital, engine funding, government also provides money. Equity capital, in fact, other than America, no other country gets as much access to equity capital as India now. But the more relevant capital for running businesses is working capital, right? So working capital, forget China, China is at 3%, even Vietnam is at 3%. Western world is 3%. Even China, Vietnam is 3%.

[00:56:59] We are at 11-12%. The reason we are at 11-12% is our government borrows so much money that it drags the cost of capital up. So in the budget for the year to March 27, the government's announced borrowing from the bond market will be 16-17 trillion. It's a central government, add state government, add PSUs, the entire government ecosystem in Russian is borrowing the best part of 30 trillion rupees. When you drag 30 trillion rupees, right?

[00:57:28] That's by the way, way more than bank lending in the country. If you drag so much money out of the country, out of the borrowing ecosystem, you drag the cost of capital up, the 10-year government of India bond deal is 7. Decent state governments, right? The better quality state governments borrow 3-year money at 8, 8.5. And thus, a BBB rated corporate borrows at 12. So 12-per to borrow karke you can't compete with, with Vietnam and Bangladesh.

[00:57:56] One could argue that that may have been cyclical, right? I mean, you needed all that money to build the infrastructure and so on and so forth. Which is why I was hoping that this year they will rein it back, but they haven't. Right. So I think, link to that, my reckoning is forces, economic forces, will constrain government spending heavily in the years to come. And as that happens, the bond yields come off and the cost of borrowing drops. So on the market response, I think we need cheaper land and cheaper capital.

[00:58:26] I'm not so sure our netas will be delighted to offer us cheaper land and capital, but I think the direction which things are moving in, their choices will be circumscribed by the compulsions that we face, right? So that was your market, that's policy. Now let's come to mindset, right? In breakpoint, we've said that, ye sab to chalo chayyeh and I think ho jayega, free market forces have a degree of inevitability about it. What's less certain is whether we'll,

[00:58:54] whether especially for the non-mercantile communities, right? Will we have the mindset to go away from studying for a job and then being a job seeker to becoming an entrepreneur? And there's a whole bunch of mental shifts that we have discussed in the book using examples from various parts of the country. I'll just, you know, address the brevity. I'll focus on three mental shifts, which I found very hard when I was trying to shift from being a job seeker to an entrepreneur, right?

[00:59:22] The first is as a job seeker, you're constantly or an employee, you're constantly looking for external validation, right? Warren Buffett calls it the external scorecard. So, you know, what credentials do I have? What's my university degree, right? Mere naam ke saamne kya kya letters hai? If I'm in a job, how long am I in the office? Does the boss know I'm doing long hours, right? Because that's important for my future career. Those are external scorecard. As Warren Buffett says, for an entrepreneur, these things are less relevant. Uska focus is the internal scorecard.

[00:59:51] What skills am I learning? What networks am I building? What relationships am I cultivating? What commercial opportunities am I spotting that I can capitalize on? The entrepreneur focuses on the internal scorecard rather than demonstrating to the rest of the world his sort of, you know, credentials, right? This shift is really hard. If till the age of 22, 23, you've been raised to say, Roshan, what marks are you getting? Which college did you get into? He got into IIT, this.

[01:00:22] You got into something else, right? That gets, it's sort of heat sealed into your brain that I have to seek external validation. And, you know, it took me a decade in India to become an entrepreneur. And as I went through that journey of trying to give up my job, I realized that entrepreneurs really don't give a monkeys about this external validation business. I might meet him and say, Roshan, this is not English. He has not read Breakpoint. But as one of famous billionaire told me after I gave him my third book,

[01:00:51] he said in Hindi, he said, And he indicated that this is lying over there. So his point to me was a lovely man. And I learned enormous amounts. He, by the way, he reads plenty. He was just screwing my happiness. His point was, there's no need for me to read every single thing some guru is writing. I'm doing my reading. I'm doing my thinking. And I'm figuring out my world, right? And he was not interested in my impression of him. He couldn't care whether I thought

[01:01:20] he was well-read or not. He said it's because that's irrelevant, right? The second shift, which I found very hard was to go away from being a doer to a thinker. See, when you're an employee, you're by and large a doer. You're told these are your targets or this is your project. And you execute a closed-ended problem. As an entrepreneur, there's no closed-ended problems. I am the thinker and the doer, Nanda Nillekani, JF quoted in the book.

