Management Perspectives

I am tempted to start this article with Satya Nadella’s statement at Microsoft Future Ready Summit in Mumbai, on January 5, “The age for celebration of technology for technology’s sake is over. It is now about thinking of its use for everyone in the world.” He went on to add, “The coevolving of Indian government’s yojanas and India’s technology stacks is a virtuous cycle— unlike anything else I have seen.” I think this speech pretty much sums up our country’s technological prowess and the direction in which government policies are taking it. Coming soon after the visit of another India-born tech Czar Sundar Pichai, CEO of Alphabet and Google, it underlines the importance the world is according to India. And I just can’t but not quote what Pichai said at the Google for India 2022 event, “I am very bullish about the Indian start-up ecosystem despite the current economic downturn.” He drove home the point that ‘Google was created in moments of downturn many years ago and that there was no better time than now to start a start-up’.

World Bank has revised India’s GDP growth outlook from 6.5 per cent to 6.9 per cent. Advance official estimates put it at 7 per cent. Total tax collection for FY23 is expected at R31.5 lakh crore. Exports for the April – November, ’22 period are estimated 17.7 per cent higher than the same period last year. GST collections show consistent, robust growth and there’s a sharp focus on completing ongoing projects. Gita Gopinath, Deputy MD, IMF feels, “India is doing relatively well.”

All this shows an upbeat direction for the Indian economy. Of course the RussiaUkraine war has not ended yet, a global recession is on the cards and China’s posturing on our borders continues to be hostile; and as a business editor said, “Anything can happen,” yet if we can look at the India-specific good news, we do seem to be doing better than the rest of the world—perhaps one of the few countries that are likely to negotiate the new economic landscape better than others! Reasons for this lie with (i) policy orientation over the last decade; (ii) our companies having deleveraged during the bad loans phase and being ready now to scale up investments; (iii) our banks having built up strong capital buffers and now in a position to feed demand from industry; (iv) RBI’s interest trajectory not being as steep as in advanced economies; (v) fall of the rupee not being as precipitous as hard currencies; (vi) increasing tax collections that enable the government to restore fiscal equilibrium; and (vii) huge size of our domestic markets to cushion against slowing trade. Let me now share a few more recap points from the year gone by as well as reflect briefly on the 2023 outlook before getting on to some specifics. It was expected that having managed COVID relatively better than others, we would see high growth, but it is getting affected by the continuing war in Europe, high energy prices (despite the handsome respite from Russian supplies), fears of global recession and inflation, interest rate hikes…and yet, thankfully, we are still the fastest growing economy in the world. Our G-20 presidency (December 22 to November 23) is a great honour and even though largely ceremonial, I am hopeful that the B-20 part of it, so appropriately chaired by the Tata Sons chief Natarajan Chandrasekharan, might open some doors for us and get us more involved in the global value chains. Need of the time—as averred to by Nadella—is to monetise our potential. Sadly, largely due to COVID, we are bound to miss the 2025 target of being a $5 trillion economy, but I am confident that the 2017 IMF projections of ‘world’s leading economies in 2030’ putting us at the number 2 spot will come true! Just to refresh the minds of your readers, here are the figures in trillion US dollars on PPP (purchasing power parity) basis:

China…………..64.2
India…………..46.3
USA…………..31.0

I am convinced that we are on the right track, fundamentals of the economy are strong, and we are making great progress despite the global turmoil. Let me illustrate.

India’s global market cap share at all-time-high
First, we got the news of India becoming the world’s fifth-largest economy overtaking Britain; this was followed by India’s global market cap share also rising to the number 5 position. The ‘rupee blues’ were also somewhat ameliorated when a study revealed that our currency had outperformed most of our emerging market rivals and even some developed countries. IMF chief economist Maurice Obstfeld mentioned during a chat with ET in the first week of December that we could well be the world’s third largest economy in the next decade. He also added a sobering warning, “Climate change will push new outbreaks,” and that, “India, as G20 president, should work to build global capacity now for the genomic analyses of pathogens in zoonotic (context transmission of disease from animals to humans) reserves.” Indeed, India has dealt admirably with COVID but, in an interconnected world, pandemics do not respect geographical boundaries!

Government bites the bullet on semiconductors
The semi-conductor chips project is a very challenging, very tough, very high investment, long haul project—so, crucial for the country’s economic growth. Production of chips in the country will have immense benefits for almost all manufacturing sectors. Announcement on September 14, 2022, of the Vedanta-Foxconn JV plans to invest R1.54 lakh crore on a display fab unit and a semiconductor fab unit is heartening. An Israeli company is already talking to Tatas and others (ISMC analog) for production of older technology > 45 nm nodes that account for 50 per cent of the market and production of which can start in just two years! Reports that RIL and HCL may also enter the race is great news.

