India's prospects over next 20-30 years look good: Jamie Dimon, Chairman, JPMorgan

Jamie Dimon as the chairman of JPMorgan is probably the only Wall Street chief to have weathered the Global Financial Crisis and guided his bank to the top rank. He doesn't mince words, be it the Fed's stance on interest rates, or policy makers who come up with strict rules that curb businesses. In an interview with MC Govardhana Rangan & Saloni Shukla, Dimon speaks his mind on issues ranging from the US elections to interest rates to China to the Indian economy.Edited excerpts:
Has India's image changed after Narendra Modi became Prime Minister?
I think so, and for the positive. You are the fastestgrowing country on the planet today and you are making changes. Politics is hard, but he is a successful and a strong leader and your foreign direct investment has doubled in the last four-five years.
India is a bright spot, but some would say that there is excessive self-congratulation. What is your view?
India is definitely a bright spot, it's not overdone. It is growing at 7%-plus, the deficit has gone down quite a bit, and the government has made changes which are conducive to future growth. All countries have economic cycles but it is quite a positive sign. I am not interested when people refer to a quarter or this year because the way I look at a country is what are its prospects over the next 20-30 years, and India's are good.
What convinced you about India's promise?
My first trip to India with JP Morgan was in 2004-05 when we were a smaller company. We covered 20 Indian companies in terms of research and we had 100 employees. Now we provide research on 120 companies and we distribute this globally. We continue to invest in our business here; and in the future, we will have 30,000 people in JP Morgan's Global Service Centre, which supports the firm globally in areas such as technology, security, programming and research. The GSC covers a whole gamut of services and it's still growing.
What about the Indian economy itself?
What you should also keep in mind is that you have a lot of successful companies in India. What makes these companies stand out is that they grew independently and weren't championed by the government.They grew because they are good at what they do in terms of offering their services around the world. If you compare this to other markets and countries, it took a lot of government support to have the companies they have now.
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A lot of foreign banks in India are shrinking, but you are one of the few to have opened new branches...
We always take a long-term view on each market. We are not a fair-weather friend.We are here during the good times and the bad times and we want the Indian people and the Indian government to say that they are better off with JP Morgan being here and that they view JP Morgan as a consistent friend. There have been ups and downs since I have been coming here, but I don't worry about those ups and downs because we have our eye on the long term. We grow with countries as they grow and with companies as they grow. Our lending here is $2 billion and we have an asset-management arm investing $9 billion in India across asset classes and this will double or even triple over the next 15-20 years.
With regard to government and Reserve Bank of India policies on foreign banks, are there issues to be addressed?
It took us a long time to get our new branches, so I applaud Kalpana Morparia, our CEO for India. I think foreign investors should be able to hold more than 4.99% of an Indian bank. However, since JP Morgan is not moving into the retail business in India it's not a huge complaint. For the most part JP Morgan doesn't feel a lot of restrictions as it conducts business here.
If you had an opportunity to buy a large Indian private sector bank, which one would that be?
Remember our retail business is only in the US and it's very, very hard to compete in a business like retail in any other country. I couldn't open 100 branches here and be good at it. Local companies like ICICI Bank would eat us for breakfast just like it would be very hard for them to open retail over there. We are instead focused on the institutional business and helping large companies and governments.We help bank countries and companies around the world. For example, we just raised $3 billion in the sovereign bond market in a single day.
How do you look at the political leadership in various countries you invest vis-à-vis India?
India as you know has a very complicated political system. Ten years ago the thought that a Prime Minister would get a simple majority was beyond imagination.But I don't want to just compare India with other emerging market countries -look at Italy, they have had 50-60 Prime Ministers in the last 60 years. These things occur when democracies are set up. In America, we have a two-party system and the American constitution is a piece of brilliance but they did not know when they set it up we would just have a twoparty system. It just so happens that our electorate pushed towards the two-party system because it's a very good way to govern. If you have too many parties, it is very hard to achieve things that need to get done with regards to education, roads, hospitals and businesses. Politics is very hard in many different countries.
You are among the few from the world of finance who wants the Fed to raise interest rates. The markets warn against such a move. Why?
The market doesn't say anything. The market is just a bunch of people buying and selling every single day and countries don't have to have the same interest rates. If America is growing and America's unemployment is low, then it should have a monetary policy that is good for America; and if America is growing that's good for you too. Whether rates are 3% or 1%, growing should be more important to you than our interest rates. But interest rate movements affect financial markets...
The normalization of interest rates is a good thing, but 25 basis points in itself is irrelevant and everyone knows it. In the old days, rates going up was considered tightening, and when they tightened they took money out of the system. Today, they are just raising rates by dictating returns on reserves so I am not sure it's quite the same thing as tightening. They are not actually taking money out of the system. I think the riskier thing is using extraordinary monetary policy when you in fact don't need it. America has 4.9% unemployment, we have added 15 million jobs since the Great Recession. Household wages are going up, it's seen a 5% leap. We have a lot of good news and I don't see these potholes that will derail America. I don't think it would have mattered that much if they had raised the rates in September. I would have raised it.
What's your view on negative interest rates?
