At the recently concluded IATA AGM in New Delhi, the big debate that provided the main focus on India, was this discussion that featured the following: Amitabh Kant, G20 Sherpa and former CEO NITI AYOG, Government of India; Ananth Narayanan, Senior Vice President & Chief Industry Officer, Invest India; Radhika Gupta, MD & CEO, Edelweiss Asset Management Limited; Patu Keswani, Chairman and MD, Lemon Tree Hotels; and Moderator: Richard Quest, Anchor, CNN International & Clare Sebastian, Correspondent, CNN International.
It’s easy to run out of superlatives describing India’s growth in all areas, from population to travel. The country is building 9 airports every year and 12km of rail and 50km of road every day. This will undoubtedly have a positive impact on travel and tourism. Importantly, it is not growth at all costs. Net zero is net positive for India. India is the only country with more than 200 gigawatts of renewable energy.
Clare Sebastian: Let’s start with you, Ananth, because you work for Invest India. And your job is to sort of bring in investment into the country. To what extent would you say this dramatic increase in the number of airports, in the scale of aviation in this country, has helped you do that, has helped you sell India to foreign investors?
Ananth Narayanan: I think, the last time, IATA meeting happened in India was in 1983. I think we were a $200 billion economy. After 42 years, today we are about $4.2 trillion economy. We’ve grown about 20 times the size. During the same time, if you look at the aviation sector, I think around 1981 we had about 10 million passengers flying. Today we have 370 million flying, which is about 37 times it has increased. Same for cargo. It has increased about 17 times. The aviation sector has been the beneficiary of the economic progress that India has really made. And starting there, the opportunity, the projection for the next seven years is that India is going to be about a $7 trillion economy, as I said. By 2047, if you have $35 trillion economy, we are just getting started in our aviation journey. We already have about 900 aircrafts. We have about 160 airports. And in the last six, 10 years alone, we have doubled the number of airports that we had built from 1947 to 2014. We had 74 airports in 2014. Today, we have 160! So that’s the importance of the sector. That’s the opportunity. Plus, for the vision that the prime minister has set, manufacturing, trade are critical components to it. And to that extent, I think it’s pretty important.
Clare Sebastian: But specifically, when investors come to you with a proposal or some money that they want to put into a specific sector, and you’re looking at high impact sectors, as you call it, ranging from renewables, electric mobility, that, are they asking you, is there an airport close enough?
Ananth Narayanan: Last year we did a survey of top 100 MNC companies in India. And we looked at what are the key requirements for them to continue investing more in the country. I think the second one is infrastructure. Infrastructure is critical component. And again, India is a very large country compared to Europe and others. We have 28 states, 8 territories. I think we are a large country. Connectivity is critical. And wherever we go, I think the first requirement investors ask us is, show us a place where we can go to, where it is closer to the ecosystem, plus also closer connectivity to either an airport, port, depending on the sector.
Clare Sebastian: Mr. Keswani, I wanted to ask you, Lemon Tree Hotels, you have, I think, 200 plus hotels, but 100 of them are still sort of not operational yet under construction. How closely does that correlate to the expansion of the airport network? Have you sort of tailored your expansion around where you see this new connectivity?
Patu Keswani: Let me answer this at a slightly higher level, but a lower level than what Amitabh would speak about. See, there are high frequency indicators of consumption. So, when I look at India today, see India is exactly where the US was in 1983, where China was in 2006.
And the next seven, eight years, this is an inflection point for our economy. So, it’s always had a lot of potential, our country. But when you look at the US, 1983 to the golden years, 4% plus growth. Look at China, 12% growth. I think India is on that path, finally.
Number two is, if you look at consumption in India, about 75 or 80% of Indian consumption comes from 200 cities, which has to grow because urbanization will go from 33-40, then later 50%.
So, when I read things like airports are growing from 140 to 220, aircraft numbers are growing, and most of them are within those driving range of those cities because highways, by the way, doubled in the last five years and are doubling in the next five. SUV sales have increased 6x in the last seven years. Vande Bharat trains are connecting the whole of India. Its not only airports, it is also access to airports. So airports will eventually be in all these 200 cities, where 75-80% of India’s consumption will be.
Clare Sebastian: How does that feed directly into how you plan your business?