[01:01:50] He sort of explains that he's the thinker, he's the doer. And it was like that in the early days of Infosys. And I suspect when he built his not-for-profit, when he built X-Step, it was like that, right? So the entrepreneur is the thinker and the doer. He's double-hatting or she's double-hatting and it's bloody hard because I found out how hard it is. Right. By 2 or 3 o'clock every day, my brain is fried because I'm juggling between thinking and doing, thinking and doing, right? Right.

[01:02:19] But rather you default to doing and then check yourself. It was like a hamster on a wheel. Let me chill. And I try to chill for two minutes before I start doing again. So that's the, and in crises, this is very hard because in crises, the entrepreneur has to think through the response and execute the response. Whereas if you're an employee, even if you're a senior employee in a large firm, you're by and large a doer. You're turning to the board or the promoter ki boss, data do. Yeah.

[01:02:48] Everything is downstream. A iron crisis chal raha hai, ab bada do kya karna hai. Right? Whatever you tell me, I'll, I'll do, right? Right. And the third piece is, is, is the John F. Kennedy wala, right? So employees attitude is what can the country do for me? Right? Right. I have studied hard. I'm a highly credentialed worker. Right. You want to employ me, aap ki mire liye kya kar doge? What is my CTC? What is my pay rise? What ESOPs am I getting? Right? But the entrepreneur's attitude is, you know, I need to figure out

[01:03:18] what can I do for society, country, family, employee? Right? Right? The, the mental framework is completely inverted. Right? And a by-product of this is, entrepreneurs tend to be frugal. Kharcha kam karna hai, you know, iPhone SE use karo, purana use karo, second hand use karo, fully depreciated use karo. Right. Whereas the employee tends to say, I will fly business class to New York and stay at the, stay at the four seasons because, you know, otherwise my friends will say, kya kar raha hai? Loser sala.

[01:03:48] Right. Economy class gya in New York. Right? So, so the, so the mindset shift is big. Right. And for a lot of people who haven't woken up to the realities of breakpoint and how powerful these seismic shifts will be, I think the next two, three years will require them to make the mindset shift. The sooner, the better for everybody concerned, I think. Right. So entrepreneurship is no longer a nice to have. It's a necessity at this point of time. I would say probably was 10 years ago. It's just that

[01:04:18] it took me breakpoint to realize, wake up to the fact that entrepreneurship is a necessity for all of us. You know, we've hosted Mr. Manish Sabarwal, the founder, CEO of Team Lease, chairman of Team Lease. And of the many pithy quotes that he has, he often says, India doesn't have a jobs problem. It has a wages problem. Right. Saying that there's an uneven distribution basically. Right. And it, I was just wondering, you know, if you'd like to comment

[01:04:48] on that particular quote. Right. Because I found it to be true. Right. I think there is a complete uneven sort of distribution. Right. Where I'm from, or even in Mumbai as well, there's a huge dearth of people, you know, doing some of the semi-skilled work as well. Right. I know friends of mine who own, let's say, EMS companies, electronic manufacturing companies who find it really hard to hire, let's say, CNC machinists

[01:05:18] and operators and so on. Right. And so, if you solve the distribution of these jobs, right, we don't have a jobs problem, but it's really that, you know, everyone's concentrated on one, two or three domains and they're sort of unevenly distributed. Yeah. So, so I think, I think, I agree with Manish, he's a, I've learned a lot talking to him over the years, I've learned a lot reading his columns in the, in the, I think Indian Express and occasionally writes I think in the Business Standard.

