Image: Sudhanva Atri for Forbes India
Current designation: Global CEO, Deloitte Touche Tohmatsu Ltd
Career: Deloitte US CEO (2007-11), Deloitte US managing partner (2003-07)
Education: Bachelor of Science (Brooklyn College, 1974), Doctor of Law
(Brooklyn Law School, 1977), Master of Laws, Taxation (NYU Law, 1981)
Interests: Family, travel, mystery novels, working with education-focused non-profits.
Contributor to LinkedIn Influencers blog.
For Deloitte Touche Tohmatsu, India is among the top-ten ‘priority markets’ and one of its “fastest growing”. Despite the country’s sluggish economic pace in recent times, the consulting major is bullish on the India growth story. In an interview with Forbes India, Barry Salzberg, global CEO, Deloitte Touche Tohmatsu says that he is optimistic about the fundamental core strength of the country and will continue to invest irrespective of the outcome of the elections.
Q. What is your view of the progress made by India recently in terms of economic reform?
I feel the economic reforms are taking hold. They cover a number of areas that I think are important. If we look back at the budget deficit (both trade and current) it’s in better shape than it has been. Inflation is a little bit better than it has been in the past. Some of the economic reforms that have been instituted, including reduction in government spending for example, contributed to that. So, looking from the outside in, it is reasonably positive, but of course, there is more to go. Even the thought about opening up some of the sectors is a good sign. I would say some of the policies and reforms have had a reasonably good impact on India.
Q. Are foreign investors concerned about the India story now? There was a time when India was the toast of the global investor community. Has that changed? How?
The growth that India has enjoyed over the years has recently slowed down a bit and it is easy to create a concern that maybe something is not right. But we are optimistic about India’s future and the question is why? I start with people, because they drive a lot of the success of a particular country. And India has a significant well-educated workforce, youthful demographics and a large consumer base with immense opportunity for additional growth and demand. The country is known for innovation and entrepreneurial spirit. Over the years there has been a significant improvement in the infrastructure of the country, but there is still a lot of opportunity for improvement. The country has a stable regulatory environment particularly in the financial sector. So, when you combine the demographics, entrepreneurialism, innovation, regulatory environment, consumer base and strong sectors like information technology that is here, there is reason to be optimistic. And it is the combination of all these factors that continues to give me reason to invest in India.
Q. What are the key areas of concern for you at Deloitte as far as investing in India is concerned?
To start with, the fact that economic growth has slowed down and so when growth slows down, our business tends to slow down. Not directly proportionately, but certainly if we were contemplating continuing material investments in India, we have to be concerned about the continued growth opportunity. Secondly, governance and oversight of corporate compliances-related activities is something we would look at and also infrastructure issues. These are examples of concerns, but we have overcome these challenges and have seen improvement in each of these areas. So, my concerns are there, but, I have concerns about every investment that I make. Overall I’m reasonably bullish.
Q. What are Deloitte’s priority areas for India?
First I would say is talent. Our business is a professional services business and we are all about people. Our success is dependent upon the number of people we hire and retain and performance by those people, quality and their development into leaders in the long term. Significant amount of investments that we are making in India is in hiring top talent across services. The next is the nature of businesses we are in. Till now we were heavily concentrating on audit with growth in our advisory and consulting businesses. Now we would like to focus on the advisory space and be able to expand the kind of services we provide to our clients. Third, where I see opportunity in future is to collaborate in the Indian market to help solve some social issues with regard to corporate responsibility.
Q. What is the roadmap for the firm as far as India is concerned?
Currently we have about 25,000 people in India across services including audit, consulting, tax, enterprise risk services and financial advisory. The India operation is not one of our top ten firms in terms of size, but it is one of our fastest growing. India is among the top five markets where we have invested the most significant amount of money within the Deloitte network.
For us to grow double digits in India we need to directly grow our professional client headcount. It isn’t necessarily linear; you can grow revenue without always growing your headcount proportionately. But, we would seek to grow our headcount meaningfully above the current 25,000 over the next six years. We are in the middle of redefining our 2020 strategy which would clearly cause investments of a different kind and focus over the next five to six years that would cause our headcount to go up. Q. The Indian growth story is showing signs of stress at a time when the US is gradually clawing back to the growth track. How do you see this playing out? Do you see foreign investment flows slowing down and global investments flowing back into the US?
It is good to see the US returning to stability and growth. If the US is stimulated, which is the biggest import market, it benefits the rest of the world, including India. I would say that India is attractive because of its vast market and human capital strength. So, countries like China and India would grow again at a nice pace and the combination of their growth and that in the US is a positive thing.Q. China is also showing signs of stress. How do you view that vis-à-vis India? Is the India-China story a thing of the past and is the global economic centre of gravity shifting back away from these two countries?
China and India are two separate markets and each has its own strength, potential and set of challenges. China is in the middle of policy reforms too. All indications are that those policy reforms could have positive effect on China’s growth, but they have other issues like rising wages and currency, issues on state-owned enterprise, declining working age population, just to name a few. But I do think that both China and India would return to reasonable growth. We are bullish on China too and our investments in the country have not been curtailed as a result of slowdown in China and some of the challenges the country faces. We are optimistic about both the countries and continue to invest. Q. How do you rate Indian corporations in terms of quality and global benchmarking? What are the areas of concern?
Looking at the broad population of companies in India, there are some world-class companies judging by the quality of leadership, trust that the investing community and stakeholders have in the company, expansion plans, acquisitions, transparency and corporate governance. I would say it stacks up well; however, there are, I’m sure as in every country, companies that don’t have these qualities. Those companies need to figure that out.Q. How would you rate Indian corporations in terms of the key parameters of governance and innovation?
On the corporate governance front, Indian companies have made meaningful progress, but I do think that there is much more room to go. On the innovation side, I think India is one of the role models worldwide, both in terms of creative ideas and business models. Also, in the entrepreneurial spirit, innovation thrives. India has a good experience in driving innovation and I would continue to be bullish on that. There is a lot for others to learn on that front. Q. The Indian government has recently laid down laws for corporate social responsibility. How do you see Indian companies complying with those?
I’m intrigued by the rules regarding mandatory corporate social responsibility [CSR]. I’m not sure if I have seen it too often anywhere else in the world. Fundamentally what the Indian government has done in this regard is intriguing to me. I’m optimistic and waiting with interest to see what it does to companies. From my vantage point, I think it should be good to help companies create policies, methodology for driving CSR, creating monitoring system to determine how effective they are in executing against their CSR areas. It is mandatory now because some companies were not engaged in proper level of activities. This was mostly to change that paradigm. Some people think that CSR is community service, for others it is gender diversity, ethical and proper governance behaviour. Frankly, I think it is all of the above. Q. What is the sense among foreign investors with regard to the general elections in India?
Whenever there is a change, potential change or uncertainty regarding an outcome, people are nervous in general. I don’t know what the result of the elections would be, but I think that there is always optimism, that whatever regime is in place for the term, things would improve both in terms of economy and business opportunities. People are just waiting to see the outcome and policies of the new government and its focus.
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(This story appears in the 02 May, 2014 issue of Forbes India. To visit our Archives, click here.)