India is one of the highest rated destinations for investments now: Mark Weinberger, Global Chairman, EY
15 July 2017
Being on business advisory boards of half a dozen presidents and prime ministers — including US President Donald Trump’s business advisory council — offers Mark Weinberger, the chairman and CEO of EY, a ringside view on the inner workings of economic machinery at the highest levels.
It also affords crucial insights on trends in the global economy. So when Weinberger says the India story under PM Narendra Modi’s leadership is being noticed by one and all, it means the message is reaching the right people.
In an interview with ET’s Vinod Mahanta & Sachin Dave, Weinberger talks about doing business in Trump era, changing perception about India and the rising geopolitical risk for businesses. Edited excerpts:
Recently Trump administration’s changed H1-B Visa rules and that could impact the Indian IT industry negatively. Should India be worried about the new president’s Make America Great Again approach?
There are some things we need to watch. Earlier, the administration gave statements when it was in campaign mode and now we have to see what is going to happen in legislative action and executive action.
We have already seen President Trump label China as a currency manipulator, rip apart NAFTA, talk about pulling out of NATO but all of that hasn’t happened. The administration does believe in trying to help people in the rust belt who have been left out and behind in global trade and economic growth.
He believes US should have more bilateral trade deals not multilateral deals. He has had a chat with China’s Xi Jinping, PM Modi and others but such negotiations are tough and take time.
India has carried out large-scale reforms in the last three years, are global investors noticing the change?
With the clients I speak around the world, and as we make our investment decisions, India, today, is one of the highest rated destinations for investments right now in the world.
It’s got 7 per cent growth rate, stable government, good macroeconomic indicators like low inflation and deficits under control, plus it’s got massive reforms aimed at the right direction.
In other emerging markets, you have swings in commodity prices, you have Venezuela and Brazil running through difficulties, Brexit will have its own effect. There are difficult decisions to be made in the world but when you look at where to put money, India constantly comes out as one of the safe bets right now.
Are reforms like GST helping change perception of India becoming a better place to do business?
There is no doubt that PM Modi is changing the attitude of India towards opening the economy to the rest of the world. His government is trying to put in place reforms that will broadly improve the Indian economy and that means from infrastructure investment to reaching out to rural population to creating more wealth to things like putting in a GST structure, which is monumental.
Then, things like the bankruptcy law to deal with nonperforming assets, a whole bunch of things that hadn’t been done for years. India still ranks very high on the list of places that are difficult to do business in. But the reforms have just taken place and it takes years for them to be actually executed well. There will be mistakes.
For example, demonetisation that was initially thought to be a big mistake, which could have slowed down the economy, but after the country has gone through it, it’s being seen as a net positive. It was a bold and courageous move to deal with corruption which has been a big problem in India. The resultant digitisation push will be beneficial over time.
Another area that India has really improved is in opening more sectors to foreign investors. Inviting foreign investors to invest in insurance, defence, rail roads etc is a positive step.
The money is coming, but a lot of execution has to occur for these reforms to translate from central government to each of the states and get into the actual business climate.
President Trump stood isolated in the recent G20 gathering. Won’t an isolated US lead to China becoming the leader of globalisation ultimately?
I believe in the Trans-Pacific Partnership, it was a good deal that would have created a strong ASEAN with better ties, better laws and better employment rules.
It would have been a strong voice against China in the region. China talks about globalisation but they need to work on certain things. As they come up on the 9th National Congress of the Communist Party of China this November, where they will vote for the new leadership, a lot of reforms have been on hold.
Once the people are in place, they will move forward. But there are still state owned enterprise issues, trade barriers of working in China and that is not lost on trading partners.
I think even China has been open to revisiting those in direct negotiations with US. While it’s possible that China, that has strong reserves, can start investing and creating trading opportunities in other countries, I think it will be hard for all countries to align with China.
With the volatile Middle East, the tricky Saudi Arabia-Qatar situation, uncertainties due to Brexit, a belligerent North Korea would not geopolitical risk be a prominent boardroom topic these days?
The global economy is strengthening and for the first time in six years we saw the World Bank and IMF increase their projected growth rates. We are seeing strength in emerging markets, commodity prices, some growth in Europe.
The single biggest risk to that growth is a geopolitical risk. In a recent EY survey, 69 per cent of CEOs said the geopolitical risk is a major concern that we have. It can slow down decision making. It puts an ‘uncertainty tax’ on business that makes it difficult to operate and delays decision-making.
Last week PM Modi made a statement while speaking at the Institute of Chartered Accountants of India function that he would like to see four Indian firms in the Big Eight by 2022. Should the government support Indian accounting firms because they haven’t been able to face competition from the Big Four?
Today, EY has 38,000 people based out of India and we are going to have 50,000 by 2018. That is right now, the second most number of people we have anywhere in the world. The United States is first. Whether they work for a company that has an Indian name or some other name, I don’t think it matters.
The point is the Big 4 are providing good career opportunities for thousands of young Indians. So, the idea is to get good employment going in the countries you work in. If you now add up the Big 4 and how many jobs we create here in India, I think you will be supportive in what we are trying to do and what we are trying to accomplish.
I think it is great to encourage Indian companies to be able to grow and expand outside of India. But to set a benchmark to have some percent of any industry that should be made up of companies that are headquartered here or there — I am not very clear on that.
That being said, what you do need today in order to have the presence of aBig 4 accounting firm is global expanse so you can monitor firms all over the world, to have expertise across all the various service offerings —tax, audit, valuations, digital, data technology and the likes. We are helping thousands of Indian companies compete and win in the domestic and global market.
You are promoting The Coalition for Inclusive Capitalism, a platform of leading CEOs that plans to encourage and measure long-term value creation. What’s it all about?
If you look at some of the biggest problems today, it is income inequality, and that has led to lack of trusts for big businesses around the world. If you look at most polls today, it would say CEOs have slightly more trust than members of Congress, which is very low.
We will have to figure out how to be more inclusive and share our wealth that these businesses create. Right now, if I am an investor, the only thing I have to look at is earnings every quarter.
This benefits the shareholders but not necessarily employees. What we are saying is let’s create ways to measure value than just quarterly earnings. So this group of companies, we have $20 trillion assets under management.
The purpose is to try and measure brand, employee satisfaction, community services and give this information to the investors.
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