ET GBS: There is every reason for India to be confident, says Hans-Paul Bürkner of BCG

There is every reason for India to be confident about the future and to embrace the opportunities given how the geopolitical world is changing, said Hans-Paul Bürkner, chairman emeritus, BCG. In an interview to ET’s Anumeha Chaturvedi, Bürkner spoke about the China +1 model, rapidly changing geopolitical and economic dynamics and signs of green shoots in 2023. Edited excerpts:

In a world affected by unprecedented crises, do you see an opportunity for India?Absolutely. I don’t just see optimism for India, but for the whole world. We have a tendency to say these are the worst of times. But we had similar situations in the past decade. In the early ’70s, for example. In the Vietnam war, the war in the Middle East. We had the first oil crisis. We had conflicts between East and West. Yes, we have a lot of challenges. But we have also seen over the past 50-70 years a steady improvement in the standards of living in India and around the world. I am always energised when I talk to young people and company leaders in India. And the same is true for people in the government. You see great energy, great momentum. There is every reason for India to be confident about the future and to embrace the opportunities. Especially now. The geopolitical world is changing. People are thinking about their global footprint. Companies are trying to have a larger group of suppliers in different regions to mitigate the risks. A lot of MoUs (memorandums of understanding) are being signed. We understand not all of them come into fruition. But it’s important (for India) to be open for domestic investments but also investments from other countries and other companies from outside to strengthen the service sector, which is strong in India, but also the manufacturing sector; to have more exports but to also allow more imports.

India stands to gain from the China+ 1 model. While the country has made substantial reforms to enhance ease of doing business, do you think it has moved the needle enough to get a higher share of global manufacturing?
I don’t like the China+1 comparison. I think as companies globalise, they look at their footprint again and again. There will be local, regional and global supply chains. Companies will sometimes have to be close to their customers and also try to provide products which are customised for those customer groups. We will see a lot more spreading of factories and manufacturing bases. We see more customisation of products. There is indeed a huge opportunity not just because of China and certainly not China+1. It’s a short word for a big general movement. As India opens up, the ease of doing business is getting better. Once companies have decided to make an investment, they want to be sure that the conditions remain the same. That’s really crucial.

How has the BCG India consulting practice grown over the years?
We celebrated the 25th anniversary of our team last year. Our growth rate has been about 25% per year on average. It is a truly fantastic story.

What have been the drivers of consulting demand after Covid-19? Have you seen any other such bumps in your long consulting career?
People always think this crisis is the worst crisis ever. Remember the financial crisis of 2007-2008. We had the Euro crisis. There was an Asian crisis in 1996-97. There was a Latin American crisis in the ’80s. Now we are much more connected and so something that happens in one part of the world can easily, especially when it’s a pandemic, spread throughout the world. Any financial crisis will have implications for the rest of the world quite quickly. The lockdown has been a massive issue for almost all people around the world. It’s also something which has accelerated digitisation, for example, in many places. It has led us to think more carefully about local and regional supply chains and how to hedge your risks. Out of every crisis, come opportunities.

Do you see rising inflation impacting capital flows to markets such as India?
Prices are increasing, especially energy prices and food prices. There has been strong double-digit inflation in some countries. What is really important is to see that things will normalise. We are seeing inflation rates coming down and by the end of this year and next year we will be more in the range of, depending on the country, 5-6% or 7%. So it’s normalising a lot. I think some companies will have to rethink their strategies but for those that are operating internationally or globally they will keep on pushing forward as growth resumes, not necessarily in the first half of this year, but over the coming years we should have normal growth again. India is the fastest growing large economy in the world. So you want to be part of that success story.

What’s your prognosis about the global economic scenario?
At the end of last year, a lot of surveys, CEOs and economists thought there would be a severe recession in Europe and a mild one in the US. At that time, China had not opened yet. So, there was a general concern. As 2023 unfolds, the sense now is that there will be very low growth in Europe of about 0-1% but no recession. And the US economy should grow by 1-2%. China will certainly come back strongly towards the second quarter. India will have good growth and also the Middle East. There is a lot more optimism. It’s up to us to make it work. Overall it should be an okay year and stronger year in 2024-25.

Geopolitical tensions have raised the prospect that strategic competition and national security concerns may trump shared economic benefits of global trade. Is there reason for Asian countries like China and India to worry about economic fragmentation? Experts say Asia could be the biggest loser if the global trade system splits up.
After the invasion of Ukraine by Russia, people know that they have to expect the unexpected. Now the question is, will something happen in Asia around China? Nobody knows. Hopefully it will not happen. But you certainly have to think about these possibilities. So governments and also companies do their scenario planning on what to do and how to react. Still, from an economic point of view, India, Southeast Asia and China will be the strongest growing regions in the world. They have different characteristics. Southeast Asia is an assembly of countries. But these three places are very important. They will grow faster than any other region. And if you really want to be a global player with good growth prospects, you will be engaging with these three regions. Despite all the challenges that may be there. I think that’s what we all have to work for. I think global tensions will certainly affect the trade flows between China and the US and maybe also Europe. But BCG analysis shows that Southeast Asia and India could be the big beneficiaries of that.

After a tough year that included soaring inflation, war in Ukraine and rising cost of living, do you see any tentative signs of optimism in 2023?
There is always reason for optimism. We have to contribute to achieve economic growth. We have to address energy scarcity by opening up new sources and by opening new channels for delivery. You see massive increases in wind energy and solar. But also energy terminals are being established in Europe. I think there will also be more investments in defence. Europe and North America will continue to support Ukraine to bring the war to an end. I am hopeful and optimistic that when we look back at the end of this year, we will say it was not such a bad year.