[01:05:47] So I agree with him. Where, where we are, where we are coming at it in breakpoint is to say, there are some societal attitudes that we have, e.g., that going to university and then getting a white collar job in an air conditioned office is somehow seen as more desirable as opposed to being a CNC worker in your friend's EMS factory perhaps earning more. Yes. Right? So, so there are some, maybe there is some caste system story going on here which, which we didn't clock. Maybe there's something

[01:06:17] like that happening but that's the first challenge that there are some preset prejudices about what constitutes a respectable job and what is one notch below. I think free market forces will. Also, let's face it, right? I mean, air conditioning plays a huge role as well, right? I mean, rather than sweat it out in the refinery or on the shop floor. There is that. Yeah, I agree with that. Is that at what stage of, at what stage of, at what stage it tilts

[01:06:47] given the challenges that we are going to face, right? Right. And by the way, for those who are watching, if they believe this is some theoretical thing, I would submit, go to Hyderabad, go to Hingewardi in Pune, go to Mohali in Chandigarh and you will see the cutting edge of how difficult life is becoming in cities which are historically been centric around IT services. The drying up of IT services jobs is fast, it's tangible, you can see the impact on the property market right away. Right? So, so the first piece was just to address

[01:07:17] the Manishwala point, I think we will, the free market forces will force our, our, our, our graduates, young people to confront why am I not doing the CNC, workerwala job. The second piece is I think the education system will also gradually become capitalistic. We're already seeing private sector universities emerge. The private sector universities are offering courses in entrepreneurship. Although if you ask me, if you're having to offer a course in entrepreneurship, that itself tells you a lot about

[01:07:46] what's happening. But I think the education system is becoming capitalistic. My daughter doesn't want to do white collar jobs. She wants to do design. She wants to do either fashion design or industrial design. And as a 16 year old, she already started visiting websites, visiting entrepreneurs who do these sort of things, making her stuff, selling it. And my reckoning is many people her age, 16, 17 year olds who are seeing how the country is panning out, who are seeing the challenges their parents face in white collar jobs will say,

[01:08:15] this is not going to work. Sitting in an air conditioned office, I need to figure out something practical with my hands. And ideally, I need to figure out something practical with my hands which can be entrepreneurial. And I think there's a free market response to that in the education system. Design institutes are coming up across the country. They are private sector. They're charging reasonable fees and they're offering apprenticeships to these youngsters. I think people will become consultants and freelancers before they become business owners.

[01:08:45] And I think that's a good thing. The fact that the gig work economy, the fact that when I go to say a coffee shop anywhere in the country and certainly in Bangalore, so many people are freelancing. We can see it as being saying it's necessary, it's necessary, that's why they're doing it, mil nida job. But we can also see it as saying this is the right thing to do because the white collar job is a matter of time before the white collar job goes away. The white collar job was an aberration in human history.

[01:09:15] It was 100 years of aberration roughly 1910 to roughly now. And as technology changes, that aberration in human history of people converging on a building in a city to do white collar work, that's going to melt away. So when we see the gig work economy in white collar jobs, I don't think there's anything wrong with it. That is the future. All of us in some shape or form will be part of that over the next 10-20 years. Right. I want to come back to something that we discussed

[01:09:45] earlier, which is credit demand. I mean, you're seeing credit demand growing on the business side as well, corporate credit demand as well. Why is it not translating to as many jobs as one would expect then in that case? So two parts to it, very little of that corporate credit demand is capex. So brand new factory building by private sector businesses is relatively rare. There's the government doing capex and there are a few corporates who are very close

[01:10:15] to the government, they're doing capex. But the typical Indian SME with 100, 200, 300 crores turnover, they are a little reluctant to do capex. If they want to do capex, they're saying we'll do it with our own money. The banks are also pretty reluctant to give capex funding to private sector enterprises. They were burnt in that 2005 to 15 period. They gave money to the private sector for capex. The majority of it blew up. And then in 2015, there was this review by Raghuram Rajan called Asset

[01:10:45] Quality Review. And the banks had to come clean and own up to the fact that the vast majority of their capex loans had gone bad. capex in the capex capacity from the private sector, barring a few large private sector concerns who are in capital in the intensive sectors is relatively modest. Secondly, as we are discussing, to the extent capex is happening, as I said, promoters are using their profits,

[01:11:14] their surpluses and the balance sheet to set up new plant capacity. Most of that is highly tech intensive. And if you ask Indian companies, why do you buy all these European and Japanese robots? Why don't you put more workers? They say these machines will work 24 hours a day. There is no union ca jhanjat, there is no pay rise, no strikes. And I've got extra cash on my balance sheet anyway. And I can, if I spend on the machines,

[01:11:45] I get a tax break as well effectively. If you buy machines, you're depreciating the machine out, you're amortizing it off and you're getting a tax break as well. So I'm winning every which way. So even companies who are setting up factories, and there are several, there is no demand of workers. So I don't think there's any getting away from the fact that even as the economy grows at a decent clip, jobs are going to be bloody hard to generate.

