External investment needed to create an atmanirbhar India

The reality is that India will have to take assistance of its friends from overseas as well, says N Venkatram.

I don't believe we have to worry about demand any more: N Venkatram, Deloitte India
Some of the good practices of the lockdown days, particularly the conservation of cash, are things we should continue to do when life turns back to normal, says N Venkatram, CEO, Deloitte India.

Are things looking up now? Has bad become better or does it still remain bad?
The bad has become better but it has not peaked out yet. So we still need to be cautiously optimistic. I would not rush back to work tomorrow but the time has come to think how we get back to revive mode and how the economy can go forward. A lot of steps have been taken thus far and reopening the economy is really the logical next step that we have to take very seriously both as individuals and as businesses.

Lots of companies are saying they are back to pre-Covid demand level in terms of business. Have things really changed for auto, steel, consumer durables and white goods?
Eventually many sectors will emerge as winners. The truth is there is a lot of pent-up demand. The reality is that India has been in lockdown for many months now. We are all looking in terms of getting back to what we would call a more normal way of life. So whether I look at retail, automotive or fashion, all these things are going to come back to normal. I do not believe that we need to worry about demand any more. The real issue is what do we set as a task for ourselves as the next normal?


While things will get better, we have also got habituated to a certain way of life. We have started working from home. We have got used to cost reductions and managing with less. Some of these good practices, particularly the conservation of cash, are things we should continue to do when life turns back to normal.

Has the ability of the consumer to hold on and to generate demand surprised you?
Not at all. In fact I think even on the white goods side there has been quite a spur in demand. The consumer has not surprised me at all. As I said a lot of pent-up demand is coming back.

The government has carried out some agricultural reforms. What is your view on that?
Agricultural reforms per se are good but it can be made even better if we get into food processing in a big way.
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The only hurdle that we have to using processed food is a mental block. But processed food can be hygienically packed and more widely distributed. It can be used for everything including midday meal schemes.

I think India is a country that is right for the food processing industry. It also brings with it all the other ancillaries in terms of setting up the machinery manufacturing units and it can become a major area of export for us. So, agriculture reforms per se is good but it can be made even better if we get to the secondary processing area as well.

When I look at labour reforms I am a little surprised that it did not pick up much press. These are the areas which industry has been clamouring for a long time and even when you look at the ease of business doing business index, we were below 100 in the area of labour and this should pull us up substantially. I believe the multinationals will look at this very favourably in terms of making investments in India and will find that we are a very favourable investment destination.

A lot of this dovetails into the ease of doing business where I think we are about 68 out of 130 odd countries but the reality is that three areas still need more work. One is land reforms. It is not that the work has not been done, but availability of land and the ease with which you can use the land are still important concerns for industry because it increases the gestation period when you set up something. We have had greenfields in very, very small doses over the last few years and a large part of it has been brownfield. Some of the major investments in recent times have actually been for the bankruptcy code where people have bought businesses that have already been built and which have gone bankrupt. We would like to see more people who in the old days were called industrialists, people who actually built businesses from the ground up.
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If large corporate houses like Reliance and Tatas who understand risks and who always participate in a downtrend are currently deleveraging, who will do the heavy lifting?
The accumulated profit of corporate India has been depleted over the last few years. Even some of the stronger corporates’ coffers have got depleted during the times of Covid. So if you look at accumulated profits, there is absence of reserves which can be used for rebuilding. Many of the companies are highly leveraged and will not be thinking in terms of building new businesses. How do you broadbase entrepreneurship in this country? It will require capital and technology as well.

While India as a country wants to be atmanirbhar, we have to also bear in mind how we become self-reliant? That does not mean that it is without taking the help and assistance of others. We will need external investment, we will need a very strong sustained export market but some of these things will take time to get to. Our banks have enough funds but these have not been disbursed. They would be happy to disburse funds to people who have the right knowledge and the right pedigree perhaps. We need to improve the levels of governance in this country so that we can nurture a new set of entrepreneurs.
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I think there is sufficient entrepreneurship in India. We probably need some outside funding especially in infrastructure. regardless of what the government is putting in. Foreign capital coming in is good for our markets, it is good for our exchange rate and everything else. Most realistically, this is a journey on which we cannot walk alone.

We are genuinely coming across the country that wants to privatise and give the private sector primacy over the public sector. We are opening up parts of our economy, areas like defence etc. The reality is that India will have to take assistance of its friends overseas as well.

Do you think this is India’s renaissance moment in manufacturing? Of land, labour and capital cost issues, labour and cost of capital problems seems to be getting addressed.
The government says it is getting more land available but we have tp create the successful clusters. It is not that India has not done it in the past. We have done it for hosiery very successfully. We have to create these clusters, land corridors and this is where the medium- size enterprises can play a larger role.

One area in the ease of doing business which will become important is logistics. We have made great strides in logistics but there is a report of logistics which talked about the fact that we are ranked about 44 in the world on logistics against China’s 23 or 24. I am presuming there is a lot of scope for growth on that. So yes, if we get logistics right and if we are able to create an environment, a cluster in which like minded companies in similar industries are able to prosper and thrive, that is the right way to go about it.

India has banned Chinese apps, there is definitely a backlash in America also.There is outcry against data piracy. Is the tech war real? What implications this could have on India in terms of future investment?
Well there are two parts to the tech war; one is in terms of technology and whether you will have technology standards that are defined by the West vis-à-vis the technology standards that are defined by China. That in itself is a long conversation and it is a large opportunity for India because I am sure that India will be sitting on the right side of that one. When I look at the other things which are going on in terms of blocking on internet or in terms of data, I believe that as one of the most populous countries in the world, we are sitting on a goldmine and we need to rethink, but we need to again keep thinking about how we can use this for the public good.

I do not think it is right to restrict use of data or to set such tight data privacy laws that we are all nervous about what we look at or even to turn the page. But we should see if that data is being used for a larger public good. That is where we need to spend a little more time because otherwise we are going to get exploited. A lot of the data that comes out of countries like India will be used by other countries to their benefit and we will not really see the true benefit of the results that it yields.

At Deloitte, where are you telling companies to start investing?
When the pandemic started, we all looked short term. We all said quarter se quarter tak. How do you get past this quarter to the next quarter? How do you preserve your cash flows? How do you tell employees that the jobs are still safe? And also how do you pay them or reward them? When we get to the revive and thrive stage, the first thing that we have got to look at is our workforce because sometimes in all this we have ignored the aspect of mental wellness as well.

Working from home is not easy and it can play strange tricks at times. If any of us is thinking that when things get back to normal, all our employees are going to stay with us, we are probably in for a rude shock. So even before I look in terms of investment in plant and machinery, the first investment should be in human capital.

Look at the human capital and see whether you have done the right things to retain your employees and how you reward them for the sacrifices that they have made during this period of crisis. Thereafter, you have to look in terms of how you build a more virtual organisation. A virtual organisation does not necessarily mean the jobs go away. Digitisation does not mean that you merely replicate something that was done manually in another shape or form.

There is a lot more intelligent thinking that would go into what you transform the business into. So there will be investments in technology, there will be investments in people and there will be investments in your plant and machinery but the big challenge will be who is going to invest in new areas? Who is going to invest in food processing? Who is going to say that I want to serve this domestic market to a quality by which I have become a supplier in the global supply chain? There are a few people who will do that and these are the companies which will go to the banks and say please open the doors for us and fund us. Perhaps those conversations should start.
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