Management Perspectives

So much has happened since I wrote ‘India Shining’ (Indian Management, February 2023 issue) that I really don’t know where to start! Permit me do so with a subject somewhat different from the usual economic indicators like GDP, tax collections, infrastructure, market cap, FDI etc. I want to first touch upon inclusivity and diversity—subjects usually left on the back burner when discussing a developing country’s progress, but equally or more important. Unless the wealth generated by a nation percolates down to bottom of the pyramid and is also distributed widely amongst regions and states, one cannot really call it growth.

My friend and highly respected columnist Shekhar Gupta wrote a beautiful op-ed ‘Pedigree, past and present’, a few days ago in his column ‘National Interest’. Even though his focus was on the sad demise of Sir Ivan Menezes, at the young age of 64, and Shekhar wrote nostalgically about Sir Ivan’s 1979 batch of economists from Delhi’s St Stephen’s college— ruing how things had changed after that class of distinguished scholars—who went on to occupy high positions in different professions; how they all came from well-educated, accomplished families, spoke correct English, had impeccable table manners, etc. and how different are people joining the corporate world, civil services, judiciary, defense forces, even management institutes after that.

It makes you think ‘did 1979 really define change of an era’? Anyway, his nostalgia aside, what I found remarkable in this superb article are the facts that now all echelons of society are getting the new elite of India from Hindi medium schools and small towns. How, in all walks of life, it no longer matters where you come from, how well your daddy had done, what clubs and networks your family was linked to. Is it not that something to celebrate? To my mind, all that—which, of course, started perhaps twenty years ago but has accelerated now—is wonderful, as it speaks about the new, more inclusive and diverse India. I think it is a crucial social indicator for any developing economy and a true measure of holistic and robust growth. It was heartening to read stories about the IMA passing out parade on June 10 where many of the newly commissioned officers were sons and grandsons of NCOs and JCOs, who had their early education in villages where no one spoke English. In the recent UPSC exam too there were sons of a loader at Mumbai Docks and a Kaithal grocery store owner’s daughter, another bus driver’s son and a police constable’s son…amongst the successful candidates. This is the kind of profile of youngsters joining IITs and IIMs as well as large corporates, banks, IAS, and politics. Recent NEET (National Eligibility cum Entrance Test) results showed up successful cases of an illiterate parents’ son from back-of-beyond Gadchiroli and also boy from a poor, cattle rearing family from Naukada in Rajasthan, who got a high 892 All India Rank that will assure him admission to a top ranking government medical college. To quote Shekhar, again “Etons, Oxfords, and Cambridges of India - St. Stephen’s, Doon, Mayo, St. Columba’s, St. Xavier’s, La Martiniere are great institutions, may be India’s finest still, but these are too few to meet our need for talent.” Way to go for this great social change and emergence of the ‘new Indian elite’.

Let me now move to some outstanding national achievements and path-breaking measures initiated to fast-track the economy.

G20 Presidency, to go by what Amitabh Kant, India’s G20 Sherpa, says, “I believe this is a fantastic opportunity to present India as an investment and tourism destination. City infrastructure is being transformed, which will promote both ‘ease of doing business and living’…. benefits of G20 will be felt not just this year but also in the years to come as the benefits of improved infrastructure and greater brand presence in key tourism markets will continue to accrue.” Let us hope that all he says comes true, and finally, this largely neglected sector— tourism—gets the much needed attention, thereby turning it into a big growth area promising foreign exchange inflows and huge employment potential. G20 might, well, help in improving infrastructure at our glorious beaches, amazing forests, breath-taking mountains, awe inspiring ancient temples, historic forts, and everything else that we have for attracting hordes of tourists but has not happened all these years because no government had paid serious attention to this ‘non vote catching’ sector.

Infrastructure development is going on at a rapid speed. We seem to have realised that China’s economic growth owes a lot to its audacious infra build up or, for that matter, US economy picked up pace after they built an amazing network of highways all over the country. In a recent interview with BT, Morgan Stanley India’s MD, Desai, specifically mentioned about- (i) doubling of National Highways addition pace (ii) 7X rate of Railways Route Electrification and (iii) nearly 4X growth in Renewable Energy Capacity. He also made a pointed reference to (iv) Broad Band Subscriptions going up from 58.9 million in 2014 to an eye popping 771.3 million in 2023 and (v) astronomical jump in Digital Transactions that accounted for a mere 8 per cent of GDP in FY17 to an unbelievable 76 per cent per cent in FY 2022-23. And, there are the new, better quality and more comfortable trains being introduced frequently

So, as several commentators have said, “we have the Building Blocks in place and we are bound to grow faster than China” We also have the astronomical speed of 5G. Parents who used to worry that their children going abroad for higher studies will not come back home are now resting assured that they will return to the jobs and opportunities in their own country. Palki Sharma, in a vantage video early June, repeated what many global corporate leaders have said, “India’s growth beats estimates and defies global slowdown.” She also quoted a recent IMF statement- “India remains the fastest growing economy in the world despite our own slashing down of the 22-23 estimate by 0.2 per cent.