Patu Keswani: Look, we have our own little AI system, machine learning. We have a small digital company. And what it does, it scans multiple data sets. I can see it happening. Wherever we have put up a hotel within half an hour of an airport, there is a material difference. Now, the second interesting thing, so these are high frequency indicators?
One is the structural, or I would say consumption shift in India. One is the high frequency indicators in tourism, which I just spoke about. The fact that airlines, I think consumption of airline seats has grown 13% in the last 10 years. Hotel capacity has grown 16% in the last 10 years. And remember, you cannot make a mistake – see, an airline can shift a route, but hotels, once they are there, they are there. So, if I look just three years forward, I can make three predictions – or four years, actually.
I think we are at the beginning of a double whammy of the tailwinds, which will lead to a step change in discretionary consumption of travel and tourism in India. Indians, my best guess is there will be 100 million traveling outside of India in the next five years, which is where we want to go with our loyalty program. And the last is, and this will entertain you, is the chairman and CEO of the top four hotel companies in the world have all met me, telling me their boards have set the best market in the world today. And for the next five years will be India. And please focus there.
Clare Sebastian: Radhika, stepping outside of tourism, 28 flights in 30 days, it seems like this new connectivity is really working for you. Can you explain what this has done for your business?
Radhika Gupta: So when I said 28 flights, I know Richard gave me a look, but this is the reason why. So, I represent the retail financial services industry and our job is to take financial products and financial inclusion across the country. And as with many industries, including tourism, what we’ve seen over the last 10 years is aspirations don’t lie in the top four, five, six cities in India. They lie much beyond. In fact, the next 30 cities in terms of their aspirations are growing much faster in terms of assets than the top 30 cities.
So we went from having 5 centers to 25 centers to 50 centers. And within the next year, we’re going to have 100 brand cities in India. And that may expand. Now, each of these cities calls for infrastructure and airport access. Because if you have to provide sensible delivery of financial products, you have to be present on the ground, which is why I’m in that many airports. So, if you want to connect capital markets products or financial products to investors, you need to be out there meeting those investors, meeting those distributors.
There’s also a second angle to it. Capital, both foreign capital and domestic capital, chases businesses. It wants to see factories. It wants to see businesses on the ground, particularly when I talk to global investors. And that’s only going to be enabled by connectivity. Connectivity will also connect companies to capital and capital markets providers and investors to capital market solutions.
Richard Quest: I guess what I want to remove from the discussion going forward is the India’s growing very fast. Let’s take that as a given – that the numbers are astronomical and we haven’t even started yet. But I think we have to go to what is the challenge that you have to do that. Growing per se is not the difficult bit in India. Growing, I would would say responsibly, growing in a manageable fashion, that is going to be the challenge, don’t you think?
Radhika Gupta: Yes, I think growing responsibly, growing profitably, growing sensibly. All of this is a challenge. But I don’t think when you build extra capacity in India, as far as airport or infrastructural capacity, you’re building ghost capacity. In fact, wherever capacity has been put up, you take the recent example of Prayagraj, where you had 66 crore people who came because of Kumbh Mela. Or you take the example of Ayodhya, you take the example of Aligarh, wherever capacity has been put up, the private sector makes something of it. So our challenge is to get capacity as far as business wants. We’re not building ghost airports and ghost towns.
Clare Sebastian: But is enough being made of these new airports? They are a representation of the city where they are. They can in themselves, I think, help sell the place. Is that being done enough as this network expands so rapidly?
Amitabh Kant: So if you go to Bangalore, you’ll see the greenest airport. And if you go to many of the tier two, tier three cities, you’ll see a representation of the local architecture in many of these airports. But the important thing is that India is the only country in the world which is making about 9 airports and 3 metro travel systems a year. And India is the only country in the world today which is doing about 30 kilometers of roads – that’s highways and expressways – and about close to 12 kilometers of railway lines every day. So, if you’re creating 9 airports a year, it has a huge multiplier impact on your economy and on your travel and tourism.
Clare Sebastian: What about you, Ananth? Do you think that when you see this expansion of aviation, does the other infrastructure, is the other infrastructure catching up? Is it enough?
Ananth Narayanan: We are in the journey of creating that infrastructure. The problem with the hard infrastructure, it takes time. But the good part about India is there are so many alternatives. If an investor doesn’t like going to Maharashtra, where there is a port, in Udichandhai, Gujarat, a lot of other places? So there are options available. But that infrastructure will take time for it to come. I think what attracts people is one, the track record of government being able to create that infrastructure as they promised the last 10 years and the plan for future and they are confident that that will happen. We see a lot of investors trying to start small in places that they are and as and when they get better infrastructure, they expand rapidly.
