Dominic Barton and Rich Lesser agree on India outlook

08 December 2014 3 min. read

The winds of change are blowing across India’s wide fertile plains. Two global consultancy giants are in agreement about India’s potential and both express cautious optimism about the newly elected Indian Government’s ability to sow and foster the changes needed to grow a prosperous future for the Indian people.

Optimistic agreement

Last week reported on McKinsey & Company CEO Dominic Barton expressing optimism in India’s future, “I think India has gone right back up, people are interested, obviously people are going to want to see action but I think the feeling is they will because this government seems serious," he said, on the back of a detailed report assessing the potential of the Indian economy. A few days later, the CEO of The Boston Consulting Group, Rich Lesser, has joined in voice, adding to a chorus of optimism in India’s future, "The sense of hope and opportunity is just so much higher. It is a very exciting time."

Both business leaders, heading up two of the most influential consultancy firms globally, are responding to Indian Prime Minister Narendra Modi’s statement reflecting his intention to initiate broad government reform programs. In light of the programs, both advisors conclude that India is on the right track toward creating the conditions for the country’s long term growth prospect, as well as the prosperity of its 1.2 billion people. "Global leaders are looking at India with a high degree of optimism, but tempered by the realisation about how hard it is to make change anywhere in the world," says Lesser.

To bring about the internal changes required to turn India around from recent lacklustre growth to a global powerhouse stabilising the world economy, firm and active transformation of the government machinery will be required. As it stands, it represents a transformation that Modi appears ready to make, saying in his Independence Day speech at Red Fort: “Today in the face of global competition, when we have to realise the dreams of millions of Indians, the country cannot run on the lines of "it happens", "it goes".  In order to fulfill the aspirations of masses, we have to sharpen the tool called the government machinery, we have to make it keen, more dynamic, and it is in this direction that we are working.” While Modi is strong in his intention, Lesser is cautiously optimistic: "Of course actions speak louder than words and we will see how things evolve but there should be a great deal of optimism and very close looking at investment opportunities and opportunities to build businesses here in the years ahead,"

Dominic Barton, Rich Lesser and Narendra Modi

McKinsey and BCG both note the potential as well as the changes needed to transform India. By focusing on areas of energy policy, infrastructure, regulatory constraints, tax regime education and upskilling the work force in particular, India’s true potential can be unleashed. Lesser notes, however, that tax uncertainty is creating risk and discourages people from investing.

Manufacturing growth

Developing India’s manufacturing sector is a key area about which Modi spoke in his Independence Day speech, announcing his ‘Make in India’ initiative, of which the aim is to foster and grow the sector in India. McKinsey’s research on India reveals that, looking back, the lacklustre growth in recent years can largely be explained by deceleration in the industrial sector.

Going forward, Modi envisages a “zero defects, zero effect” programme, the aim of which is to reduce the number of defects in products manufactured in India, while also reducing the level of pollution created by the manufacturing process. This sentiment is echoed by Lesser: "you have got tens of millions workers coming into job market. You have got to have opportunity for them, and services will be a big chunk. I'm not minimising that India can be a great part of the services economy, but there has to be a strong manufacturing base,"

With two of the world’s most influential consultancy service rivals demonstrating optimism, the future looks bright for India. Both firms are recommending their clients to look at India for growth opportunities.