Their projection for 2023-24 is 5.9 per cent and for 24-25 at 6.3 per cent. For some other major economies, they expect FY 23-24 as follows. USA - 1.6 per cent, Euro Zone - 0.8, China - 5.2 and Russia - 0.7.”

India’s own estimates are higher, based on factors like zooming exports, lower CAD (20-month low at $15 billion in April 23), weakening inflation (at a 25-month low of 4.25 per cent in May) unprecedented GST mop up (over R1.5 lakh crore on the trot during March, April and May, with April collections peaking at R1.87 lakh crore) and other indicators.

Already, the chief economic adviser has mentioned that the 7.2 per cent GDP growth reported for FY 23 is likely to be revised upwards during data revisions and he sees 23-24 growth anywhere between 6.5 to 7.5 per cent. Kant (BW 17 June) talks about an ILO 2023 study ‘Global Employment and Social Outlook” which mentions “India’s unrivalled ability to lead the increase in global productivity”. In the same issue, Mehta, the outgoing CEO of HUL, is quoted “The world is conspiring to make India win.” We now need to put this ability to practical use by increasing ‘output per worker’ and make ourselves more competitive so that our manufacturing sector too can excel and stand shoulder to shoulder with services. Let the ‘world’s conspiracy’ succeed.

Let me now come to a few other points:

Exports: According to the union commerce and industry minister (2 June) “India’s exports have gone up from $500 B to 776 B - a 55 per cent increase in just two years - and our sights are now set on a $2 trillion target by 2030.” It is heartening to note that the FY 2022-23’s total exports included almost $450 B of merchandise. We have indeed lost to Bangladesh and Vietnam in the garment exports area but more than made up with automotive and engineering sectors. And now there’s excellent movement in export of defence equipment too.

China-alternative list: India now leads the pack of countries hoping to grab manufacturing activities being moved out of China. Whereas MNCs are also considering Vietnam, Thailand as well as return to home countries, a recent study showed that India tops the list. Final outcome will depend on precisely what facilitation is offered by individual host states by way of land, power, movement logistics and labour laws, etc.

Motor vehicles production: An OICA (Organization Internationale des Constructeurs d’Automobiles, based in France) report put our 2022 figure at about 5.5 million (against 4.4 m for 2021) which includes passenger cars, LCVs, trucks and buses. We are ranked 4 in the world behind China at a whopping 27 million, followed by USA with 10 million and Japan at 7.8 million. It is also good news that sale of tractors during the year was over 9.4 lakh (8.4 in 2021).

Maruti alone is planning to invest $5.5 billion to double their production of cars, by 2030, from the 2022 figure of just a little less than 2 million (20.5 per cent more than the previous year) and they hope to triple their exports from 2,50,000 units in FYE March ’23. The two proposed new factories will produce 1 million cars each.

Another happy augury is that the country’s automakers together plan to pump in $10 billion, by 2030, for ramping up EVs production capacity. Prices of EVs are now closing the big gap with those of fuel run cars. Latest to show interest in making EVs in India is the iconic Taiwanese manufacturer Foxconn.

On the flip side, a recent reversal of subsidy for E-2 wheelers from 15,000 to 10,000 per kwh of battery fitted and capping of incentive at 15 per cent instead of the 40 per cent earlier might sink the projects focused on this segment. One would’ve thought government will bend backwards to encourage the fledgling projects to make the product cheaper than the fuel based two-wheelers.

Mobile phones manufacturing and assembly: Apple CEO Tim Cook’s April visit to Mumbai and Delhi, for opening their company owned stores, is yet another indication of their increased interest in consolidating their base in our country. Indeed, May exports of iPhones were in excess of R10,000 crore.

‘India has failed in industry’ myth not true: Veteran journalist SSA Aiyar, in his 14 June article in the ET, has written extensively about how this general perception about India doing well only on the ‘services’ front is not true! Our GDP break up does show ‘services’ at 54 per cent, ‘industry’ at 26 and ‘agriculture’ 20.

However, SSAA argues in his characteristic convincing manner, that there are different nuances (a) We churn out 6 lakh graduate engineers every year which is an advantage in higher skill industries like automotive, pharma, steel etc. as well as in services and R&D. Over 1,400 MNCs have set up their global capability centres here (b) Our failure in low wage, labour intensive areas like garments and footwear was perhaps more due to our rigid labour laws, excessive leaves and holidays that hurt our competitiveness.

