James S Turley, global chairman and CEO of Ernst & Young, who’s stepping down in June, draws a parallel between businesses in India and the US not having enough confidence in their respective governments. Foreign investors are bullish on India, according to Turley. To do things right globally, companies must experience India and China, Turley tells Nivedita Mookerji. Excerpts:
How do you look at the economic slowdown? Do you think the worst is over?
I’m pretty optimistic overall. When you look at the major economies of the world, globally we have recorded 3.5 per cent GDP growth this year, and will probably be more next year. We don’t have any serious risks going backwards with one exception - Europe. The Euro zone is a very difficult place. There’s a lot of change that has to take place.
A spending cut of $85 billion was announced recently in the US. What is the implication of that move for the global economy and India?
The impact is going to be very limited on the world economy. In fact, its impact is going to be relatively small on the US economy. The sequestration, as it is called, is a very small percentage of the really big budget of the US. I don’t anticipate it to be a big drag on the economy.
The bigger issue is not how sequestration plays out, but the US has to get its political act together and try to have the President and both houses of Congress reach an agreement on what combination of spending cuts and increases would be appropriate.
What is the foreign investor sentiment about India right now?
The foreign investor sentiment is as good or better than the local business leaders’ sentiment. In recent years, there’s been a bit of tension between the government and corporate leaders in India. But foreign investors look at India as long-term investment potential. Predictability in policy and stability and things that companies can plan around are very crucial.
The more stability in policy there is in a country, the more confidence the business leaders will have. Like in India, it’s the same in the US, where the confidence of the American businesses in the US government is not very high.
Foreign investment in multi-brand retail was allowed several months ago in India, but companies around the world are yet to respond to the change in policy. Why?
India has announced reforms before also, even in retail and other spaces. Investors would like to see these reforms take place truly. It is important for India to be open and transparent about such steps because FDI is going to drive the country’s growth and create jobs.
It’s really important that India continues to make itself globally attractive. Its not just about opening up sectors but it means following global standards, governance and transparency, stability in tax and legal systems. It means in many cases streamlining administrative barriers.
What are the biggest challenges in India at this point that keep foreign investors away?
India is positioned alongside many others when it comes to foreign investment. What we have seen in the past year is increasing globalisation. There’s competition from Vietnam, Malaysia, Mexico, Peru, Indonesia and many others.
They are all attractive for investors. But most others don’t have what India has. India just doesn’t have a great market, but also an enormous talent pool, which is second to none. So, companies working around the globe need to have an India strategy, like they need to have a China strategy, because those two markets are so enormous. Foreign investors are long-term bullish on India.
What do you think of the quality of financial reporting by companies in India?
I would say it is good and improving.
What is the India contribution to the global revenue pool of E&Y?
We have about 14,000 people in India and we have 170,000 people globally. It may not reflect revenue contribution, but India is a very important market for us.
When did you have the last job cut anywhere in the world?
We continue to fine-tune where we must have more people and where we must not. But on balance, we are going to increase the people strength by 40,000 in the coming year. So, we continue to grow.
Which are the regions where you are adding more people?
Growth is in the Americas. We double our headcount in India almost every three years and we see strong growth continuing in India.
What’s the M&A (mergers and acquisitions) scene like at this point?
Globally, there are signs that there could be a renaissance in M&A activities.
This could be your last visit to India as the chairman of E&Y. What’s your expectation from the Indian system and will you meet the political leaders?
I must have come to India 30 times in the last dozen years but I’ve never holidayed here. So, I will come to holiday in India after I step down. I may meet some leaders, but the principal reason why I’m here is that our entire global executive team is in India. Some of our team members had not been to India; we wanted them to experience India first hand. India is a place you need to learn about not only by reading, but also experience.
Until you understand India and China, you won’t know what it is to be successful long- term in the world. India, China and the US are going to be quite important.
You must have had many frustrating experiences with your clients. How do you handle that?
The most important thing that I have tried to do is instill a culture in your people. If something smells funny in your client, or if something smells funny in E&Y, it’s not just okay to raise their hand, they should ask for help as well. No one of us is as smart as all of us. So, when people consult, they get to the right answer.