2. China slow down – leading to global uncertainty
Fed rates – will define how Capital flows in new
Economies
Commodity Cycle – reflecting Global profitability
Shift is from traditional “Brick & Mortar” economy to
“knowledge” & “IP” based growth
The Present Environment !!
3. The China Factor!!
Slowing Growth
1. Economy slowing down, growth half of its peak, expected to go below 7% in 2017
2. Softening of demand – imports falling, easing of export
3. Multiple devaluation of currency to keep the exports competitive
4. Low Chinese demand impacting commodity prices
5. Stock market crash due to various factors including slow down
6. All this causing significant global turmoil
4. Fed continues to keep us all guessing!
Unemployment rate fall is in track
Sluggish inflation a concern – still below 2%
Reasonable inflation important for growth &
profitability
Govt. being the largest borrower, increase in rate
would impact adversely
Mortgage rate will also increase, possibly impacting
demand
Chinese turmoil may have also been a trigger not to
increase rates
5. Advantage India!
India is presently in a “Sweet Spot”
Commodity prices have corrected sharply leading to
Lower inflation
Lower cost of production
Lower CAD
Contracting Fiscal Deficit
Lower WPI & CPI gives headroom for monetary easing
China turmoil increases focus on India – best
positioned EM
Contd……
6. Advantage India!
Reforms finally showing results
2015 railways budget – no new train introduced
“Give it Up” campaign - > 2 mn LPG subsidy surrendered
FDI in insurance up to 49%
Coal production of CIL up significantly ~ 10% (4x of previous 4
yrs average growth)
Diesel prices completely deregulated
Labour reforms have started
Significant impetus & focus on infra building and growth
Significant transparency in Govt. functioning
With monetary easing coming up sooner than later, India
is all set to grow at 8% + (10% ??)
Growth expected to be highest amongst large economies
7. Other advanced
Australia & New Zealand
Japan & S. Korea
Western Europe
North america
Advanced
2013 profit % by region
$7.2T profit
9.8 %
Of world GDP
$2T profit
7.6%
Of world
GDP
2013
1980
Global trends - a three-decade trend of rising profits
9. Advantage India!
While India is in a position of advantage, what worked for
China will no more work for India and the canvas has
changed
China was an export led growth, world economy has since slowed down
significantly
For India to grow ~ 10% over the next 2-3 decades, it will have to blaze a new
path
While “brick and mortar” would continue to be relevant, India’s leap frog cannot
be sustained only by conventional businesses, or conventional ways of doing
business
Corporates would need to challenge the convention, invest in innovation and
R&D
Success of Telecom & IT industry is a case in point
While India will & should increase its exports thru increased export
competitiveness, domestic consumption would continue to be the key driver
10. India – Why the change?
65% population below 35, working age population between 15 – 64
to surpass 1 bn by 2030 (^China) – rising PP and aspirations
India needs 12 mn new jobs every year, 50 mn skilling required
every year
Growing middle class seeks new value propositions – by 2021, 900
mn ppl would be the “emerging middle & middle class”
India’s human development index is ~ Sub-Sahara Africa, needs a
quick fix (health, education, sanitation and per capital income)
India has to adopt new solution to achieve unprecedented growth
to > 10 trillion USD by 2034 – a three pronged approach
Fierce catch up – accelerated pace to grow traditional sectors like Mfg &
Infra; this would remove bottlenecks & red tape and brisk pace reforms
Significant leap – adopting new or different approaches or technologies
which may have worked in developed nations or may be a first timer – driven
by innovation, R&D and human intelligence
12. A more uncertain environment and slower profit growth
Many more companies fighting for market share
Volatility and swings in corporate performance
Profits shifting to idea-intensive sectors, which produce big winners
Margin pressure on capital-intensive firms
$8.6 T profit
7.9 %
Of world GDP
2025
How tomorrow would shape up?
13. Relevant Growth Strategy!
Tomorrow’s business would be led by innovation & customer experience
Create strategies & products that has the capability to enhance customer
experience
Technology no more an enabler but the “cutting edge”
Use of data analytics for predictive analysis – with fast changing customer
behaviour, predicting customer behaviour only way to survive
“Brick and Mortar” becoming more & more irrelevant – the old bastions are
falling
Physical reach no more a competitive advantage, physical distance no more a
deterrent – can be converted into an advantage
Scale very critical…disruptive technology & pricing, if not beneficial can surely be
destructive for the competition
Innovation and R&D key to capture existing & new markets and aspirations
“Speed to Market” key for new experiments – with capital no more scarce; fail
cheap, fail fast the new manta
Lean and mean key to success – “cash” or “war chest” a much to survive
14. Play offence,
Not defenses
Be lean and agile Focus on the intangibles Play the long game
Go after fast growing market
Focus externally to stop
disruption before it hits
Learn the nuances of
emerging markets down to
the city level
Winning firms are more
productive
An asset-light footprint can
minimize disruptions
Avoid strategic inertia
Plan ahead for resilience
Intellectual assets matter in
all industries
The new weapons are
software, data, algorithms,
brands, and R&D
Fight for the best talent and
consider M&A to gain
capabilities
Many new competitors
prioritize sales and scale over
margin
Seek out institutional
investors with long horizons
Create incentives for long-
term value creation over
short-term returns
How companies can compete and win in this new landscape
