The India Growth Story is Still Good
Image: Vikas Khot
The exhilarating economic growth of the noughties (decade of 2000-9) infused great confidence in Indian business. India Inc grew stronger and went into new geographies looking for opportunities. The sheen has dimmed somewhat in the past two years as GDP (gross domestic product) growth slowed, and international realities started biting. More recently, gloom and doom conversations abound and there is concern around the policy paralysis in government. It is almost like unbound pessimism has replaced the irrational exuberance of five years ago.
Forbes India has chronicled much of these ups and downs in the past three years. We decided to focus on whether the negative sentiment is becoming a self-fulfilling prophecy for India Inc.
We invited the high-powered jury members of the Forbes India Leadership Awards for a televised discussion moderated by Suresh Venkat of CNBC-TV18. The question for Jury Chairman KV Kamath and members JJ Irani, Adil Zainulbhai, Akhil Gupta and Zia Mody was: “Is our pessimism killing the India growth story?”
Here is the edited transcript of the conversation.
Venkat: Let me begin with the chairman of the jury, Kamath. It has been a tough year for corporate India. How has it been for you as a business leader?
Kamath: I look at events around me as mixed blessings. One positive is that we are still growing at a rate which most of the world would give at least one limb for.
Venkat: There has been a general slowdown on growth, but there has been a non-corresponding increase in pessimism—and that’s my question for Akhil Gupta, chairman of Blackstone—are we being unreasonably pessimistic about the slowdown of the India growth story?
Gupta: It feels worse than it is. I would say that India is in the best position, if you look at the large economies. In Europe, the best scenario you can think of is flat growth for the next five years. The US may be able to do 2 percent for the next 5-10 years, China is going to slow down and if China slows down, Japan is going to have a tough time—Southeast Asia, Australia and Brazil are going to have a tough time. The only country that has a structural strong story intact is India. So, I would say what we are facing right now is cyclical headwinds while our structural story is intact.
Our feeling is—why are we not doing better than what we are doing? Five percent is a great growth rate for any developed country, but for a country at our stage of economic development, that’s not great. I won’t see pessimism. I think we are a little disappointed that we are not getting as much help from policy formulations and we are not taking reforms faster. We are not taking the next step.
Venkat: If the India growth story is intact, then why does everyone—the industry and government seem to be so pessimistic?
Mody: I think it is probably feeling let down of what could have been.
Venkat: We are at 5 percent and we could have been 10 percent?
Mody: Maybe not 10 percent but maybe much more than 5. I think that India Inc has a natural exuberance and when they feel it being dampened they probably get upset. So, it is the same animal spirits that everybody wants back, and I think there is a sense of disappointment of things that could have been better. Are we really succeeding despite ourselves? That, I think, is a mantra you hear quite often. So, often it spreads to borders beyond our subcontinent and then it sounds even more negative. If we are saying it then why shouldn’t the rest of the world? But I think there is a sense of ‘did we really have to do this to ourselves?’
Venkat: And we did this to ourselves, no two ways about it.
Mody: I think there is certainly a debate which would justify some suggestion that we did.
Venkat: Zia Mody spoke about animal spirits and our Prime Minister not so long ago said we need to reawaken the animal spirits. One of the things that businesses are talking about is the failure of governance, the trust deficit. How much do you think that plays a factor in our growth slowdown?
Irani: I think the nation is showing its frustration that we could be doing much better, more than 9 percent and so we are doing something between 5 and 6 percent. We have an added advantage that we have a population of 1.2 billion and, therefore, there is a tremendous capacity for internal domestic consumption and we are not that dependent on external factors. We could be doing a lot more within ourselves. There is, of course, a desire that the government should move on to the next phase of reforms and that is not happening. Maybe, in the next few weeks, we will see a positive change in that area. Let’s expect that, but I think it is not so much a matter of pessimism. It is a matter of frustration that the nation says we want to go ahead and the conditions are not allowing us to go ahead. Of course, when I say conditions, the gateway for that has to be opened by the policymakers.
Venkat: So, the political system has to set right those conditions and dismantle the barriers to growth?
Irani: Political and bureaucratic.