The Times of India
Arun M Kumar, currently the chairman and CEO of KPMG-India, had served as assistant secretary of commerce for global markets and the director general of the US and foreign commercial service under Obama administration. In an interview with TOI, Kumar shared his view that the Indian economy will be benefited by various reforms like GST and bankruptcy code. He also said that India could benefit from the ongoing US-China trade war. Excerpts from the interview:
How do you see 2020 and the decade ahead?
Progress is rarely a straight line. 2019 was a year in which many upward trends took a pause. Uncertainties around the world, including the US-China trade situation and Brexit made economic headwinds, and India was affected as well. Even so, India continued to attract investment and the growth of entrepreneurship remained unabated. Such interregnums can have their benefits, if companies and countries use them to become more competitive. India’s GDP grew by a factor of 2.2 over the last decade. Looking out over the next decade, especially given the aspiration and energy of India’s young people, India should emerge as one of the top three economic powers in the world.
Will India be benefited by the ongoing US-China trade war?
There is an opportunity for trade diversion. In some areas, it is already happening with mobile phones being made here. There is definitely a big opportunity to take on some of the manufacturing happening in China – one in the context of the US-China trade war, and the other is based on the changing economics of China. There is an opportunity for India and other countries like Vietnam and Bangladesh to take on the manufacturing of various products. India has to prepare carefully in multiple ways and the government has identified several areas. We ourselves have prepared some studies like which are the kind of products and companies that will be interested in reconfiguring their supply chain to go through India.
Modi government had been bringing in many reforms that have serious effects on businesses and industries. How do you see their impact?
There are two important reforms. One is GST. It is very important that goods can move across the country faster. It was a Constitutional innovation to get the states and the Centre to work together to agree on standard rates across the country. Yes, there were some hiccups and some will continue. The second one is the bankruptcy code. It is important and timely because right now, you are dealing with a lot of non-performing assets.
Is the Indian economy really strong enough for all these reforms?
In the long-term, you have to have these changes. Otherwise, you can’t have a dynamic and competitive economy. GST is a good example. One of the areas where India lags behind China is logistics costs. Your labour costs might be low, but if your logistics costs are high, you can’t be competitive. So, GST is one and the infrastructure spending is the other one. Better roads and bridges increase competitiveness. We need more productivity and exports, and all the benefits of high competitiveness lead to high income.
Which are the sectors that are going to have two-digit growth?
In Kerala, it is tourism. Kerala is a good example, but the whole country has got so many (tourist) attractions. It is like infrastructure becomes important and the good progress made regarding airports. I think transportation and infrastructure really boost tourism. And, tourism is job-creating. Nationwide, there are many service sectors (that should have a high growth rate), and although we have a slump in automotive, it will come back up again. The country is going to have more cars, as the energy and aspiration of the middle class and those entering the middle class are quite incredible.