While talk of fiscal deficit, current account deficit and policy infirmity is hogging the limelight, Janmejaya Sinha, chairman of The Boston Consulting Group-Asia Pacific, is not enthusiastic about quarterly or annual outlooks. In an interview with Abhineet Kumar, he dwells on what holds out for India in the coming decades and how a consumption revolution is shifting the business paradigms. Edited excerpts.
There are serious doubts if the Indian economy can get back to over eight per cent growth rate now. What is your view on that?
The people today are not what they were 10 years ago. India’s GDP (gross domestic product) per capita is $1,800 (Rs 98,000 today). When you start going from $1,000 to $2,000 and from $2,000 to $4,000, you get good news. Your income is rising initially higher than your aspiration. So you are feeling happy. From $4,000, you start expecting it, so your aspiration starts rising little higher than your income.
Whatever people may say, they are actually feeling that their income is going up. In 2012, we were at $1.2 trillion consumption economy and in 2020, we will be at $3.6 trillion. If people are going to consume three times more, then there is business.
What about the current problems that have slowed down India’s growth rate?
We are basically looking at three problems: the fiscal deficit, the current account deficit and the policy infirmity. What is the fiscal deficit? It went up from 1.4 to 2.7, because we decided to spend more money. The US, the UK and Greece didn’t make us spend more money. We decided to spend more money. We have six-to-seven subsidies. Now we are doing cash transfer. This is a revolution. In India to give money to people whom you want to give is not a joke. It’s great.
Second is current account deficit. It’s coming from two lines — one is gold imports and the other is the increase in oil price. Why is gold imports happening, because land has become dodgy and the prices have gone up, Sensex is down, and interest rate is such that as a fixed deposit holder, you wonder whether you are beating inflation or not. So you are buying other alternative assets.
What about policy paralysis? How can we see better policy framework in the future?
The quality of governance across the world is pretty mediocre. In the US, we hear about the fiscal cliff. I do not want to talk about Greece, Portugal and Italy. What would you say about France, Britain and Japan? Where is the great government? I think there are three buckets — government doing harm, government being benign and government doing good. So if we suddenly have a North Korean or Sudanese government, true we will have a real problem. If we induce policy-led uncertainty, which we did, we will create investment paralysis. Now I see some signs on the horizon, which are very uplifting to me.
What is your best hope for India?
I find the world keeps looking at the world it knows. And the world it knows is 900 million people out of the seven billion that live in the world. And these 900 million people — 300 million in the US and 500 million in Europe and 100 million countries like Japan which are rich — are what the world knows and that is what it focuses on.
Also Read
The truth is that there is a revolution taking place. From 2010 to 2020, Asia is expected to consume $7 trillion and the US and Europe are expected to have $19 trillion consumption. But in 2020, Asia will start consuming $21 trillion and the US and Europe will start consuming $27 trillion, which means that they will add $8 trillion of incremental consumption, and we will add $15 trillion of incremental consumption. But it is not that the Americans will come to India and start consuming. It’s not even you and me, we are actually consumers already.
How are the Indian companies expected to benefit from it?
The whole world has geared its entire business model to serve 900 million people. Suddenly there are three billion people coming around. They earn little differently. Individually, they are not spending much, but collectively they are spending a lot. There are 12,000 companies in the world (3,500 in Asia, 3,500 in the US and 5,200 in Europe) which are over $1 billion. And there are about 2,800 companies which are above $5 billion. In 10 years from 2000, India had 25 billion dollar companies and in 2010, it had 177 billion dollar companies. In the next eight years, there will be 3,500 billion dollar companies added in Asia. India will go from 170 to 750, China will add another 2,000.
Which will be these companies, how do we spot them?
There is a new consumer, we do not know who he is. There is a new competitor, we do not know who he is. There is a new supplier, we do not know who he is. And we need new business model to serve this consumer who is both demanding and buying in small ticket.