[01:12:15] And that I think poses a dichotomy. It could well be that the Indian business elite actually does very well in the future like they've done in the last 5-10 years. It could very well that the Indian elite does really well in the future as they've done in the last 5-10 years. Alongside that the middle class could have a really tough time. So in economist terms, the returns to labor will diminish, the returns to capital will go up because capital will reinvest more capital.

[01:12:45] And labor gets an increasingly small part of the pie because the returns are going to robots and to AI. That's the challenge the world faces. Now America faces that challenge at $30,000 per capital income. We face that challenge at $2,800 per capital income but I think we will face that challenge. The replacement of labor with capital both in factories and in offices. Plus the obvious population differences as well. The obvious population differences. Now China also has our

[01:13:14] population but they managed to figure out a solution where they've got to 5x up per capital income. They're more prosperous. We will have to figure out some other way to generate gainful employment for the bulk of our population. Gainful livelihood. Employment to not livelihood for the bulk of our population. So one of the things that you bring up in the book is also Indian SME is getting crushed by let's say regulation. And again I want to bring up the point of how much of

[01:13:44] this is a painful transition versus like something structural that is completely wrong. GST 2.0 is here. They've tried to simplify it further and there's some amount of deregulation as well. The labor courts were consolidated and so on. So directionally I think we seem to be working towards consolidation. We seem to be working towards some amount of easing the cost of doing business per se. Right. I mean even though let's say

[01:14:14] I mean it's a far way off. Right. I mean I think directionally we made that transition a start at least. Right. So how much of this is a transition and how much of this you think is something structural we can't avoid. So I think Manish Savarwal has also spoken about this about labor red tape and so on. Look I mean I've said in the book that whilst there are noble intentions expressed by our government on the subject not least I think two budgets ago

[01:14:43] the FM said some committee will be set up to reduce red tape. Right. As an entrepreneur I have not seen a lot of movement on the ground and whilst GST has come through for businesses like us and for businesses even smaller than us the amount of challenges faced in the whole process remain meaningful. So it's not apparent to me that the red

[01:15:13] tape has reduced significantly in the last four five years in spite of lots of intentions expressed by the powers that be that they will reduce red tape. What we also highlight in the book is something more counterintuitive. What GST has done as is well known is made it harder for smaller businesses to evade tax. Right. So until GST came along a smaller business could compete with a much larger enterprise by evading tax and thus effectively getting

[01:15:43] a lower tax rate. Right. The smaller business would evade tax and make up for the disadvantages of smallness. The smaller business would make up for the disadvantages of smallness. For example, if you're small, the banks lend to you at a higher interest rate. If you're small, you can't afford the best talent in the country. If you're small, the transport companies charge you higher rates. So there's a whole bunch of disadvantages of being small. Historically, they would make up for it by evading tax. It was a bit of a compensation and small businesses

[01:16:12] therefore were doing reasonably well. Remember, 80% of India's jobs come from small businesses. 80% of India's jobs come from businesses with profits less than 1CR. GST makes it harder to evade tax. And GST therefore is far more inimical for small businesses. You now face the situation where a business with a pat of 1 crore and a business with a pat of 1000 crores face the same tax rate. And it doesn't

[01:16:42] take a genius to figure out who's going to win that battle. Now, as you snuff out small businesses, that's where the job creation was because larger businesses as we're discussing neither for the ice cream factory nor for the media setup do the larger businesses need to employ more people. So by building really world-class infrastructure, by rolling out GST, by rolling out digital payments, we've made it easier for larger businesses to ramp nationally. And they've done a good

[01:17:11] job on that. But in the process, they have jammed the fortunes of the smaller businesses who are more labor-intensive. And that's created another layer of pain in the workforce. So this is a counterintuitive thing. Effectively think about it like this, we are making say, Tanzania and Taiwan compete inside the same economy. Assume you put Tanzania and Taiwan in a free trade area, Taiwan will pound the living daylights out of