I personally don't like them and I am not sure they are going to work. It doesn't seem as if it has worked. Some very smart people think it has worked a little bit but it's like pushing string at its point. If you are a company, I cannot make you spend more money because rates are lower. I don't know of any business that has said they are going to build a new plant because rates are low. And savers have to save more money. I am not sure consumers spend more if you have low rates. You know this phenomenon in airplanes that the air flows one way and when it goes to high speed it flows the other way -that might be monetary policy.So I am not sure if zero works.
You have said you won't buy 10-year US treasuries...
I wouldn't and I have been right since I have said that.
So is that an indication of a bubble in this asset class?
I am always very careful. I look at probabilities. I think there is a high probability of people saying it's too low. Again we have added 15 million jobs, wages are going up, inflation is going up, there are no potholes and housing is in short supply. If you look at the buyers of 10-year bonds since QE (quantitative easing) started ­ it's the US government, the Chinese government, other governments, US banks, because there is a change in regulatory policy, and the so-called risk-off buyers who get scared and jump into 10-year. The first three have disappeared already. But when things get good, eventually there won't be people who are going to jump into a 10-year as a risk haven. The US treasury curve is not a real market unlike the credit curve of the world where you freely buy and sell and I think there is a quite high probability that it will go up more than what people think and it will be more volatile than what people think.
If someone Googles you, the first thing that pops up is your statement that you would like to be President.
I would love to be the President of United States and I think I would be good at it but it's too late and it is too hard.
You are younger than both Hillary and Trump by a long shot...
OK yes, but most of these people have been in politics their whole life. They have come up through their respective parties and they have got the support of their parties. Michael Bloomberg would have been a fabulous President but he thought he wouldn't get the Democrats or the Republicans to support him and he didn't want to run as an independent because you can't win as an independent. So, yes I would have loved it but it's too late. But what is more important is that whoever is President, if they do right things America will boom.
And which one would you prefer of the two?
I can't comment on that and I have no interest in whether they call themselves Democrat or Republican, but it's important that they do the right things. We get into this debate in America that Democrats want infrastructure to create jobs. In some respects they are right we need better infrastructure. You have a new airport in Delhi and if you go to some of our airports you will find that they are surprisingly bad. But the Republicans are also right in the idea that they don't want to tax Americans more, have that money go to Washington and watch it being misspent. There are examples where building a hospital costs $2 billion when the government does it, but would cost $350 million if a private enterprise does the same. They are both right. We need good infrastructure with property built and delivered on time at the right price. We should have more tunnels and bridges for example. If you see New York City, the traffic is similar to Delhi. I don't think we have built a tunnel or a new bridge in 50 years. Infrastructure should be planned out for the long term, yet it gets bogged down in politics.
What about human resources, talent and immigration?
We need immigration reform in the United States that is respectful to the people who have earned the right to become citizens. We need better education because it creates more jobs especially when it's done in partnership with local business. Germany is a good example, where 95% of the kids who go to a vocational school walk out with a job because their training was in conjunction with some local business.The companies say they will help train the students and they get a job.
What about the resistance to open trade and taxation issues?
We need to reform our corporate tax.It's a disaster. And we really need to get the TPP (Trans Pacific Partnership) done. All these things are great for Americans but somehow the political debate is made to reflect that they are bad. I know that some people get hurt by trade but there are ways to fix that.We call for trade assistance, which is if you can demonstrate you were hurt by trade then we will help you find another job. Trade is very good for the country, it's very good for the GDP, it's good for wages but it doesn't mean it's always good for every business. So we should have trade assistance, which is about relocation, re-education and training.
But the classical model that trade is good, more openness is good, seems to be under threat...
It's under threat because we have failed to educate a lot of people about the benefits and we have failed to acknowledge the negatives. I would say it's been great for the world. It has lifted 2 billion people out of poverty and in the next 20 years it's going to be another 2 billion people. So don't tell me it's bad for the world. Does that mean it was good for everyone in America? No it was not. That's why I go back to trade assistance.
And there's a raging debate about rising income inequality...
I think it is also true that wages haven't been going up enough for people in the lower paid jobs. And there is less certainty around their jobs and we should do something about that. Now you can blame me as the CEO of a big bank but that's not going to fix the problem --we help grow economies.What will fix the problems are the right policies that will introduce training, jobs and relocation. I always tell the Republicans that they should start their conversation by saying that we are going to take care of our sick, our old and our poor. We just want to do it intelligently. We need a better conversation and hopefully that will happen.
The opinion on China ranges from extraordinarily bullish to the opposite.What's your view?
China has done an extraordinary job with their country. The leadership is very bright, they acknowledge issues such as corruption, their inefficient state-owned enterprises, the need for market reforms, the need to build more technology. They make a lot of right moves in order to lift their people. It will be OK.
You spoke about how JP Morgan uses technology to offer better services and also how it has become a mini police state. Can you explain? Ok so these are two different things.We are the largest bank in the United States of America and of course we use technology to move money around the world. Why I referred to a police station was about internal controls and cyber security. The only way you can combat cyber security is to use very strict hardline rules about the production of software, the testing of software, and who has access to your systems, the monitoring of everything that takes place out there. So we monitor everything internally. If things go wrong, we close it down.
So what keeps you awake at night?
Cyber security is one of them. We spend approximately $600 million on cyber security every year.