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Dominic Barton, Global MD, Mckinsey
Dec 01, 2017 | Source: ET
From the McKinsey point of view, the terminology we use is that it’s the end of the beginning — the first 25 years. We had a debate: why were there only eight Indian companies in the world’s top 100 and 41Chinese companies? My view was that, why would Indian businesses go global when the domestic growth opportunity is so enormous? We are at a place where the amount of investment, momentum and reinforcing circles are going to accelerate. You can see that in the headlights now — the economy is going to touch $10 trillion. I don't mean it next week, but you can actually start to say that this could be a $10 trillion economy.
India is one of the absolute biggest growth pockets in the world. Reforms by the Modi government are not perfect in terms of execution, but they are jolts. Japanese PM Abe talks about three arrows. But in India, we are talking about maybe eight to nine arrows. It’s not to say there are no risks or challenges, but to have scale and population like India, the growth potential is present.
I think India…is well on its way to creating bigger companies. You have more people in China participating formally in the economy than you do in India, so the base you are dealing with is different. If we can get 400 million Indians into the system formally, with bank accounts and access to smart phones, then you will see it. Companies such as Tencent came out of nowhere. What they've done using data analytics is that they are serving 300 million people, so participation rate of Chinese in their economy is higher and that will come to India. We're just at an earlier stage. China has poor regions but not as black and white as India. But as more and more Indians get connected, get inducted formally into the system, it will happen. It will be easier for Indian companies to globalize than the Chinese companies because Indians, by definition of having so many languages and with so many global Indians in different parts of the world, are more connected.
I'm not so obsessed with the export driven element because of the size of the domestic market, which will be the growth driver for India. We have to be focused on how to get 9% growth; what is the infrastructure that needs to be built, how can we de-bottleneck that and how can we get the NPA (resolution) system to actually work?
I've heard Apple and Foxconn want to build their facilities here, but we have to look at how to fast track such ideas. So I will be much more obsessed with the domestic unleashing, as opposed to doing things to the export market, because digital enables more people to participate in the economy. When we look at China, we underestimate the role that Tencent and Alibaba have played. The last phase of China’s growth story was pretty much exports, but you have to see how Alibaba has hooked up hundreds of millions of SMEs into one system; that's a bigger policy shift than the Chinese government has put in terms of getting people involved in the system, even in terms of financial inclusion.
Maybe India is where China was in the early 2000s; that's what my gut feels. The big thing is, I can now actually see $10 trillion. I never would have said that before and I don't know how long will it take, but it's not crazy. The market is acting in a certain way, you are heading towards this compounded growth rate which all of us humans underrate the impact of. I see one of those things starting to come and I just hope we can get the execution right.
I think it’s the most important theme, because it’s a natural evolution. Indian IT companies are very good and that will allow the country to leapfrog technologies or deal with the issues of giving people access to education, access to markets, making them part of the formal economy. I think digitization is the tool. We need to rethink education and even how you train someone for a job. Also, in healthcare, what digitization allows us to do is to get a lot of data, which is a huge competitive advantage for India. GST, Aadhaar and demonetization are serious attempts that are risky, maybe unpopular, but will lead to formalizing the economy; trying to put foundations in place to build something. A lot of governments would make a single GST agenda the only focus in their entire term because they will be scared like hell about how it is going to happen. Here, it just seems one of the things that you pull out of the quiver.
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