‘For India, addressing headwinds more important than China’s growth rate’
India should focus more on addressing the headwinds it is confronted with, instead of concerning itself with China’s growth rate, says Nikolaus S Lang, Managing Director and Senior Partner of Boston Consulting Group (BCG). In an interview with businessline, he said the right talent, right infrastructure, and right trade regulations are key for India to enhance its share in the global supply chain.
Everybody is talking about India’s high growth potential. But, the real problem for the country is that the headwinds are stronger than the tailwinds. What should India do to minimise the impact of headwinds and accelerate growth?
Let me first start with the tailwinds. The geopolitical development of the last five years is very beneficial for India. Some companies will say China is so big that we need to be there. However, there is also a very strong wish to move towards other options. India, with its sheer size and an improving infrastructure, is seen as an interesting alternative.
In terms of the headwinds, I’m not the right person to talk about all the specifics. But, when you look at it from a foreign angle, traditionally, there were still questions around ease of doing business, heterogeneity of infrastructure and of business systems. There were very different expectations with regard to cost and pricing, for example, which made it, for many in Russia, literally impossible to match Indian expectations.
Over the last few years, we have actually seen an improvement along all these dimensions. Also, with the advent of a bigger middle class, there are also other price expectations that make it easier for MNCs to sell products here.
India has a very low share in the global supply chain. With the changing global economic quarter, there is a huge potential for India to increase its shares in the global supply chain. What should India do to achieve this?
First, you need to get the right talent, which means skilled labour in different industrial applications. The second is infrastructure. The global supply chain requires adequate port infrastructure.
Look at what countries like Singapore, not just China, have invested in their port infrastructure.
A right trade approach is also important, which means, not only trade regulation, but also export promotion. Going forward, this will play an important role.
China has announced that its GDP grew by 4.5 per cent in the January-March quarter. This exceeds expectations. What does it mean for India?
First of all, the projected GDP growth for India in the years to come is around 6 per cent or 7 per cent per annum. I doubt that China will be able to match that number the next decade. China is more likely to be somewhere around 5 per cent or even below that. So actually, you will have delta growth in GDP between the two countries.
Second, I would not worry too much on this growth part because a lot of the growth in China is also driven by internal consumption. We have trillions of dollars saved during the pandemic because people couldn’t spend it. This will generate a lot of additional demand.
Traditionally, GDP in China was focused on investment. And now, we’re moving more towards internal consumption in the GDP and that will play an important role. If the Chinese consume more internally, it does not affect India‘s position on the global stage. For India, how it addresses headwinds is more important than the rate at which China is growing.
Considering current geopolitical situation, do you think, there will be delay in implementing new global tax order as proposed by the OECD?
I see the setting up of global regimes of taxes, carbon mechanisms, and so on, getting more complex because of global fracturing. So, from that perspective, I think that there might be a delay.
On the other side, there might be more tendencies towards regional regulatory systems and bodies. Europe now has a carbon border adjustment mechanism. The US is also thinking about one. Japan and China are also following suit. So, we’re far away from a globally coordinated approach.
When India is moving towards general election, there is a feeling that reforms process will slow down and there will be more focus on populism. How do you read the situation?
I think every political environment has a choice between two things. One is striking the tones of populism and that might or might not work out. And on the other side, what I found more sustainable, is actually governments being re-elected on factual, sustainable change in the livelihoods of their people — be it better education, better sanitation, better economic support, and so on. From what I have observed in many countries around the world, growth-oriented approach is more sustainable.
To improve global supply chain, India needs adequate port infrastructure. A right trade approach with not just trade regulation, but also export promotion
Nikolaus S Lang
MD and Senior Partner