Brand India’s image as an investment destination has taken a severe hit, not just from policy issues but also from the big noise over corruption, says the Chief Executive Officer (Elect) of KPMG, Richard Rekhy. He pins hopes on the implementation of the recent ‘positive’ policy announcements for bringing back higher growth and to attract foreign investors.
Excerpts from an interview:
What are the key challenges being faced by consulting agencies such as yours?
The key challenges that consulting firms face are basically around foreign direct investment, which has declined because of various Government regulations and policies. There are two issues. One relates to areas where certain reforms have not taken place. The other is that there is no clarity of laws (on FDI). Then, we have the retrospective amendment on which there is still no clarity about the Government’s stand. Also, there are issues concerning some other tax regulations that are very complicated.
Another issue relates to the setting up of business in India. The process is very bureaucratic and slow. You have to obtain 50-60 clearances. People cannot understand why there is need for so many clearances. All these things impact business.
This is the big challenge that consulting firms are facing.
Also, new investments are drying up to some extent and is impacting the Indian economy. Earlier, there was a huge inflow of foreign investment which fuelled the economy. But, that kind of growth is now declining, which is impacting new businesses coming into the country.
As the new CEO, what will be your strategy to strengthen ‘Brand KPMG’?
One, find ways to play an active role with the Government on policy reforms, on providing inputs. Second, we will focus on growth sectors, more specifically infrastructure, telecom and financial services. We are also strong in areas such as retail and aviation. We would like to grow in all these sectors. Today, the strength of all consulting firms lies in sector focus. We have already created teams, now we will create more focussed teams.
In which sector do you think you have core expertise in comparison to others?
We are strong in infrastructure, financial services and telecom and, of course, transport and logistics. These are the four sectors where we have invested a lot of manpower to create a thought leadership. We also focussed on two emerging sectors such as defence and education .
What kind of manpower do you have at this moment?
Today, we have around 7,000 people and on an average we are adding 15-20 per cent year-on-year.
What is the rate of attrition?
Attrition is very high because of the opportunities that people are getting. We found that people are generally not going back to consulting. They are going into other areas such as industry or further study.
So many reforms measures are underway. Do you find positivity among overseas investors?
I think the Government has come up with some very good proposals. The question now is of implementation. I think directional changes are very good. If all the changes are implemented, these steps will take the economy to high growth. For example, the Finance Minister spoke about Goods and Services Tax (GST). It alone can bring a percentage point in GDP growth.
Do you think with these measures the perception about ‘Brand India’ has changedor will it take some more time?
It will take some more time. If you go to any global forum, earlier China and India were spoken about. Today, India does not get spoken about as much. In fact, people are talking about new countries such as Indonesia, South America which are emerging. Africa is considered to have high growth potential. India has somehow lost its shine because the retrospective law has really impacted people. You can have whatever law you want, but one should know what it is about. You can’t say that something that was done 40 years ago will be changed now. (As a result) People cannot take business decisions. They need an environment that is safe, so that when they take a business decision, the law at that point of time is respected. So, retro taxation has really had a negative impact on India.
A lot of interest has been shown by Japanese companies, especially on the infrastructure side. Because what is happening in infrastructure. Till now, the companies were capital-intensive and they were creating assets. Now, there is change, as they are operating those assets. So, a lot of global players are looking at India in a positive way.
Have foreign investors shown some positivity on the Shome Panel’s recommendations on retro tax changes?
No, and it will remain so till steps are taken. After the Vodafone case, a number of companies got notices for their transactions. All these are at different stages with the authorities. There is a lot of uncertainty in people’s minds. So, people are watching India. They are waiting to see whether these (Shome) recommendations will actually become law.
Is the big noise on corruption affecting (foreign investments) more than policy decisions or indecisions?
Nobody will say that corruption is good. At the same time, the noise being made is also not good. It is not that corruption is nowhere in the world. But, I think here it is becoming a distraction, which is hurting India. We need to fight corruption, but we should not do so by hurting ourselves.
There needs to be exemplary punishment (for corruption). At this moment, there is no punishment or nobody is fully convicted. Until and unless examples are set, I think we will continue to be known as one of the most corrupt countries. There are anti-corruption laws in various countries. The UK has an anti-bribery law. So, we need stringent laws, not just noises. We also think accountability should be there for the bureaucracy.