Economist Bibek Debroy, who has also translated the Bhagavad Gita into English, has an interesting take on the current economic slowdown. "This too shall pass," he says, quoting the Gita. The assurance from him, though in a lighter vein, would perhaps resonate well with the hopes and prayers of many Indian businesses today.
But there are others who demur. "This slowdown should not be seen as a temporary jolt. I do not see things returning back to the way they were earlier," says J. Ramachandran, Professor of Strategy and International Business at the Indian Institute of Management, Bangalore. What has changed? "The premise till 2008 was predictability. Now, it is uncertainty. Businesses need to plan for uncertainty, which is permanent," he adds.
The solutions are going to be a little different from the typical toolkit used to cope with a slowdown. Hawkish eyes on operational efficiencies will alone not be enough. "There is a problem if you look at operational improvement as a panacea in such situations. If uncertainty is more permanent in nature there is need for strategic review rather than mere operational improvements,'' says Ramachandran.
Underlying the need for a review of strategies, Zia Mody, managing partner, AZB & Partners, the law firm that has advised companies such as Reliance Industries, Vedanta and Bharti Airtel on some of their biggest deals, says, "If I were a mid-cap company today, I would be more realistic about my ability to achieve results. Excessive optimism cannot succeed." She also feels the focus has to shift from financial performance on a quarterly basis to performance over a three to five year time horizon. "It is good to see that some Indian companies are becoming aware that they are no more insulated from the rest of the world and that their need to blend their future path with the happenings elsewhere in the world."
The challenges are also compounded by the increased negative global perception about India. "In all my recent travels abroad I have to keep defending India," says Modi. "The sound bytes coming from foreign investors are completely negative." Also options are getting limited.
"There is a sense of apprehension among Indian business houses about what is going on in the Western economies and unless there is a good opportunity I don't think Indian businesses will go out in the same gung-ho fashion they did earlier."
Within the country too, there is little to crow about. "I sense a sadness among business houses, who say they cannot expand as they are not sure how much capital outlay they need to raise. Banks have also become much more skittish in disbursements and the disbursement time is no long that the project cost is affected. The pipeline for getting a project started has become long," she adds. There are also concerns about the availability of talent and also the prospect of losing the labour arbitrage, which could be severely hit by 2020 with other countries like Vietnam gaining an edge with lower labour costs."
She also feels it is important for industry to keep engaging with the government to ensure there is action on key issues. But what are the key issues? "I think the industry is seeking the wrong things," says Debroy. "While raising foreign direct investment limits, bringing down the fiscal deficit, withdrawing of subsidies and pricing of petroleum products more realistically are important issues, I do not think industry should be seeking these per se. But it must push for decision-making process to be hastened.'' In critical sectors where there are regulations in place, such as power, infrastructure and others, "it is important to seek a time-bound approach to clearances such as those related to land acquisition or environmental approvals", he feels.
Given the recent scams, the manner in which the politicians put together their team of bureaucrats could be reviewed, he says, so that favouritism and lobbies are avoided. Companies also need to focus on the consumer and on innovations to address the consumer's needs. "Companies should change the value proposition so that others cannot compete on earlier terms,'' says IIMB's Ramachandran. He sees a classic example in Bharat Forge. "It designs in Europe and therefore gets the advantage of skills in Germany, manufactures in India and therefore leverages the low cost of making and sells in one of the most lucrative markets, the US.''
Finally, Y. K. Hamied, Chairman and Managing Director of Cipla, one of the oldest Indian pharmaceutical companies has a vital piece of advice: "Do not put all the eggs in one basket!'' If you have spread your risks the thought from the Bhagavad Gita may seems a bit more comforting.