Indian buzz in global biz

Dr N Janardhan

In 2014, there was a new buzz about Indian business in the corporate world after Microsoft joined a growing club of multinational companies run by Indian-born managers. This list now includes Pepsi, Deutsche Bank, MasterCard, Adobe Systems, Diageo, Reckitt Benckiser and GlobalFoundries, among others.

The success of Indian executives was variously explained — their style reflects participative management and meaningful relationships with subordinates. They are comfortable with diversity and difference, which make them more willing to adapt and lead, are humble, hard-boiled in the harsh Indian environment, which helps them soar in a business-friendly global environment; and they try to maximise output with minimum input, such as the famous Indian jugaad approach, which is part of their early upbringing.

The success of Indians abroad led some to categorise NRIs (non-resident Indians) as “never really Indian”, “never relinquished India” or “national reserve of India”. A natural question that followed, and one that has been repeated for several decades, was:  Why can’t such successes be replicated within India?

 A political attempt to address this triggered another buzz with the campaign and election of a new government that promised the ‘moon’ — a complete makeover of the Indian political, economic and social spheres. Eight months into the new government’s rule, there are already questions galore about how much substance there was, is and will be behind the promise of change.

While the results are yet to manifest, the government has done well to keep the air of expectancy alive domestically and gain momentum internationally. This brings to mind recent research into the projection of economic growth and its coverage in the media. It suggests that whenever tall claims are propagated about robust growth in any country, for example on the Time magazine cover, it is probable that two years later, the reality is often contrary. Surprisingly, a negative media portrayal about a country’s economic fortunes has yielded positive results.

This is akin to a commentator’s curse in cricket when excessive praise invariably brings a batsman’s downfall. The logical question therefore is: Looking ahead, how should the Indian growth story be portrayed or projected — boom or gloom? Following are some indicators that may help you draw your own conclusions. No praise or criticism, just facts, trends and a note of caution.

Aided by the enthusiasm of a new government and its structural reforms, India is expected to ‘turn the corner’. According to the International Monetary Fund, the Indian economy could grow at 6.4 per cent in 2015; global consultancy PricewaterhouseCoopers pegs it at 7 per cent, almost the same as China; and, the Reserve Bank of India at 5.5 per cent in 2014-15 (ending March) and 6.3 per cent in 2015-16. This means India is expected to resume growing at more than 6 per cent after expansion below 5 per cent since 2012.

This enhanced GDP growth will be facilitated by low oil prices, which would ease current account deficit and reduce inflation. Further efforts to achieve higher growth rates will become evident in the February 2015 budget.

The government has already taken some steps towards addressing policies affecting key factors of production — land, labour, capital and entrepreneurship from the perspective of ease of doing business. This has enthused corporate India’s medium to long-term prospects. According to the Grant Thornton International Business Report 2015, 98 per cent of the respondents of its corporate survey were pleased with the government — the highest in the world, as opposed to the global average of 35 per cent.

In midst of hype, however, lies a touch of reality. Research suggests that the growth story peaks during the first year of a new government taking charge anywhere, and is brought down to earth thereafter.

Addressing this, Prime Minister Narendra Modi recently said that his government is trying to “complete the circle of economic reforms speedily”. Modi also spoke of the achievements he hopes will help lift hundreds of millions of Indians out of poverty, including the opening of more than 100 million bank accounts, a ‘Make in India’ campaign to promote manufacturing, and plans to expand the rail, road, energy and digital networks.

However, the following, among others, are some issues that reflect the volume of hardships that lie ahead. One of them is infrastructure, which is a necessity for India as highlighted by the blackout that left more than 650 million people without power in mid-2012. Investment in the electric grid is critical to economic growth, just as important as roads and bridges. In 2010, McKinsey estimated that India’s poor logistical infrastructure cost its economy about $45 billion every year. Investing in infrastructure would not just boost the Indian economy, but also result in addressing poverty through additional employment opportunities.

Another problem is urbanisation. The ruling Bharatiya Janata Party’s election manifesto calls for building 100 new cities “adhering to concepts like sustainability, walk to work, etc.” The ideas make economic sense because they are meant to serve as incubators for entrepreneurs and to improve the lives of women, etc. But accomplishing them in the short or medium terms is more difficult than said. Yet the reality is that India will require new cities to accommodate urbanisation, which McKinsey estimates will result in 11 per cent of the global urban population by 2025.

While answers to these and other problems lie in ‘good governance’, which Modi has stressed, the proof of the pudding is really in the eating. Hope can assume greater reality if the government partially implements its ambitious ‘e-kranti’ mission — a digital revolution that addresses the rural, education, public services and bureaucratic sectors, among others.

The success of these initiatives could go a long way in determining if the Indian buzz will amplify or reduce in the next few years. 

Dr N Janardhan is a UAE-based political analyst, author on Gulf affairs and honorary fellow of the University of Exeter, UK.