It's not India's decade, it's India's century, says Bob Sternfels, CEO, McKinsey & Co
A large working population, multinational companies reimagining global supply chains, and a country leapfrogging at digital scale-to achieve something special not just for the Indian economy, but potentially for the world.
The Indian economy seems to have weathered the pandemic fairly well, despite hitting a few rough patches in the last two years. How do you see India's growth story unfolding in the context of a deceleration in global economic activity?
Many people have said that it's India’s decade. I actually think it's India’s century when we look at some of the raw ingredients here. India is the future talent factory for the world. By 2047, India would have 20% of the world’s working population. And with supply chains being reimagined, it has massive potential for India across all aspects of manufacturing. The third is digitisation. India has leapfrogged on the digital scale. All those are the raw materials to do something special for not only the Indian economy but potentially for the world.
So does that optimism translate into more investment in McKinsey India?
I’m bringing our global board here in December because we are going to make a disproportionate commitment to India. We are about 5,000 people in India now—both in India practice and global centres—and it’s my aspiration to get to 10,000. We are about 40% women today, and I want that to be 50%. We turn 100 in 2026, so my question is, what can we be in 2026 in India.
The global economy, which is reeling from the pandemic, stubborn inflation and Russia’s invasion of Ukraine, faces an increasingly gloomy and uncertain outlook. Are we on the edge of a global recession?
It’s easy to list all the things and even more, like the increasing socio-economic divide in almost every country in the world and increasing labour shortages. But there are some things that make these times unique. Tom Barkin, the president of the Richmond Fed and a McKinsey alum, told me, "Bob, remember, it's hard to have a recession if you have zero structural unemployment." We have zero structural unemployment in the US and in most parts of Western Europe. So you are running at a very low unemployment rate. That may be unlike the last two periods of disruption—the global financial crisis and the dotcom bust. Equally, I think you have started to see some of those inflationary signs start to taper off. Oil prices have started to fall below $100 a barrel. Also, in certain supply chains, you are seeing a massive influx of secondary sales in the US and Europe. So goods that were once going through primary channels are now going through discount channel because of supply chains catching up. So, I would say the signals are mixed.
And what are the CEOs telling you about the state of their companies?
One of the things that I did over the past year was get out and talk to clients, and I have talked to over 500 of our CEOs in the last year. CEOs now want to play offence and defence at the same time. So defensive measures... shore up the balance sheet, increase efficiency, and ensure the company can withstand shocks. They are also saying, my balance sheet is healthier than it was in either of those downturns. And I want to actually take two or three big strategic bets so that I can come out on top. In the end, we may come out better than what some of those signals are saying, and particularly in India, I think there's an opportunity for India to come out in a disproportionate position ahead.
Do you think the impact on global trade due to geopolitical fragmentation will be temporary?
I think this is one of the existential questions of our time. The order we all grew up in is coming to an end. And what a lot of people are saying is that what's going to give way is that it's going to go to deglobalisation. And I think that would be a big mistake. When you look at the costs, the World Trade Organization just came out with a report that said if the US and and China decouple, in a very conservative calculation, 5% of global GDP gets wiped away. And it disproportionately impacts the bottom 40% of society. So there's a massive cost associated with this. I think, quite frankly, it's up to business leaders to start to articulate what can follow globalisation that doesn't default to deglobalisation. The problems that we all want to tackle—growth, climate, talent—don't stop and start with borders. It's hard to solve these within the boundaries and borders of individual states as opposed to some form of integrated solutions. The second is this notion of resilience. I think as we start to think about resilience, we may define interdependence, in a different way. It's still interconnected, but it may be a much more resilient, interconnected model. And from McKinsey's point of view, we stand for interconnectedness; it's core to the belief system that we've got.
Are you getting more questions about rising geopolitical risks after the Ukraine-Russia conflict and the China-Taiwan tension?
Very much so. How do you stress test your organisation to see how resilient it is to these types of shocks? And moving away from risk management to resilience muscle building is one of the big conversations that we are having with all CEOs.
You have kickstarted a set of changes in McKinsey. How is India practice doing on that front?
I’m very pleased with India. We're leading the way in what I'm trying to do in the world overall. India's a microcosm. Whether it's diversifying talent, increasing our gender diversity, or increasing the number of sources we hire from. McKinsey has historically been thought of as being elite. But I want it to be distinctive, not elite. Elite implies exclusive, a certain number of backgrounds, a certain number of profiles. Every year, we receive a million applications for 10,000 positions, but they have historically come from less than 500 sources.
I want that to be 5000 sources. India is on that path. We going to measure what kind of impact McKinsey is having. So what I want to measure us against is that in an economy, are we making a difference to what I'm calling sustainable, inclusive growth? Is the economy that we're in growing because of the work that we're doing? Are the clients that we work with upskilling and adding employment or are they taking away employment? Are our clients hitting their climate goals? India is on that path too.
Last year, our clients helped drive 20% of the world's GDP growth. They added a million net jobs, so they added employment and they moved seven times faster on their climate goals than the rest of the global 1000.
Source : Economic Times