Clare Sebastian: So they have faith that it will follow?
Ananth Narayanan: I mean in the last two years I think what we have seen is a lot of Japanese companies who have come with putting up one plant within normally a plant cycle refresh cycle is about three years. Within the second year they started three more plants simply because one the opportunity and second building in India and exporting. The labor cost in India is 40% cheaper than their alternative market they’re working on. Huge advantage. So we have started seeing a lot of investors who come, do small, get a hang of the ecosystem, and know what’s happening, rapidly scale.
Clare Sebastian: They want first mover advantage. Mr. Keswani, I wanted to ask you, you are somewhat exposed here because, hotels, it’s part of a high frequency indicator and as a mid-market hotel, you’re exposed to sort of the fluctuations in the economy. Do you see the aviation expansion not only as a symptom of the growth that we’ve seen, but as a catalyst and are you worried about any of the challenges that it is facing, things like the high costs that airlines face?
Patu Keswani: See, I think for many years India has got a certain, I mean there is a certain perception externally and perhaps some years ago it was valid, that it was very difficult to do business in India, especially in a sector like mine which is heavily regulated and there is a lot of oversight. But I can tell you through personal experience that if I just looked at the ease with which I can do business today in India, and in the last 10 years, we have grown 100x in the last 10 years. There are today, 6% of the world’s billion-dollar market cap companies are in India. Are you aware of this? It is the third largest market – third largest market in the world for billion-dollar market cap companies. America first, Japan second, surprisingly India third. All these have happened in the last 10 years. The point is this could not have happened with a headwind. It has happened with a tailwind.
Richard Quest: So what changed?
Patu Keswani: Okay, I’ll start with regulatory oversight. I’d say it’s 90% gone. It’s gone. Yes, I build hotels in two years. Okay, earlier I would build a hotel in one and a half years and take two years to get initial and ending approvals. I hire people. Forty percent of my company is people who are, well let’s put it this way, under class 10, that is not high school. They are educationally deprived. They’re geographically deprived. They come from areas where there are no employment opportunities. The government has encouraged me through multiple schemes to hire them. I have about 12,000 employees now. 5,000 of them are from this category.
I have 2,000 women who are either widows, who are single women, and so on. I think what the point I was making was the golden years, I can see it happening. For the first time, Richard, I watch your World of Wonder, so let me make you wonder. For the first time in the last 25 years, see hotels have very long gestation, I own personally two hotels in New York. My loan to value today is 60%. I get 15 years debt instead of five year debt. Let me tell you it is more difficult to build a hotel in New York than it is in India. There is no asset liability mismatch in my borrowings. My cost of debt is 1% more than what it is in the US today. You tell me why I won’t succeed when the economy is growing 3x and my cost of debt is 1% more. And why did I grow 100x in the last 10 years?
Clare Sebastian: Radhika, I saw you nodding along during that conversation. Do you want to pick up? Are you also finding it easier nowadays to do business? What are the challenges that you’re facing?
Radhika Gupta: I think it’s gotten materially easier. Look, I’m not from the tourism industry, so I’ll pick it up and perhaps add to what Richard was saying and make two specific suggestions as we think about evolution of airlines and business. And they’re suggestions because I think India is a uniquely diverse country. And just two thoughts I wanted to share there. One is, one place that we can do work on is region to region connectivity. So, exploring more city-to-city connectivity with smaller airports, smaller carriers, regional airlines. Because region to region, tier 2 to tier 3 connectivity without having to come to hubs I think is important.
The second thought is that you can’t look at India as one. You have to build goal-based solutions. So there’s a solution you build for business travelers who are looking at Mumbai and Delhi and look at that airport almost like Changi and look for efficiency. But there’s a solution you build for pilgrim travelers because religious tourism, as Mr. Kant said, is also going to be very, very large. And so there’s a solution you build for business travelers, and there’s a solution you build for medical tourism where the experience is that.
Clare Sebastian: Maybe, Mr. Kant, you’d like to chime in. Because you said to Richard that you want young people in India to be traveling as much as possible. But there are barriers to entry for that. How do you lift some of those barriers? How to you being this new generation of people into the travel community, with it growing so quickly?