(c) World Bank data on share of industry and services in employment in different countries shows that share of industry in jobs in India is not low at all. Of course this data includes, besides manufacturing, mining, electricity, water and construction. During the three decades from 1991 onwards, industrial jobs share in India rose from 15 to 25 per cent which is just a little lower than the 28 per cent in China

(d) During the same three decades, share of services in total employment rose from 22 per cent to 31 per cent which is far lower than the 47 per cent in China (e) Our failure is actually more in the agriculture sector where we employ a whopping 44 per cent of our total workforce for contributing 20 per cent to the GDP. It is probably a legacy from the days of 3.5 per cent GDP growth from 1947 to 1980. Interestingly, our three major software companies, Infosys, Wipro, and HCL, all have their roots/beginnings in hardware.

Boost to Indo-Us relations: There is lot of excitement about the state visit of Prime Minister Modi to the US which promises to herald a new dimension to the age-old ties that started in 1947! As an advance measure, DAC (defence acquisition council) has cleared a $5 billion deal to import hightech, state-of-the-art ‘hunter-killer’ US drones. These predators, manufactured by General Atomics, are equipped with air-toground missiles and smart bombs. Another agreement between General Electric and HAL, to jointly produce GE-F414 engines to power the indigenous Tejas Mark 2 fighter jet, is already on the Modi-Biden meeting agenda. US NSA Sullivan, during his visit to New Delhi on 14 June made a significant statement “US has responded in a way that we have not seen before” to deliver material progress on the tangible areas of defence cooperation. Our plans to manufacture semi-conductors may also get a boost. Some memes even call it the ‘Real AI’ (America - India). It seems our common enemy China is finally persuading the US administration to loosen its stranglehold on high technology transfers. Just to put this in perspective, well known expert on Indo-US-China triangle Tanvi Madan recalls how we have moved from the time there were sanctions against India to several bilateral dialogues, groupings like Quad, participation in each other’s multilateral initiatives, deeper defence and security ties, cooperation during crises like Afghanistan and COVID, escalation in trade ties, mutual FDI, energy cooperation, larger number of Indian students going to the US, increased travel both ways, diaspora dimension etc. She calls it all “an investment from both sides and definitely not a bet” as some detractors seem to think. Strangely, Blinken’s sudden visit to China—perhaps a balancing act or a last ditch effort to appease China—does seem to add some uncertainty about the outcome!

Challenges galore

Before closing, I must flag some hurdles and challenges to this glorious march forward. Frankly, that is a given in a country of our size, diversity, and complexities. The World’s third biggest economy (second on PPP basis), in 2050 will also have the largest population (thankfully the peak) of nearly 167 crores, whereas China at that time is expected to have only 132 crore mouths to feed—and no one seems to have a clue about our ‘Per Capita GDP’ in 2050! Gautam Adani did mention $16,000 (7x of the present figure) but, I think, it is too optimistic. Do we really have a chance to become a high income economy before our population peaks? This edit answers in the negative and I tend to agree. We might move from lower-middle to upper-middle class status but mass affluence is unlikely. About other challenges, let me start with (a) our Achilles heel/ albatross China—whom no one in the world has really understood. Despite being our number one or two trading partner (2022 $136B total trade with our deficit of about 100B) our neighbour does not miss any opportunity to needle us—on our borders or vetoing our permanent seat in the UNSC or blocking blacklisting of terrorists like Mir, even a failed attempt to stop Ajay Banga’s appointment as the WB president; (b) Disheartening national health report, from ICMR, about wide prevalence of diabetes, hyper Tension, and obesity as well as Minister Irani’s statement in the Lok Sabha about poor child health. Clearly public health needs a major toning up; (c) vitriolic inter-party and even individual political attacks and the never ending tussle between the centre and opposition ruled states; (d) greater polarisation; (e) unsatisfactory handling of the protracted protests by international medal winning wrestlers over serious complaints against a politician chief of the Wrestlers’ Federation; (f) crumbling civic infrastructure of most metros and popular hill stations and insufficient efforts to develop new cities and hill resort towns; (g) grossly inadequate affordable housing for the poor; (h) effective duopoly in the domestic skies leading to frequent very high tariffs; (i) Manipur unrest turning violent; (j) far too many cases of law and order breaches especially by knife/ gun carrying youngsters; and (k) lack of seats in institutes of higher learning leading to emergence of many ‘coaching institutes’ that put unbearable pressure on the young aspirants and their families.

Hopefully, central and state governments are working at finding early solutions. Otherwise, we believe in God and a billion prayers