See a big opportunity in India, in terms of mid-tier single-digit growth: PwC global chairman Bob Moritz

Bob Moritz: It's clear that the pessimism on the economy is driven by primarily two things. First, the macroeconomic environment that we're seeing, which is the result of what we've done over the last couple of years when you think about fiscal and monetary policy issues, the issues of COVID, supply chain challenges, etc. So you're dealing with inflation, interest rates and volatility in a big way. That does result also then in potentially certain asset classes being negatively impacted. You can look around commodities, housing and, for that matter, stock markets. 

The second thing that's important is the geopolitical uncertainty. In the past few years that was primarily focused on China-US and the relationships over five-six years, but it's much bigger than that. As we think about the role of the Middle East, particularly with energy now, the Russia-Ukraine issue being contained and whether it can be contained to just that, and equally as important the elements of how organisations and countries are going to deal with some of these big macro issues. Because right now, they're dealing with them on a fragmented basis. 

All of this creates uncertainty, concern, and that pessimism. But to your point, the bigger thing is for CEOs, what can they control, and what can they do? And the good news—not necessarily bad news—is 40 percent of them say, I have a challenge, I acknowledge the problem that I will not exist 10 years from now if I don't change. The question now is what change, and do you have the confidence to get that change done? 

The more pessimistic issue is 60 percent of the CEOs on the other side say it's not an issue. We at PwC would say just the opposite. Everybody has to deal with this issue right now. So waking up to that concern is a big challenge for CEOs and management teams and supervisory boards right now.

Incidentally, a couple of people I spoke to today said that while the International Monetary Fund (IMF) is pretty pessimistic, WEF's economists are pessimistic. There is also a view that things will get more benign. The public markets are clearly behaving differently—China in the last 90 days has been doing well ever since they opened up and people believe that the worst is over when it comes to technology stocks in the US. Do you think there could be positive surprises, even amidst all the negativity that we're seeing on the macro front?

Moritz: You have to remember that when we asked this question, it's a relative game. Yes, I do believe you'll see an increase in the economy at a mid-single-digit level relevant to China, as they both come out of COVID and candidly change some of their monetary, fiscal and economic policies relevant to the domestic agenda. The last three years have been extremely challenging in that regard. 

I also see a big opportunity in India, in terms of mid-tier if not higher tier single-digit growth, when you look at the needs of that economy, and how the world is reacting to the potential opportunity that exists today. You do see the same if the Middle East can continue to reform itself and be less energy dependent in terms of where it needs to go, because you'll fuel growth in the non-energy sectors moving forward. 

Last but not least, as the US continues to play a role—we've banked on the resilience of the US economy. The consumer has generally been pretty good at being a resilient source of economic activity. The question is, is that going to continue and if so, for how long? Yeah, I do think you'll see some good clouds that are less grey and I think there's some opportunity, but it's going to be fragmented. It's not going to be great around the world, and that global picture hopefully has some more optimism than it does negative.

From your survey, I think the Indian CEOs, for instance, are more optimistic compared to their counterparts in the West. What do you think they are doing differently? Is it a function of the overall macro?  

Sanjeev Krishan: No, most certainly, I think the macro is really helping. I mean if you look at our budgetary estimates, we are running ahead on most of them. We'll hopefully be within range on the fiscal deficit this year, we will know in less than three weeks’ time now. I think very clearly, bank lending has gone up, we can see that the government of the day is actually saying that even the next year, they will continue to expand on capex, which is a good thing. In some ways, I think the fact that the Indian macros are looking good now, you can attribute whatever reasons to it right—the way we procured oil or whatever else.

The second part really is that if you look at India as a market, we have always been a big consumption market and that stays. You heard just now a lot of people saying that technology is something that we will not stop focusing on. Now, if the US, Europe and the rest of the world are continuing to focus on technology and transformation, we know that a lot of it gets delivered by India. This means that India’s services sector which is 55 percent already, comes back to the fore— it is rock solid, in some ways. We would say there's some pressure on rates and so on and so forth, but it is rock solid. 