[01:17:41] Tanzania because Taiwan has better tech, lower cost of capital, better infrastructure and Tanzania economic activity. Taiwan will suck. Tanzania will largely end up becoming an importer from Taiwan. So somewhat similar is happening and there's two dimensions to it. There's a labor, small business, large business and there's a South India, North India. South India effectively is Taiwan. Well educated people, good factory infrastructure, ports, the peninsular

[01:18:11] seafront. North India is closer to Tanzania. So if you put South India and North India in the same economy, you can guess what's going to happen. Everything is going to get made in the South and it will be exported to the North, which is effectively what's happening increasingly. So how would you think of formalizing this part of the economy? Let's say small and medium businesses, do you think that you should offer some kind of sops? So my suggestion to the powers that be has been reduce the tax rate for smaller businesses because otherwise it's an

[01:18:41] uneven battle. And the biggest casualty in this uneven battle is employment because small business generates employment. If you give him a lower tax rate, it's still not an equal chance of competing with larger businesses, but at least it's a fighting chance. But the challenge with my suggestion of tax breaks for smaller businesses is the trade bodies, which are dominated by the larger businesses, will shoot it down. Our big boys deserve and there's a whole bunch of literature in our country which

[01:19:10] gets published in the op-ed pages of newspapers that if only our larger businesses were larger, we thought would be competing with China boss. The fact that there'll be no employment in the country is missed in that debate. So the middle class is getting squeezed, jobs are getting a little more finite, wages are stagnating and so on. But at the same time, we are seeing this elite that are just zooming upwards. And especially over the last two, three, four years, I mean you've seen like a whole bunch of

[01:19:40] people like for example apply for this golden visa in Dubai and take more vacations, etc. Do you fear that there could be like a case of extreme wealth inequality in India and what that will lead to from a societal perspective? So rather than my trying to look into crystal ball on that vexed issue, let me just do something more prosaic. Firstly, our reckoning question is that the country is creating a million new businesses a year.

[01:20:11] The reason I say reckoning is the government doesn't have data on all the small businesses is only the data on formally registered small businesses. That number is 70-80,000 a year but our reckoning is if you add micro enterprises so if tomorrow I set up a paan ka dukan that will be counted as a micro enterprise right. So including that a million entrepreneurs are setting up shop a year and related good news is that somewhere around 40 billion dollars of

[01:20:41] angel, VC, startup funding, soft loans are available for small businesses. This ecosystem I think is one of the most vibrant in the world. Both the setup of small businesses and the funding availability therein right. And I don't care whether this is happening because of compulsion or because of great policy. I think it's a great outcome regardless because this is the we need more of this. This is the ramp that the country needs. We need 5x, 10x of this. If you're going to create 100 million AI jobs

[01:21:11] which I think is what we need we will need more of this. those AI jobs are not going to come from some large IT company opening a colossal tech park in Marathalli. Those AI jobs are going to come from entrepreneurs setting up their own gigs and selling their services globally from their bedroom in Tirunal Velu or Coimbatore. So these pieces are I think a big positive. We are on our way to creating a far more entrepreneurial society with reasonable access to funding. Vis-a-vis the elite getting

[01:21:40] richer, I think there's a natural check and balance in the system. And that being if you have an ecosystem where jobs are drying up as is evident from the data, unless there's an entrepreneurial upsurge, there's very little demand left for the elite to cater to. You can get a golden visa in Dubai and set up a family office in Dubai, but if back at the ranch in India there are very few customers for your business,

[01:22:11] then hey, there's very little profit for you to send to your family office in Dubai. So even for the elite, for all of us, if we don't turn around and figure out a way where livelihoods can be built, albeit as self-employed people as gig workers and as owners of small businesses, if livelihoods cannot be built, then everybody's boat is busted. And that's why I'm

[01:22:40] confident both through, you gave us those three heads, right? I think there'll be a market response. Free market forces will take us to a positive response to the situation. There'll be a policy response, lower cost land and capital, hopefully sooner rather than later. And there'll be an attitudinal response, an associatial response saying we need to stop having this knockery mindset. In Bangla, we call it chakri, by the way. Chakri effectively means slavery. We need to rid ourselves of this chakri-knockery

