The Hindu Business Line : ‘Inflation, biggest global challenge’

The Indian economy is robust. Even if growth slows down over the next 12-24 months, which is quite possible, it is still high compared to other markets.

MR SAMUEL A. DI PIAZZA, JR. , GLOBAL CHIEF EXECUTIVE OFFICER OF PRICEWATERHOUSECOOPERS INTERNATIONAL

V. Rishi Kumar

Mr Samuel A. Di Piazza, Jr. the Global Chief Executive Officer of PriceWaterhouseCoopers International Limited (revenues of $25 billion), was in India recently, networking with clients and meeting the company partners and executives.

With PWC since 1973, he currently serves as a trustee of the International Accounting Standards Committee Foundation, is chairman of the World Business Council on Sustainable Development and Executive Member of the International World Business Council of the World Economic Forum.

In an exclusive conversation with Business Line during his visit to Hyderabad, Mr Di Piazza spoke about global economic conditions, the current US slowdown, changing business landscape and the move towards global accounting standards.

Drawing upon his vast experience and industry insights, he explained how they view the markets and India.

Excerpts from the interview:

How do you view the current global economic scenario?

We have a complex global economic environment. It is clear that the developed world is slowing down. The US markets too have slowed down but it is not absolutely clear if the economy will slip into a technical recession.

It is clear, though, that certain parts of the US markets are already in recession. This includes real estate and financial services, while automobile sales have been declining over consecutive quarters. Industrials remain reasonably steady.

While the global economy is important, what is happening in the US is a big concern. Japan, the other major economy, is concerned about the very low growth in its market and in the US.

However, countries such as Russia, China, Brazil, India and Turkey continue to show positive growth, even if they too have begun to show some signs of slowing down a bit.

Because some of the other economies are growing fast anyway, this is being backed by regulators who are taking reasonable actions.

For instance, the US Fed’s changes vis-À-vis the overall reserves in the US to help accelerate economy is good. The Fed is reacting very actively to the crisis.

So what is the main issue?

The issue is about failing confidence. Right now it is less about fundamentals, and more about confidence. Three issues stand out, these are related to transparency, risk aversion and crisis of confidence.

How about India?

India has some of the same kinds of issues and is concerned about inflation. It is the same in China and some countries in Europe. India reflects many of the issues in other parts of the world.

During the last visit to India, I met with Finance Minister and Commerce Minister, who are very capable and addressing issues with great concern. The biggest issue the world is now faced with is controlling high inflation rates. India and China are particularly concerned about inflation. The Chinese Government is working hard to deal with high growth.

Europe has kept its interest rates high to control inflation. Spiralling commodity prices and wages all drift into prominence.

It is too easy to say Government will control inflation by dealing with various measures. The inflation here has appreciated to about 6-7 per cent.

The Indian economy is robust. Even if the growth slows down over the next 12-24 months, which is quite possible, it is still hig

h compared to other markets. That is even if the growth comes down to, say, about 6-7 per cent from 8-9 per cent now, it is still a high growth market.

What about recession and its impact on tech spend?

Different people have different views on this major issue of concern to everybody. Some predict the recession may be deep. I would say we may see that many other fundamentals of the economy continue to be positive.

With regards to the technology spend, in general, there could be some sort of softening across the board.

That is, capital expenditure could be marginally lower. But if this is the case, enterprises will seek ways to maximise returns on their investments. I believe India will benefit by this and possibly get more offshoring business.

How do you view the Indian market?

There are several factors that are driving investments in India. There is growth opportunity in infrastructure, power, retail and technology. This presents many business and investment opportunities. Significantly, domestic companies have good opportunities to go global with their products and services.

Indian companies are making a good number of mergers and acquisitions. Be it the case of Tata Motors with Jaguar-Land Rover or Birla’s Novelis acquisition. But a good number of smaller-sized acquisitions too are taking place. This shows great momentum.

The Indian Government is doing a good job managing the economy by backing it up with good reasoning and bringing about the necessary regulatory changes. Maybe they could hasten reforms in some areas, possibly open up insurance and retail.

How is it that some financial service companies are collapsing in the US?

Businesses are in the business of taking risk. Sometimes these risks could go out of hand. At other times, the market forces are such that businesses face closure. Many financial services companies are faced with challenges.

The Bear Stearns (not a PWC client) development has nothing to do with any business failure. It is just that the business model was impacted adversely by the liquidity squeeze. And one should understand that this is nothing to do with any auditing flaw, either.

The auditors are now doing a much better job in curbing frauds and addressing the many risks companies are facing.

New accounting standards set to come in?

International accounting standard is irreversible. Over 100 countries have adopted this and India has given a commitment to adopt this by 2011.

Markets have become globally competitive and increasingly inter-related with markets outside. Therefore, they need a simple, single international standard of accounting and not US GAAP. I compliment India’s commitment to move towards this.

What about PWC in India?

PWC has been growing in double digits every successful year. In fact, the growth in India is about 30-40 per cent.

We have also made the acquisition of RSM and expect to double people within three years and also bring in more services offerings.