Amitabh Kant: Oh, the younger lot is all traveling. They don’t use credit cards, they all use their mobile. We Indians, I haven’t used my debit or credit card for the last four and a half years. Everybody in India uses his mobile to make the payment directly from the bank. We’ve technologically leapfrogged in many ways. And I think it’s important to understand that India is a very large country.
It’s bigger than 24 countries of Europe. And therefore, there’s a lot of experiential tourism in India. I mean, every state is different from the other. And every resort is very experiential, very different.
Richard Quest: Do you see the airlines as being the instigator of growth that the railways were in a previous generation or in a previous era? And that what you’re now doing in this country is facilitating that.
Amitabh Kant: So my view is that airlines will be the biggest driver of India’s growth and prosperity and connect people in a very big way. Because imagine we have about 150 airports. When you have about, in another decades’ time, we’ll have about 400 airports across India. So, 400 airports getting connected means literally, virtually about three-fourth of Indian cities getting connected through airlines. And that’s why the prime minister says that it’s, he doesn’t want just 350 million people to be traveling. He wants 1.4 billion people to be flying across India.
Clare Sebastian: I mean, I have to pick up on a point that you touched on earlier, which is how do you do that? Because in Europe, we’re going the other way? We’re being told many countries are banning short-haul flights, telling us all to get trains because it’s more sustainable. So then how do you do this in a way that is sustainable?
Ananth Narayanan: India always has developed its own solution, as I was saying, the UPI payment system. I mean, it’s a completely Indian-grown, Indian indigenous system that has completely transformed, no parallels anywhere in the world. So I think we’ve been able to develop India’s own unique models. And as the prime minister has said, the goal for 2070 has net zero. I think we will find our own way in the times to come.
Richard Quest: Let’s hear from our distinguished panel. So, what could screw it all up? What could actually ruin this lovely scenario?
Amitabh Kant: Well, one can be the Trumpian tariffs. The other will be conflicts around the world. You have a conflict in Europe for the last three and a half years. The World War I was fought in Europe, the World War II was fought in Europe, and you have, (after yesterday’s attack), you’ll probably have a World War III in Europe. So, you are in the midst of conflicts, you have a conflict in the Middle East, so conflicts are important. But I think a country like India, which is growing and rapidly expanding, needs to be very positive, needs to be constructive, and needs to constantly on a daily basis carry out structural reforms.
Richard Quest: Now that’s getting to the point. My point is you’re talking about exogenous events, for example, wars. I’m saying at home, what could screw it up?
Patu Keswani: Well, I’m talking as a consumer of policy, he’s a decider of policy, so let me answer that. In India, if I looked at risk, because risk mitigation is I think the single biggest job in the post of a CEO or a new business. The risk we looked at was internal. It was not company risk, it was market risk, environment risk, regulatory risk, risk of no support, or change in support. I think I can absolutely honestly say that that has changed enormously. Today, the risk I look at is actually external risk, how India is linked to the rest of the world, how that affects us, and of course, events like COVID and so on and so forth, which are increasingly less one-off, war, COVID, and so on. That’s my view.
Radhika Gupta: I think it’s simple. As investors, what we look at is policy continuity. What’s worked for us over the last 10 years is clear directional policy to expand infrastructure, whether it’s airport or others. Policy continuity is what you need.
And the second thing you need, as Mr. Kant said, is execution, execution, execution. You need to go out, build those roads, build those airports, and you need to just keep doing it.
Amitabh Kant: It’s important to understand that by 2040s, India will be providing 30% of the skilled manpower to the rest of the world. And the hotel managers of the world will not come out of Lucerne in Switzerland, they’ll come out of many of the hospitality management institutes from India because Indians will be traveling all over the world and you’ll need good hotel managers to look after these Indian travelers.
Clare Sebastian: But what about you, Mr. Keswani, as a representative of the hotel industry? Are you working on that? Is the pipeline of talent part of your daily challenge that you face?
Patu Keswani: See, we follow or try and anticipate demand. In the past, it was very difficult to actually do that. But you see, trends inform views. And the clearer the trend, the better the view and the better the decision. So I think I can say that in the past, and I’m going back to your point, what changed was I felt there was a lot of disablement in our country in the 80s and 90s. It is actually social capitalism that we will lead the world with. Because there is definitely, I know we are not a fully developed economy, we have to take care of the one quarter of the economy world, of the population which is poor and destitute. That’s happening through urbanization, through connectivity, through social schemes. It’s something I think every Indian supports. And that’s a good ask for me. Infrastructure, skilling, and keeping people to a minimum level. And I think now India has opened up.