[01:23:10] mindset and move to a non-suproperial mindset. In many parts of our country, including in Bengali culture, this is seen as an adverse mindset. What's wrong with you? Why did your parents get educated? We'll have to shed these mindsets. So, if we don't click through the gears on this, then there'll be no golden visa and no family office in Dubai. Right. One of the very interesting points in the book that you

[01:23:40] mention is this impact of social media on the psychology of young Indians especially. I mean, this whole get rich fast, get rich now kind of schemes that seem to appear whether it's in terms of, let's say, online real money gaming or the FNO trading that we spoke about and so on. And again, you know, I'm still that in-between generation that had a bunch of the older folks who were heavily influenced by this whole Gandhian socialism sort of a mindset. And then we saw the post liberalization

[01:24:09] fruits of, you know, globalization, unbridled capitalism, so on and so forth. Right. And right now, I don't know. I mean, where we are right now. I mean, are we at a stage where we're trying to find a balance between the both of these? Or, you know, what is your outlook on that? So I think this piece is again unique to India, what's happened on social media. I know there's plenty of books and plenty of research globally that social media has fried people's brains. That piece is common to the whole world.

[01:24:39] But the impacts of social media seem especially dire in India. So ironically, we figured this out when sitting in this room we were discussing Indian pharma companies. One of our pharma analysts happened to say that demand for anxiety and depression treating drugs is rocketing in our country. I immediately got intrigued. So I asked for the data and found that anxiety and depression taking drugs are outpacing other drugs in India by a growth in anxiety and depression

[01:25:09] taking drugs are outpacing other pharmaceuticals by an order of magnitude. Basically, 2 is 2 is 2 is 1. So we got very interested in saying why is this happening? Then we went and met a bunch of psychologists and psychiatrists and they took us through what's happened. They're saying that there are three dimensions in which the impact of social media in India is unique. First is mobile data is almost free in our country. So 140th the cost of Europe or America. If it's free,

[01:25:38] then naturally the security guard in my building or your building will spend the whole day glued to mobile data. The second dimension on this is we're a very young country. And there's plenty of research that shows the younger you are, the more social media hits you. And the third dimension is that we're a very unequal society. Rich poor gap is very big. So when the factory worker on

[01:26:08] 3 lakhs, 5 lakhs or the entry-level bank teller on 5-10 lakhs or even the bank manager at 20-30 lakhs is fed five hours of curated images of luxury. We weren't built for that. We weren't built for that. So you're being shown on your screen, on your commute into work, commute home, perhaps in your leisure time, how the rich are living it up, day after day, year after year. And you're also being

[01:26:38] told you can now access this luxury yourself by borrowing or by punting on the market, it becomes impossible to resist. So that piece is unique to us. Social media has obviously had damaging impact the world over. Australia ban. I think Karnataka was dwelling upon such a ban. But leaving that aside, forget 16 years on grown-ups, on debt, on stock market losses,

[01:27:07] on demand for depression, treating drugs. banks, we are in an outlier territory relative to much of the rest of the world. Slightly philosophical question, on that note, do you think that the government has a sort of paternalistic role to play in terms of banks and regulations, or do you think that the government should laissez-faire, let the markets

[01:27:37] control this? So I think on real money gaming, the government clearly took a start. So October 25, real money gaming disappeared. The FM then opined, I think before the union budget in February 26, the FM opined. She said that if we ban futures and options, it will basically grow underground. So let's not ban it. And I think she did the right thing on 1st February 26. She jacked up the STT on FNO. A lot of people for some reason felt

[01:28:06] it appropriate to criticize it. I couldn't see what's there to criticize. There is no logical justification for having 9 million people punt on the bank nifty. Bank nifty with 9 million people are not going to lead to market efficiency. Some bizarre people think like that. They think if 9 million auto rickshaw drivers do FNO training on the bank nifty, somehow that leads to an efficient market. No, that's not how it works. It simply leads to wealth transfer, 11 billion dollars

[01:28:36] from the pockets of middle class. Half of it goes to foreigners sitting in hedge funds in New York and Chicago. Those are people with PhDs from Stanford, MIT who are creating clever algos. Our hard-earned middle-class money ends up in bank accounts in New York, courtesy the FNO market. The other half goes to the pockets of prop traders, primarily in the city of Mumbai. A little bit goes to the pockets of brokers and exchanges who provide the casino in which this wealth transfer happens. So the FN's point of view, which I think I can see

[01:29:06] the logic of. She said, I don't want to ban it. We will tax it, much like we tax alcohol or cigarettes. And it's a vice. It's being communicated to its vice. If after that you want to kill yourself, your prerogative. And I think I can see the logic of that to a certain extent. If you've known people who suffered as a result of this, it's hard not to side with what the government has done both on gaming and FNO as well.

