So between when you left India and reposition in Singapore and now what are the big observation you see in India?
I think it is fair to say that the excitement of India has certainly grown dramatically in the last two years. Well part of it is a reflection of some of the other parts of the world not looking so good. I think everyone is talking about a looming recession in the US. I think Europe is under structural difficulty and China has been a different ball game for the last two years. So a lot of attention on Asia and I think markets like India, Indonesia and Vietnam are frankly just getting a lot more interest and attention from global investors and everyone.
What are your thoughts on the recession? Will it be a soft landing in your view, hard landing? Markets are scared. You have your hands on a lot of corporations across the world, what are your thoughts?
Yes, obviously as you said even the best economists have failed to predict when and if we have a recession and I would not venture a guess. The reality of what is happening is that it is not just about the economic recession. I think we are faced in a scenario where there are discontinuous changes happening on multiple fronts. We have seen the power of technology and I think AI is going to drive the next decade. I think we are seeing a fundamental shift in geopolitics.
We have seen so much talk about de-globalisation. Actually, by the way the reality is very different. The fact remains that while trade has now stabilised, the activity in non-trade which for example services, intellectual property, are growing quite fast even now. But still there is a lot of debate about de-globalisation and so on. And finally, the reality is that corporate balance sheets have been quite strong. We have seen that in India, we have seen that elsewhere in the world and frankly the wage market remains very tight which is not what we would expect if you are heading into a recession immediately. So there are a lot of mixed signals and it is not just an economic discussion, it is a discussion that now cuts across economics, geopolitics, supply chain, resilience and technology. And I think that is what business leaders have to think through and analyse what it means for them.
Is India coming up in conversations overseas be it investors, large corporations you work with?
I think it certainly is and sometimes our view of India’s position on the world stage is a little different when you are sitting here versus when you are sitting outside. I think certainly you sense a lot of excitement when you are here and when you have foreigner visitors here. It is certainly coming up more in discussion globally. But I also would say that we are still in early days of India truly capturing the imagination. The potential is way bigger than the reality and that is one of the things that keeps investors at bay but interest is increasing.
Yes you can see that. How about policy making? How are you observing policy making here? Can we attract high quality global corporations at much more faster pace in coming years?
That is what the idea is. I think the reality is that, if you look at India, certainly as we know for us to continue to grow and whether it is third largest, five trillion, whatever you want to call it, I think manufacturing as an example has to go up from 15-16 to 20 to 25% of GDP.
We cannot produce enough jobs if we remain only a services-driven economy so sectors like manufacturing, construction have to take off. And frankly, we have to be able to attract investors. And I think the pace of reform has to be maintained, whether it is labour and land markets. I think investors want lower cost of doing business, better infrastructure, more reliability of policy. These are all things that are doable. And if you look at some of the early signs coming out of the PLI scheme in India, it is very encouraging. I think we seem to have made some good first few steps and now it is a question of follow-through.
In fact in this budget as well we did see quite a lot of focus on upping the capex, the railway capex, putting more money in rural and tier-2, tier-3, do you see that also playing a big part in achieving the idea which we spoke about?
We all realise that look in India one of the things that has not happened in the last couple of years is the level of investment spend. And I think the government certainly has a key role to play and I think we better spend money here than anywhere else. So I think infrastructure is a big force multiplier in terms of generating income and I think those are all positive steps.
What are some of the risks on the global side, people, investors as well as big global corporations who are working should bear in mind going forward?
It is not just India I mean globally. I think one of the biggest thing is geopolitics. Today every CEO is wondering how do I build resilience in the model, what if I have to exit a certain market, what if the world fractures, what does that do to my supply chain, what does that do to my market, how do I get predictability in my business model. So the one big thing which was not on peoples’ agenda if you think about geopolitical muscle, it was not a muscle that CEOs have grown with. Supply chain resilience equally, how do I think about it.
Earlier it was always a question of cost but it is no longer that. It is reliability, it is robustness, all of that, that is the new language for CEOs to think about. Energy transition is on everyone’s mind, every board, every company, every investor is thinking about that today. So if you are a CEO today navigating the world is not what it used to look like five years ago.
One of the reports from McKinsey which caught attention was that this is India’s century, even Prime Minister Modi alluded to that report, your global CEO mentioned that. How convinced are you because when you go and meet corporations across the world and you are saying that we still have to make a mark as we desire in a full manner, why does the McKinsey team believe that it could actually be India’s century?
There are many fundamental demographics in our favour. By 2050, one in five people in the world is going to be working in India and we are the only country other than Africa continent which will have growing working population till 2075. China is declining. I think many of the large world, big countries are declining so that is one. Second is the consumption. We are going to add 100 million households just in the next 10 years to consumption.
That is going to take India’s share of private consumption from 3% to 10%. One in 10 dollars is going to be consumed here, one in five people are going to be working here. Look at energy transition, I think that plays to India’s favour because a lot of the investment, a lot of the capacity still has to be built unlike other markets where you have to transform it. And finally, the whole thing about digital. India is leading the world. I think in digital economy, it is second fastest digitising country in the world, that is opening up new possibilities. So, when I add all of that and then finally the spirit of the entrepreneur and the ambition and the confidence of young, aspiring India, I think we have a lot in our favour that could make this India century.