Indian companies have strongly grown revenues, profits and presence over the past few years, but the road ahead looks bumpy on account of a possible recession in the US, the world’s largest economy and a key trading partner for India, and a slowing of demand in some product categories here.
Paul Laudicina, managing officer of management consulting company AT Kearney Inc., and its India managing director, Vivek Gupta, spoke to Mint about the challenges facing Indian companies as they try to sustain and manage growth. Edited excerpts.
Corporate India has been growing strongly for the last few years. But there have been questions about how sustainable this is.
Laudicina: I remember doing a study on the Indian market several years ago for a client. I had suggested three possibilities. “Angry subcontinent” was the pessimistic scenario. The baseline scenario was “chaotic productivity” and “uncaged tiger” was the optimistic scenario. I had said at the time that there was a 65% likelihood the uncaged tiger would prevail and the client pushed back, and here we are in this uncaged tiger phase.
The prescriptions for sustainable growth India has got are more right than wrong. The question is whether hard and soft infrastructure is developing quickly enough and the second is (whether) the reform agenda is being sustained by the government.
The third question is whether there are enough resources and (whether) India will be able to close the gaps between the mobile minority that benefit immeasurably from globalization and the immobile majority that benefit incrementally, creating an even bigger gap between the haves and have nots.
Would you say talent crunch is one of the big challenges here?
Laudicina: One of the global research papers we do is called the global location services index , in which we rank destinations as destinations for offshoring of business processes and increasingly knowledge intensive skills.
We have consistently ranked India (number) one on this, primarily because of the people skills and availability. It has become a euphemism to say India has the deepest, broadest pool of talent. But we are seeing some talent compression because given these extraordinary rates of growth, there is increasing concern on whether India will have a sufficiently deep pool of talent to continue, fuel and lead growth. So, India needs to continue to make the kinds of investments (needed to grow its talent pool).
Gupta: The biggest squeeze is at the middle level. We cannot give people 10 years of training in two-three years. We don’t have such people with 10 years’ experience.
That is pushing up salaries. Do you see this denting corporate India’s competitiveness?
Gupta: Yes, totally. People are hoping that in four-five years, when supply comes in, there will be some equilibrium with wages.
But right now, it is hurting competitiveness. People are very scared about what it is going to do. But at the end of the day, it is a demand and supply situation—that is why people do what they have to do.
India ranks last but one on your new globalization index, suggesting that it is still fairly regulated. Is there any regulation you would change if you could?
Laudicina: One of the things we would not like to see is things such as the new Competition Act. This clearly would not be a favourable development even though we know that it is racing down the legislative track. And I think for most businesses outside India, this is completely counterintuitive to the kind of policy environment that is supposed to be conducive to sustained economic growth.
That piece of legislation if enacted as intended will be damaging to the forward movement and direction the Indian economy needs to take.