[01:29:36] Last couple of questions. Given everything that we've discussed so far, if you had to say what is your headline outlook for the Indian economy over the next five years, where is it headed? What things will be interesting from an investing perspective? What things you should watch out for? Because again, if I don't ask you this question, I'll get plenty of hate in the comments. So what would you say? So look, as I said, I think the Sagarmanthan

[01:30:06] dimension I outlined, I think we will have to shift per force from being a services export-oriented country to a manufacturing export-oriented country. I also think we have no choice. The amount of personal debt will have to reduce. The way I see it is as we move towards gig jobs, self-employment entrepreneurship, savings rates will have to go up. Because when you're an employee, your employer effectively is your... Underwrites your expense rates. Absolutely,

[01:30:36] right? And as that ecosystem drops away, as an entrepreneur, as a gig worker, you'll have to create savings buffers for yourself, plan your savings more carefully. I think that to my mind necessarily means diminished demand for borrowing, greater availability of savings. I think that's the second response, which in turn, greater availability of savings pushes down the cost of capital. Year 2, FI23 was our lowest savings rate in 50 years. FI23 was

[01:31:06] the lowest savings, it was a marginal improvement since then, but even now we are close to our 50 year lows on net household financial savings. Again, RBI data, we are close to 50 year lows and it's no surprise, therefore, if your net household savings are at 50 year lows, your cost of capital, working capital is zooming through because the government is borrowing a ton of money, it jacks up the cost of capital. So, Sagarmanthan, secondly, distinct

[01:31:36] market change in savings patterns, which necessarily means the consumption economy will have to get suppressed, subdued growth. And that era of consumption driven GDP growth is, I think, behind us. And the last layer of this is we'll also have to go global because what we have done in the last five years is by getting everybody excited about domestic investing, we've pushed valuations to a level which are completely out of whack with other emerging

[01:32:06] markets, even the growth in our country is significantly lower than other emerging markets. And as a result, as you're seeing every month, foreign investors are pulling billions of dollars out. So again, the free market is doing its adjustment. But then again, on that note, if I were to think of where the money is going to go globally, let's say 60-70% of it will go to the US and now they're again on the ascent in some sense,

[01:32:36] it certainly can't go to China given the ambiguity and everything. And maybe it'll take some time in going to Europe and again we'll figure what industries and so on and so forth. And the rest of emerging markets are, well, it's a roll of the dice. So don't you think a good portion of it will stay vested in India? I mean, I know we're talking at a time when there's a lot of FIFOs and everything. It links to Sagar Vanthan, right? So think of the foundational technologies of the era we live in.

[01:33:06] Right. So AI, EV, clean tech, biotech, biosimilars, very little of that is in our country. In fact, none of that is in our country. And one of the reasons for that is what we have discussed in the last 20, 30 years we've built an ecosystem, socialism in the education system. If you have a socialist education system, you can't be on the cutting edge of global tech. If you have a promoter class which keeps taking cash and funding family offices,

[01:33:36] you're not going to be creating cutting edge tech. turned all the dots but as an investor it's clear to me that the foundational blocks of modern tech, none of them are in our country. Our country is by and large a labor arbitrage economy where we take bright young people, they either sell them through IT services or they migrate abroad and repatriate, send money back to India.

