India's economy has got the momentum and it will keep going, says Arun Kumar. He adds that India should keep the economy open, despite the US protectionism
When KPMG, one of the ‘big four’, started its India operations in 1993, the country was beginning to experience some of the initial benefits of opening the economy. In the next 25 years, even as India emerged as the fastest growing economy in the world, KPMG also made its mark as one of the most rapidly expanding professional services firm in the country.
“It has been wonderful story of growth and evolution of KPMG growing alongside the country at a very important time in the country’s history,” says Arun M Kumar, Chairman and CEO, KPMG in India.
Starting with two professionals, the firm now has 20,000 people in India, and from one city to 13 cities, from three offices it has now expanded to 24 offices. India has the second largest presence for KPMG, after the US, adds Kumar, who has been associated with the company since 1995. In between, he took a three-year break, serving as an Assistant Secretary in the US Department of Commerce of the Barack Obama administration.
Kumar, who studied at University of Kerala and MIT, returned to the KPMG-fold in 2017 and has been leading the India operations since then.
In a conversation with Moneycontrol, Kumar touches upon a variety of issues, including how India should respond to the wave of protectionism unleashed by the US President Donald Trump. “Open markets are better. And that is fundamental economics. India has benefited since the opening up in 1991,” says Kumar.
It has been 25 years since KPMG set up office in India. How has its operations evolved in these years?
It’s been a time when KPMG has grown along side the opening of the Indian economy, the globalisation of the Indian economy. And I would like to think that KPMG has also contributed to the opening of the Indian economy.
In that time, from the start of two people, we have grown to almost 20,000 people, from three offices to 24 offices. And of course thousands of clients. Today we are proud to serve largest companies in the country, medium and small companies. We are proud to serve the government at the Centre and many states on important programs of national importance.
It has been wonderful story of growth and evolution, of KPMG growing alongside the company at ta very important time in the country’s history.
Through these years, how have your clients' needs changed, and what have you done within KPMG to remain relevant?
We have always had to stay a few steps ahead of our clients to remain relevant. Clients have evolved. The very fact that India has become part of the global system, it increases the importance of global connectivity. If you think about global corporations, all the large global corporations have a presence in India. Sometime they have more people in India than in their home countries. That is not uncommon at all. We ourselves in KPMG, we have the second largest presence in India, after the US.
Second, there are so many different global companies who are active in the Indian market.
Thirdly, Indian companies have become active in the global markets, more than they were 25 years ago, or even 10 years ago. So you have Indian companies with global ambitions operating literally all around the world. And they need large expertise to help them address issues around the world. All of this has been the KPMG story in the past 25 years.
These 25 years have been quite transforming for India too. What has been the most important of these changes? Is it the economic development, the demographic profile...?
I would say both. Opening of the economy, in 1991. That was a seminal event. That has led to many changes. Of course, it hasn’t been a straight line, and it never is. But over the years we have seen tremendous growth. It has accelerated over the last several years.
Be it the infrastructure, if you look at the quality of airports, or highways. Infrastructure is one area that I call out because if you don’t build infrastructure it will choke off growth. If you build good infrastructure, then goods are moving rapidly, productivity is increased, tourism is increased…there are so many benefits of good infrastructure.
That has multiplier effects on the economy.
With the opening of economy, there has been increasing aspirations, consumer spending has increased and that by itself has positive advantage of lifting up the economy.
We have a special demography, very young people, they are ambitious and aspire for higher standards of living. All that creates a lot of energy in the Indian economy.
But some of the legacy issues such as extreme poverty, malnutrition and women's health remain a concern. What should be done from a policy perspective to ensure that India overcomes these challenges within the next 25 years?
We certainly have those challenges. At the same time we should realise that there has been a tremendous progress on that front. If you measure poverty by the old Tendulkar poverty line, the number of people under the poverty line is under 50 million, out of 1.25 billion people.
It’s a huge change from hundreds of millions we used to have couple of decades ago.
We have to do a lot more in skill development, employability, generally education. Healthcare also needs attention.
Power is an area where significant progress has been made. Some years ago, it was common to see load shedding and power cuts. Today we certainly don’t see too much of that. These are things that we now take for granted and couldn’t have taken for granted even 10 years ago.
Yes, in Kerala, where you were born, load shedding used to be common. Not anymore.
All around the country, there is significant progress. And now every single village is getting access to electricity.
The world dynamics have changed extensively in these two and-a-half decades. As a senior member of the Obama administration you traveled all over the world, met leaders. What do you make of the present order in world affairs? How can India keep itself relevant in these challenging times, keeping in mind its own strategic interests?
It’s a difficult situation. Because when you see the protectionism is coming from the world’s largest economy, then other economies have to figure out what is the best thing for them. From India’s point of view, I believe keeping markets open as much as possible is in the country’s interest. I think it’s the interest of the country to figure out how to work around the protectionist measures that may hurt the country. And this would apply to any country.
I generally believe that open markets are better. And that is fundamental economics. And it tells you that open trade is better than distorting trade. India has benefited since the opening up. China has benefited even more. It opened up 12 years before India.
Going forward, what do you think of the Indian economy?India’s economy has got the momentum and it will keep going. There may be ups and downs and that is expected. But the upward momentum will be very hard to stop. I think we will be growing significantly for the the next 20 years and beyond. It is the right place to be.