In fact, people want to do more of that, because people are talking about transformation, sustainable or otherwise, but it's only going to grow. I think that gives us the confidence that it is going to grow. Then you look at manufacturing, which is where the government has actually been trying to say that 'I want whether for import substitution reasons’ or indeed for saying that ‘India should become a manufacturer to some parts of the world, if not the entire world', they have been giving a lot of subsidies and incentives. 

A bunch of states also are trying to do that, there is competitive federalism at this point in time, I think all that will make sure that there is job creation, there is equality, if I may say so, when the focus is on manufacturing. 

If this actually pans out, you're taking care of manufacturing, you're taking care of our services growth. Why would not India surprise in 2023-24? That's my hope. Otherwise, people say that the global economy grows 3 percent, India cannot grow more than 5.5 percent because you can only have a 2.5 percent delta. I would say that definitely we would grow more than 6 percent as things stand today. Yes, there is a black swan event tomorrow again, who knows, but I'm pretty sanguine that we will grow more than 6 percent.

Moritz: If you look at India and its economy, there are three fundamental questions that have to be asked and actioned upon. The first is, can India as a country capture the upside potential that it has in a world where it should have natural competitive advantages right now? And that 6 percent—the question is, can it be even more so?  It doesn't have to replace it [China], it actually has to gain market share but not replace entirely to be an alternative option. The question really is can I get 6 percent to be closer to double digits? That's question number one. 

The second question, which we've seen in the past over the many decades, is a great promise doesn't have sustainability because there's too much variability where we go 8 percent one year and then we're down 1 percent the next year, whatever it may be. 

The third piece is, can that economic growth be much more inclusive to all of the citizens of the Indian economy and the country? This way it's beneficial that sets a much more solid foundation for that long-term sustainability.

People were banking on this China plus one factor, but if the China growth engine is coming back, do you think India will still be an attractive destination?

Moritz: That's the opportunity India has right now. I see it, I believe it, and we at PwC see it more broadly. But let's not talk China plus one, let's talk China plus many. India should be one of the many. That's the framing that India has to have. If you want to get your larger proportionate share of that, you've got to be cheaper, you got to be more effective and agile, you've got to scale and you got to be cleaner. That right now is the opportunity for India at a policy level and with the business community to serve the world with those four elements.

Krishnan: You don't win a game just because someone else is not doing well. We need to be able to do stuff which makes us stand on our own feet and that's why I personally don't like this China plus one or Europe plus one kind of situations. Yes, we are doing a bunch of things and I think they will hold us in good stead.

I think your survey said CEOs are prioritising climate goals. But at a time when survival itself is becoming difficult and they have to cut costs, don't you think climate goals, sustainability goals will be one of the first overheads they will look to cut down on?

Moritz: I don't. First, when you think about this—this is to solve the simultaneous equation of the short term and the long term, Climate is going to make things more expensive and climate will start to change consumer behaviours and even employees' behaviours. As a result, if you are not more climate-friendly, you will not have employees and the only way you're going to get them is to spend more money. If you don't do that for your consumers, you're going to have to market more expenses embedded in that marketing to overcome the presumption you are not climate-friendly. So the short term and long term go very much together. 

 The second thing I'm going to say here is that climate is lower in the risk rating profile because of the relativity, but in the medium to longer term, still on that list. The last thing I would say is the amount of energy that CEOs globally are spending in this place is significant. They are working together with governments, they are working across businesses and across their sectors or maybe even within those sectors. They're working with NGOs and the like to make this come to life and progress very fast. They're asking governments to make changes to policies and regulations to amplify and accelerate that change. 

 I think that change has already started to happen. The question is, how do you accelerate it? And you know, the business case for this change has actually gotten harder, because the amount of emissions just in the last year is at a record low in terms of reduction. In a time where we're coming out of COVID and supposedly learned a lot of lessons, our own PwC Net Zero survey would say it was one of the least years for reduction in emissions than we've had in the last 15. That's not a great sign which says everyone around the world has to be more focused on this.