Clare Sebastian: Radhika, I did promise that I would refer to one of your tweets at some point in this conversation. You posted that you are, and I quote, obsessed with tourism in India, and that you are, and I quote, obsessed with tourism in India and that there are two things it needs to meet its potential. Number one is infrastructure and number two is marketing. Do you think, tell us about the marketing side of things. Do you think it’s doing enough on that score to sell itself?
Radhika Gupta: So you’re asking me this after Mr. Kant has spoken, and I love the energy with which he speaks on tourism. I do believe it is the largest economic opportunity that India has. I do think, the airline industry and the tourism of the airports can be a very, very powerful signal of tourism.
And let me give you a small anecdotal example. People like me who do business travel go to different cities, we spend maybe eight to ten hours in the city, we often don’t get time to do anything else. But India is a country where each city has something incredible to offer, a famous food, a famous textile, I have saris from every state in India. I think our airports could do more to be brand ambassadors of the tourism that we have. And I must say that the new airports we’re building are outstanding airports.
Richard Quest: Does India need to do more in terms of promotion overseas for tourism? It hasn’t done since your day. In the last 5 to 10 years, it’s done virtually nothing in terms of the big campaigns. It’s relied quite a considerable amount on, again, as a result of the work that you did, sir, it’s living on its laurels of those campaigns and needs to readdress that. Do you think?
Amitabh Kant: I’m a great believer that India needs to spend 100x more on international marketing. India needs to really put out a great brand and do it very vigorously with a lot of energy, a lot of dynamism. I think marketing will be very critical to India’s growth story. But it got impacted because of COVID, and then the domestic tourism just took off. So, Indians who used to travel abroad are just discovering India.
Clare Sebastian: Tell us the one thing that you think that needs to be done to really leverage this turning point so that India doesn’t sort of lose the momentum and the opportunity that certainly the expansion of the aviation network has created.
Ananth Narayanan: We just execute the mission that’s been set. I think the plan is already there. We just need to execute that.
Amitabh Kant: Well, I think you need to get these 1700 planes now which have already been ordered to capture the rest of the world. You need to compete with the best airlines and you need to get tourists from all over the world through the airlines. There’s nothing better than that. There’s an airport infrastructure with now about 150 airports and you know the 400 airports which will be in pipeline right now will be great infrastructure which will be created.
Patu Keswani: We are a value for money market. If we succeed here, we can succeed anywhere in the world. The point is that we need capacity to grow. And I believe that this capacity will create, this supply will create demand in India. And that is the only objective I have, which is put up as many hotels, you referred to it, in as many cities in India as quickly as possible. And actually, I see very little impediments to that. It’s our own internal execution.
I do think that airlines in India, they really want to grow. And Amitabh, you will have to push this. It is we need policy support from the ATF cost side, from the airport operators side, the best possible financing. And I think airlines can be a game changer for tourism in India, because I’ll give you the last statistic, which is tourism is 6% of India’s economy, but 8-9% of employment. And if it goes to just the global average of 10, and the Indian economy grows 60%, tourism is gonna grow 218x in the next five years. And that is employment on a massive scale.
Radhika Gupta: I was going to add to this by saying, not just more airports and more connectivity, but also more airline carriers, including regional carriers. Mr. Kant talked about the growth of a number of carriers. Now, you’ve all heard the airline joke that the quickest way to make a million dollars in airlines is to start with a billion. We know what everyone thinks of airline stocks, but India has disproved that. Because here in this country, the largest airline player is also one of Asia’s most profitable airlines. And it’s done it through a mix of good execution and cost efficiency. We need many more airlines doing that and building sustainable, sensible business models. Financing will become easier for airlines. When you build that kind of model, the equity market will welcome it with open arms.
Richard Quest: Consistency of execution. That’s the key for India moving forward. This is a country that has a tremendous history of great innovation, progress, and then tripping over its shoelaces right at the final hurdle. And so, it’s consistency of execution over the next 20 or 30 years, which is the interesting thing on bringing it back to aviation, because both of the big carriers in their different ways are now executing quite sizable change. And if the rest of the infrastructure can follow through consistently, then the world’s the oyster.
