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India is a good growth opportunity, will receive a lot of FDI: Dr. Ram Charan

India is a good growth opportunity, will receive a lot of FDI: Dr. Ram Charan

"India is very crucial in two ways. One is that the people in West America and Europe have now realised that they cannot have total sufficiency of the supply chain. They want to come to India," said management guru Ram Charan.

Dr. Ram Charan, Advisor to CEOs & Corporate Boards Dr. Ram Charan, Advisor to CEOs & Corporate Boards

Edited excerpts of an exclusive interview of management guru Dr. Ram Charan, Advisor to CEOs & Corporate Boards with Business Today Global Editor Udayan Mukherjee.

BT: My first question is about the global situation. Do you think the Ukraine war brings to a head the question that western nations need to take ahard look at how they are running their economies today?

Ram Charan: The world has reset - people have woken up from the Russia-Ukraine war. There are bifurcations where countries want to go. China is totally explicit. They want self-sufficiency, and Western countries had outsourced their supply chain to one country. So, they are highly dependent on China, and no good business will be dependent on one supplier. So, this is not going to be reset. It is creating shortages and it is creating higher prices. Energy problems are getting quite big and so is the food problem. So, now every country must think about how they can become self-sufficient and with whom they must trade. No country can afford a dependence on another country for the supply chain.

BT: How long will this process take, and do you see a lot of collateral damage happening while this plays out?

Ram Charan: Yes, the transition in some sectors and products has begun and it is slow. And people must come to terms that they must accelerate. For example, in cell phones. Apple has been very wise. They had begun earlier. They are now building supply chains. Also in other countries, including India, they're also building onshoring. And they're getting their suppliers who happened to be Taiwanese and having them build factories for assembly in the United States. So that has begun, it requires determination, resilience, and so on. This will take some time, but it requires that people be determined and do it. Technologies are available. They are the ones that went to China from Taiwan, Hong Kong, Europe, Australia, and the United States. They are their engineering and technology. So, we need to start, governments may have to help.

BT: What kind of pushback do you see from countries like China and Russia, because they can see this transition going on? Do you expect them to take it easy or do you expect some kind of hostile pushback from these economies?

Ram: There will be actions and reactions. No doubt. There'll be hard negotiations and hard bargaining. If you look at the United States and China. China needs things from the United States. So, there will be bargaining on some technologies. And, there will be areas where there will be a tariff or there will be import controls, all this is going to happen because it is not going to be a one-way street.

BT: With countries like China and Russia on one side, where do you see India fitting in? Do you think we can adopt a middle path?

Ram: India is very crucial in two ways. One is that the people in West America and Europe have now realised that they cannot have total sufficiency of the supply chain. They want to come to India. Our honourable minister of Commerce Piyush Goyal said in a statement that how he's meeting people in Geneva and Davos, that they all want to come now because India has transparency. It has a greatly proven legal system. Here, the business people do on cost of capital. And, the government of India is very much getting opened to invite FDI. So, India will receive a lot of FDI, and a lot of supply chain ideas and plans are to be here. So, India has a good growth opportunity. And, India has to deal with the trade deficit it is incurring with China in the last 22 years, it has incurred about $700 billion worth of deficit. Last year, there are $70 billion of deficit in trade. All those things must be considered and the supply chain built gradually in India.

BT: Do you think we are up for the challenge? You have on the boards of companies like Hindalco. Do you think Indian manufacturing can become a global powerhouse?

Ram Charan: Yes, so first, Hindalco is global. Hindalco has business and packaging in the United States totally global in every which way, there are other businesses in the Birla group that are totally global. The basic intent of the question is our ability to have cost structure, high quality, export, and compatibility. We can do that because the prices we pay for imports are nominal, but they are based on subsidies and the currency parity that is largely artificial. That needs to change.