Not easy for India to open up agriculture; need to focus on manufacturing for 7%-8% growth: Deloitte’s Romal Shetty

For future growth, India needs to focus on manufacturing, and ease of doing business, says Deloitte South Asia CEO Romal Shetty. In an interview with Fortune India, Shetty also points out that given the subsistence level of the Indian farmers it is not be easy for India to open up agriculture sector.

Q. India’s mega economic growth targets and visions come at a time when the global growth is constrained by geo-political issues and economies looking inwards. The environment is no more barrier-free like it used to be during the previous two decades when China, or others grew. Kindly share your perspective on India’s growth plan amidst these constraints?

A. Outside China, India is the only nation having potential in terms of size and scale for the big leap. But we need to get our manufacturing right. We need to get our policies right. We need to ensure that ease of doing business is much faster. Secondly, the world is moving more towards AI. Again, we have the largest number of STEM talent in India. Yes, there is more volatility and nationalism globally, but it is not so easy to decouple everything.

Q. What do you essentially mean when you say we have to get our manufacturing, or our policies right? What are those interventions needed for India’s the developed economy goals by 2047?

A.  I think we have made significant improvements in ease of doing business. But still can we reduce that time by half. If someone wants to establish a factory, or someone wants to establish a manufacturing zone, can we do that much faster, probably in less than half the time? Does a service provider need to go through unnecessary regulatory requirements. For example, complying to the pollution control act for a services industry may not be as essential as for a manufacturing unit.

We need to create more and more plug and play infrastructure zones. People can have the ancillaries, suppliers everybody under one roof so that one is not required to invest much. So, it is all about ease of doing business at a much faster level.

Q. Coming to the macro trends, expectations are that India – US deal will be signed soon, interest rates are coming down, and inflation has been benign. In this context, what is your medium- and long-term outlook for the India economy?  

A. Amid all the volatility that we have seen, India’s growth rate in the last few years has been over 6%. I do not see that stopping. It is a combination of few factors – capability and talent. That will continue. Our focus on AI and new technology is pretty strong and that should keep us in good stead.

Also, we have done a lot of research. Countries that move beyond $4000 per capita income, suddenly see the consumption move at a much faster rate. We are at around $2800. Indonesia, for example, has a much high per capita consumption compared to India, as the per capita income is much higher. In India, 7%-8% growth will require a lot more things for us to do. But it is something which India can achieve.

Q. So what do we actually need to do to get close to the 7%-8% growth range?

A. Manufacturing has to be a priority. And we need to make our agriculture more productive. Our dairy productivity is far lower than the global standards.

In services, we clearly are the leaders. In the earlier part, we were the back office of the world. That has changed a lot. A lot of engineering design and research is coming to India. We need to look at creating higher value addition.  

Q. You talked about agriculture productivity. It is one of the vital points in the ongoing India- US trade deal. Will opening up the agriculture sector enhance productivity?

A. It is not a very easy question to answer. At the level of subsistence of our farmers, it may not be easy to bring in that. Competition normally forces everybody to do better. But we have small farmlands. Some of the other countries have five or seven times the size of farmlands our farmers have. India has to be mindful of the small farmers. Those are some of the challenges that we have there. We need to focus more on the mechanization, and technology into the farming. We also need to think on the terms of more and more agriculture co-operatives. Plus we have to look at how do we brand our agriculture produce better.

Q. India makes advances in certain things, but newer set of challenges keep coming up. Right now, we are dealing with rare earth magnet issue and its impact on the electronics, EV and automobile sector. China has taken a lot of lead in this. What could be the probable way out for India?

A. Within the country, there are two areas on which we need to focus. Firstly, we need to do explorations. India has different mining resources in various part of the country. We must locate such reserves in the country. I think that geological exploration is very important to ensure we have a certain sense of self-reliance.  

Secondly, majority of rare earth magnet processing is today done in China. But China is not the only nation having rare earth reserves.  Rare earth minerals are available in many African countries. So, we need to form alliances for example with the global South, or BRICS. Alliances are critical to how we actually safeguard our requirements.

Given the geo-political challenges, dependence on any country in the world or full dependence on any country may not be the right strategy. We need to diversify it. 

Q. Is space mining, asteroid mining an option? Is it viable to tap these resources in the space?

A. Space mining is 100 percent feasible for us. Clearly, space, or largely asteroid mining is an option. Space is an area in which India is pretty much in the top preeminent countries in the world. We are not catching up with the rest. We are among the top few there. It is definitely an area for energy for other use cases

Space is a big space for India. Along with ISRO, tech startups, too, are helping a lot. It is one of the key frontiers for India and something that India should really focus on.

Q. Coming to Deloitte, what are the new initiatives you are leading?

A. Our significant focus is on AI. We are infusing AI into every part of our business. Secondly, we believe GCCs are probably the biggest opportunity in the country. Worlds 50% of the GCCs are in India but 67% of the Fortune 2000 companies do not have a base here. Fortune 2000 companies will have to have a GCC somewhere. That is a big opportunity.

We have a Project Bharat at Deloitte where we look beyond the top ten cities.  There are a significant number of emerging companies with the size of Rs 500 crore – Rs 800 crore. They have the potential to become a billion or two billion dollar companies as well.

Q. What is the Deloitte India growth guidance?

A. We are looking at a consistent 24% - 25% year on year growth in India. Our view is that by 2030, we will be a $5 billion firm from India.

Q. There are talks in India about a domestic Big4. Do you see it as a challenge?

A.  No, I think it is a good thing. India should have a big four like professional service provider. Many people do not realize that Deloitte is actually 130 years old. Five Indian firms came together and joined the Deloitte global network. It takes time to build. But I think consolidation within the Indian firms is important. The Indian economy will grow.