Launch of 5G services
It is a matter of pride for all Indians that we are maintaining our pole position in mobile services and, following a formal launch by the PM calling it “Dawn of a New Era”, our largest companies—Airtel and Jio—are all set to spread out. Between the two, it is expected that there will be 100-150 million conversions by March 2024. It is bound to not only empower our businesses but should also help in multiple areas like agriculture, health, education, disaster management, etc

As it is, the country has taken giant strides on the path of a ‘digital revolution’, way ahead of many advanced countries. Our 700 million internet users, 350 million e-commerce buyers, UPI, lakhs of common service centres, spread across major metros, small cities, and villages, has made us a virtual world leader in the domain.

All this is driving our progress towards atmanirbharta. UPI reported that a mindboggling 7404 crore transactions worth R125 lakh crore happened on this platform in 2022! This is more than the number of transactions in China, USA, and UK combined. What an incredible growth story from July 2016 when total transactions were worth just R38 lakhs.

Endorsements by the global biggies
Global community seems to be vying with each other to ‘endorse’ the strength of our economy. First it was the McKinsey CEO who hailed India’s growth potential saying, “It (2020s) wasn’t just India’s decade, but it is likely to be ‘India’s Century’.” He was followed by Unilever’s global chief calling India a ‘powerhouse’. Later, to join the bandwagon, was chairman of Standard Chartered. His words “Confident about India’s Quality of Economic Policy Management” are great. He went on to add “Post COVID, it is hard to find a country of this size growing or expected to grow at around 7 per cent.” Deutsche Bank CEO’s remark, “India is a ‘shining star’ amid global economic uncertainty,” is heartening.

Ruchir Sharma, the highly respected US based commentator, includes India in his list of ‘7 wonders of the world economy’. IMF chief Kristalina Georgieva, while lauding our structural reforms called India ‘the only ‘Bright Spot’. Yet another comment came from the CEO of BCG, “India is poised for significant growth due to combination of global economic shifts and strong local policy. It is no longer ‘catching up’, it is leading the way.”

GST collections continue their northward March
With increasing collections, this reform seems to have found greater acceptability. Not only does it help fatten the government kitty, it keeps bringing in many businesses in the ‘formal sector’. Total tax revenues for FY 22-23 are likely to see a jump of around 12% per cent over the budget estimate of R27.6 lakh crore. Both GST and direct tax collections are increasing due to a combination of higher economic activity as well as improved compliance.

Surge in vehicle sales
Auto industry—a strong indicator of the economic health of the country due to its linkages with other industries and its huge employment potential—continues its nonstop surge. Besides the zooming car sales, even sale of tractors is likely to touch 9 lakh units in 2022-23. Car sales in December were more than 4 lakh units and as many as 40 per cent of these were priced at R10 lakh or more. There was great news around the year end that, “Out of only 12 auto companies worldwide —with market cap of over $5 billion—that recorded positive stock returns in 2022, six are Indian, with TVS motors at second place, and Mahindra at the fourth spot. Imminent proposed visits of the big bosses of virtually all international auto manufacturers to check out opportunities for EVs portends well for the sector. India could possibly become a global hub for these ‘cars of the future’.

Domestic production of mobile phones
This is another area which has caught the imagination of our industrialists. With the likes of Apple being equally interested in diversifying their production facilities, there has been a significant increase in local production and export of this vital communication tool. India is already amongst the top countries on the index of ‘mobile phones per person’ and continues to move further. Decent concentration of smart phones in villages is rendering huge help to farmers and panchayats for market information about the best prices or their produce and early warnings about weather changes. In September ’22, monthly mobile phone exports hit $1 billion and there are good chances that India will be a major iPhone maker with Foxconn, Pegatron, Wistron all ramping up production here. In the next three to four years, we could well be involved in 20 per cent of the total production of these high value phones. OPPO, VIVO, and XIAOMI have all agreed to shift some export production of their phones from China to India Foxconn is reportedly building hostels with 60,000 beds close to their iPhone manufacturing facility near Chennai.

Infrastructure building on fast track Everyday there are reports about new highways, freight corridors, rapid rail transport, metro rail expansion, development of ports…we seem to be working in a mission mode on making up for our earlier laxity in this crucial area which not only facilitates better and less expensive logistics costs, but also generates huge employment opportunities. Clearance of the R75,000 crore project for development of an international port and container depot at Nicobar should add hugely to the efficacy of our sea trade routes as well as maritime strength.

Push on green energy
India is already ahead of the world in switching from fossil fuels to renewable sources and fulfilling its commitments towards Net Zero emissions. It is heartening to see big conglomerates getting into the field for almost all sectors—solar and wind energy generation, making solar cells and storage batteries, power transmission, EV charging stations…. the entire value chain. Green Hydrogen—so far, the holy grail of energy conversion— is no longer just a pipe dream. There is progress on the ground and with the Union Cabinet clearance of a R20,000 crore ‘Green Hydrogen Mission‘, there should be even greater push. We seem to be well on our way to achieve the 500GW production of green energy by 2030. Perhaps, no other country in the world is even close to this ambitious goal.