[01:34:06] Even our pharma industry effectively is a selling of Indian intellect. No country in the world, no country, no large economy has been able to run the same economic model for more than 30-35 years. So this economic model of taking university graduates and selling them I think has run its course. So as we build the next economic model in that interim period, it is but natural that Indians will look to diversify globally. We have 4% of the global stock

[01:34:36] market. We have 4% of the global most people that you and I know have 100% of their savings here. So I'm not saying they'll end up putting 50% of their savings abroad, but I think a rational response will be to put 20-25% of their savings abroad, especially since the government has made it relatively easy through Gujarat to invest globally in a cost-efficient, tax-efficient way. So I think domestically the Sagar Vantan shift from exporting services to gradually

[01:35:05] exporting, manufacturing. In the household ecosystem, consumption down, savings up, creating bigger emergency buffers, becoming more oriented to self-employment and frugal living. And then in the investing arena, increasing emphasis on investing around the world, looking for companies which are far cheaper than what's available here and are offering the building blocks of modern tech. By the way, East Asia has a fair bit of this. Taiwan, Korea,

[01:35:35] China. We don't invest in China and Marciles because we're scared of what happens with their Communist Party ecosystem. But we invest in Taiwan and we're thinking about investing in other East Asian countries because a fair bit of the tech hardware ecosystem is in East Asia. Okay, before we end the podcast, and thank you so much for being very patient with us and answering all of these different questions. Thoughtful questions, it's my pleasure answering them. To the

[01:36:05] extent that you've done so much reading and work, the least I can do is satiate your curiosity. I understand it's been a long day as well, so I especially appreciate it. Just an optimistic note to end the podcast on, right? We've discussed plenty of these, you know, let's say the fragility in the economy, society, so on and so forth, but what are you most optimistic for going forward? I think the adaptability of our society is immense.

[01:36:36] We adapted to 91, we adapted to, I would argue we adapted to the last 10 years as well, and I have very little doubt that we will adapt successfully. And my reckoning is South India will be at the forefront of that adaptation. In fact, I'm already investing in South India's ability to stay at the forefront of this by capitalizing very proactively on rupee depreciation, the FTAs, China plus one.

[01:37:05] South India will be the forefront. I would submit to you Western India will be just a little bit behind, hopefully not too far behind. Hopefully the Maharashtra, Gujarat manufacturing belt will also broadly keep up with South India. And then I think one remove later, the NCR region, which has its own strengths in manufacturing, one remove behind the NCR region will come through. It will be a very different India and that's but obvious, right? China today is very different from

[01:37:35] China 30 years ago. America today is radically different from America 30 years ago. No country can stay the same. No economic structure can hold beyond the point. Our economic structure will have to change in the next four or five years. And I think our entrepreneurs and not the millennials, but the generation, I think they call it generation Z or something, Gen Zs, will adapt to it relatively quickly. We just need more

[01:38:04] podcasts like this from Roshan, from Bharatwarta. And I would submit to you we need more books like this to let people know that you can't just do the same old same old and expect the same outcome. I think that's the definition of madness to do the same thing again and again and expect a different outcome. And I think as I said million entrepreneurs a year, that suggests the message has gone out to people out there that don't aspire to be a wage worker, an office worker, think

[01:38:34] entrepreneurially and kudos to people like Shark Tank. They made entrepreneurialism respectable. It's a thing that smart people, ambitious people do. It's a thing that landlords and prospective father-in-laws are looking at. Thank God for that. I'm glad I'm married. I'm worried about it. He said that Luke, after starting at the LSE, if all you will do is become a Dalal, then I don't see the point of all of this. So I thought this was very interesting and it's

[01:39:04] an intriguing way to think about the problem. So I got a little worried. So I shared this with my friend Mark Mobius. We were having a drink near Mumbai airport. I was still figuring out should I leave, should I not. My relative itself, I'll just become a Dalal after studying at the LSE. So Mark said something which stayed with me and helped me clarify my thinking. Mark said when you're in a salary job, you think you're climbing some ladder. Step by step I'm rising to the top. But then as you get older

[01:39:33] you realise he said that the ladder is falling in space. And that's when you realise that if you become an entrepreneur you can't do worse. The world, the free market ecosystem is anyway so fluid that even if you're the CEO of an there's no assurance that three years ends you'll have your job because of the brutality of free market forces bearing down upon all of us. So if that's the case once you've built your

[01:40:03] basic corporate skill set you might as well go out branch out on your own and see what you can do in terms of building a business of your own and that night I kind of transformation of forcing function is required maybe now is the forcing function we've been looking forward to forever so thank you so much for writing this book

[01:40:33] let's hope break point is the forcing function thank you for hosting our session thank you so much