I'm not worried about protectionism: Prem Watsa, Chairman, Fairfax Financial Holdings

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

Talking of the current context where inflation is a problem. What is your advice to the government on how to approach it?
First of all you need to know what Mr. Modi has done. You have to understand that because once you understand that you realize that the people of India trust him to solve the problems of India. Just in terms of pure economic policy for the common person, the average Indian, when he got elected there were something like 18,000 villages without electricity. They have all got electricity now. The scale of what he’s done is unbelievable. 400 million bank accounts mainly to the poor rural people. 100 million gas cylinders. Then they have the tap water project that is now in progress. 50% of families have tap water. The scale of this achievement for a population of India’s size is truly outstanding. In the next two and a half years 100 % will have tap water. You said inflation. That’s transitory and something the government has to work on but Mr. Modi has solved big problems in India.

If you were to forecast that the probability that inflation could cause a period of uncertainty, how long could this last?
Inflation is there in the US and elsewhere in the world. It’s very high. In India the demand is there, but there are supply constraints. There are no chips, for example. Inflation is a problem for the world. India has seen significant inflation in the past. It’s not going to be one of those I think. RBI has been careful to monitor it. Interest rates will go up some, but India is coming back in spades. The economic growth is significant even in Canada, US and Europe. But India has better potential for significant upside. Inflation and higher interest rates are small factors compared to the economic growth taking place and, in my view, the Modi government will work on overcoming these challenges.

There are people who hold this view that govt has executed on the programs they have laid out. There is also an opposite view. And that’s a voice that plays out in terms of the Government initiatives like on digital India or on privatization and there is a view that the promises made have not been lived up to…
That’s because it’s a democracy. You have the freedom to say what you want without fear of reprisals. People who don’t like him (Modi) think he’s encouraging nationalism and all that stuff. But look at the facts. Try electrifying 18,000 villages, try setting up 400 million bank accounts, try setting up a 100 million gas cylinders and providing free health insurance for the poorest 500 million people. These are unbelievable achievements of scale. I was talking to Nandan (Nilekani) in Bangalore, and Nandan says India is the only country that has Aadhar. Payment transfers in India are costless. They have a digital locker. So all your information is locked up and its accessible. That’s not available in the rest of the world. The collection of taxes in India is going through the roof. That’s because its all digitized now. There are very few places to hide. They will find out very quickly if you’re trying to cheat the system. Speaking of the railway stations and their privatization, I met Ashwini (Vaishnaw), who is a phenomenal guy. I mean the plans he shared, the architectural drawings. They are actually looking at building fifteen of them and then fifty to begin with. They will eventually auction 450 to private developers.

What in your opinion is this Government’s biggest achievement?
I left India in 1972 and I went to IIT and I couldn’t get a job. A socialist view of development killed India. Mr. Modi’s single biggest achievement was to change that. Make it business friendly. Earlier, being in business was not a good thing. You weren’t admired as an entrepreneur. You were looked down upon for doing well. Making money was not a good thing. He has changed that mindset. And he has changed that because he himself is a huge success. Think of it. A tea sellers son. This is the hope of a democracy. He has given economic freedom to Indians. He has allowed them to dream again. Your caste or religion or background do not make a difference to doing well. The 100 unicorns in India show anything is possible in India just like North America! I think Mr. Modi will be known as the greatest statesman of our time, because of what he has done and is doing for the 1.4 billion people in India.

Now of course the other thing is about Fairfax and we were casually talking when you were in Delhi and you were talking about how much capital you have put in and how much you want to put in?
Sure. So we have put in about $7 billion. We’ve put in about $5 billion through Fairfax India and in total we control about $7 billion of investments. And I’m thinking we’ll put in at least that much more in the next five years. India is the best place to invest. We have to invest in a way that’s good for everybody. Good for your employees, good for your customers, good for your shareholders. And you have to give back to the community here.

Any time frame in mind for the investment of another $7 billion?
In the next five years. We think the opportunity is huge. Particularly when the government is welcoming business. Wherever business is welcome, business will come. Many businesses all over the world will invest in India.

Could this $7 billion go into companies that come up for privatization?
It could be that. It could be some of the companies we bring from North America to India. There is privatization taking place in the railway stations and other sectors, we look at them all.

I read on the railway stations front that Fairfax is doing a pilot?
I’d love to tell you but these are in early stages. We are looking at all the opportunities.

Any thoughts on the new logistics policy and Gati shakti which has a focus to bring down logistics costs?
Only thing on that is we are very close to Fedex and Fedex is looking at India and we are looking at it with them.

This could include warehousing and storage and all of that?
Yes, in broad terms. India is a huge opportunity. So where does it make sense? We want to deal with high class entrepreneurs, such as Madhavan Menon (Thomas Cook Chairman), Kamesh Goyal who has built Digit from scratch, Hari Marar (CEO of Bangalore International Airport Limited), Ajit Isaac who heads Quess. These are people who have built institutions.

Are you worried cries of protectionism from some big local industrialists could pose challenges to foreign investment ?
That’s exactly the wrong view to have. I’m not worried about this. Mr. Modi believes in competition. In the past the guys who had big industrial companies didn’t want to compete with the outside world. Because its tough to compete. But competition is good because that’s how you get products at a competitive price, you get better products and innovation. Where are the roads going to go? Where are the mining companies going to go? They are all going to remain in India. There is almost no discovery of oil in India. I was just reading about the oil industry in America. It took 25 years for one guy George Mitchell to discover shale oil. He had the audacity for 25 years to put money in. And America became the number one producer of oil in the world. So you need to encourage entrepreneurs wherever they are. Because the country benefits. If you go to silicon valley, you’ll see people from all over the world innovating and competing.

India doesn’t have the capital. You need the capital and you need entrepreneurs. As Mr Modi says, make the environment business friendly and welcome everyone to come to India. But India is a democracy and in a democracy people can have different points of view, but it is the government that sets policy and Prime Minister Modi has made India one of the best countries to invest in.