Defence production in private sector
Here is yet another positive initiative that reinforces the concept of public-private partnership and accelerates atmanirbharta. Now that the Ministry of Defence has given go ahead for ‘emergency purchases without imports’ empowering the Armed Forces for quick contracting of weapon systems, local defence equipment companies are in a hurry to support the nation’s efforts at improving preparedness. Many of them are ready with high-technology innovations for various types of missiles, unmanned aerial vehicles, swarm drone systems, etc.

Global ambitions
India has had great success in sports, recently—Olympics, Paralympics, Commonwealth Games et al. Its New Education Policy shows a semblance of holistic growth in the social sector. A senior IMF official, addressing a news conference at their annual meeting called India’s Direct Benefit Transfer Scheme a “logistical marvel” and the use of Unique ID—Aadhar— “striking.” Comments of the India Today chief in end November talked about a 10-fold increase in the number of those with R1000 crore+ net worth in the last decade to 1036 and that 178 of these came from small towns. Such dispersal of wealth is a wonderful sign of a changing India. An early January news about ‘foreign universities opening India chapters with full powers in case of hiring faculty, academics, courses, and admissions’ should see a major transformation in our higher education landscape. News about India looking at making a bid for the 2036 Olympics is another great morale booster.

Employment opportunities and other good signs
Latest reports suggest that FY 2023 will create nine million new blue-collar jobs as against eight million in FY 2022—mostly in ‘logistics & mobility’, e-commerce, facility management, IT, retail, quick-servicerestaurants, and manufacturing. Significant increase in the investment and turnover ceilings for qualifying as a small industry should also give a big boost to efficiency of our backbone SMEs sector and further help the jobs scenario.

Hiring at B-schools is already strong. EPFO reported in November 2022 that 1.68 million new subscribers joined them in just the month of September 2022 as against 1.54 million in the same month in 2021. Inflation seems to be easing slowly and steadily. Melinda Gates’ statement that “India can teach the world about health surveillance” and maternal mortality rate coming down from 178 (per one lakh births) in 2010-12 to 97 (per one lakh births) in 2018-20 is also heartening.

Travel-hungry Indians
The pick-up in the tourism sector—after a hiatus of about two years due to COVID—is nothing short of spectacular. People are travelling like never before and there is mushrooming of home stays, budget hotels, as well as luxury resorts giving big boost to tourism and also foreign exchange earnings from reciprocal inflow. Recently, the ITC Hotels chief went on record to say that his company is ready to launch over 20 new properties in the country and in the Middle East. Announcement of Akasa Air to increase salaries of pilots by as much as 70 per cent and Air India’s plans to acquire 30 more aircraft bear testimony to the fact that travellers and airlines are on the same page.

Tourism, as we understand, has huge employment potential. Air India’s plan to order 150 Boeing 737 Max Jets and the US company offering immediate delivery of 50—originally intended for China—is proof enough for improving health of the civil aviation sector. Overall Indian civil aviation is likely to add 100-110 aircraft every year and should have a total fleet of 1200 by 2027 against the 700 at present.

Emphasis on exports and increasing inward remittances
Indian government’s recent announcement (December ’22) of a R1000 crore incentive package for export of chemicals, pharmaceuticals, and steel products should do wonders for this lagging sector. An early December 2022 report talked of estimated $100 billion remittances in FY 2022-23 which is way higher than those into China (51), Mexico (60), and the Philippines (38)—conventional high earners from their people abroad. The next Budget is expected to be a ‘High Capex’ one to offset global slump; this includes a R2 lakh crore upgrade of our ports. This great push on logistics should also benefit exports.

And, there are challenges
Challenges like inadequate primary education system; public healthcare—notwithstanding an admirable show during COVID—that still needs a permanent upgrade; not enough attention to tackling effects of climate change; inflation despite some signs of easing; lower exports, which will hopefully improve with the steps being taken; weak rupee and high crude prices; ongoing RussiaUkraine war and the consequent depressed global conditions; Chinese menace at the borders; inadequate inclusivity, equality in society and between the states and communal strife; ever-increasing political hatred; credit seeking for vote bank objectives; 13.7 million households still living in slums with an overwhelming 40 per cent of these in our commercial capital Mumbai; burgeoning current account deficit; issue of pendency in the courts, etc. I am sure there are many more as indeed there are bound to be in a country of our size and complexity, trying to develop at a scorching pace.

The good thing is that the Central and State governments are aware of the roadblocks to progress and are making serious endeavours to remove the same, but, perhaps, they need to accelerate and synchronise their efforts.