Ram Charan is a highly sought after business advisor, speaker and writer. Famous among senior executives for his uncanny ability to solve their toughest business problems, he is well known for providing advice that is not only down to earth but also takes into account real-world business
complexities. He spoke to HT on a range of leadership issues. Excerpts:
The Indian economy is going through a period of slowdown and uncertainty? What advice would you give to India's leaders?
Top financial administrators in India's finance, commerce and external affairs ministries need to hammer out an efficient system of coordination for effective policy-making that is consistent and is aimed at attracting greater foreign direct investment (FDI). In India, it is important for these three ministries to co-ordinate more along with active collaboration with the Reserve Bank of India (RBI). No country can really grow without having FDI, because FDI brings in capabilities. It is important for India's political and economic leaders to make it clear that it is not going to have inconsistent policies. A lot of questions were raised about India's policies in board rooms of foreign companies after the government had announced a proposal to impose retroactive taxes (on corporate mergers and acquisitions). Leaders should realise such moves cause a lot of harm to a nation's image.
What are the challenges that leaders face in the current period of economic uncertainty?
Turbulent times have been here before. Leaders in business, government and politics have faced this before. There is nothing new about the challenges that leadership faces. But there are some things that are different. The size of the world economy is $70 trillion and, despite the slowdown, it is expected to grow at 3% per annum, adding about $2 trillion. The bigger question to ask is: Who is getting a greater share of that $2 trillion?
What are the causes of the current turbulence?
It is important to first know the causes of turbulence. It is absolutely critical to realise that less than 100 leaders in the world of finance have caused this meltdown and instability in the global financial system. Alan Greenspan, the former US Federal Reserve chief, admitted that he did not understand the complex derivative instruments that finally caused the meltdown. Therefore, there is a growing need to see the world through multiple lenses.
What would you advise India's leaders vis-à-vis China?
India's policymakers should wake up to the rising concern about a growing trade-deficit, especially with China. India's extremely large trade deficit with China can worsen in the coming years. This is not a good sign. It is a must to balance growth with liquidity, in fact, it is absolutely essential to build liquidity. Those who have the money call the shots. We need to set a target for achieving a positive trade surplus. That is really going to put us on the world economy's map. Leaders, both in business and in the government, need to market India with a more targetted approach.
Does the speed, or the rather the lack of it, of decision-making by India's leaders bother you?
The speed of change will continue to remain high. Leaders in business and government need to wake up to the fact that there is accelerated competition among nations and also to the fact that digitisation and the use of algorithms are changing the composition of the world GDP. Digitisation is destroying industries, but also creating opportunities for entrepreneurs. It will eventually boil down to how good is our decisiveness and it has to be high quality decisiveness. It is important to remember that businesses don't compete, leaders do. In China there is decisiveness and there is speed in the execution of decisions. The differential in quality of decisiveness and the speed of execution will be a key determinant for India's growth. Temperament is very important. Remember, you can't clap with just one hand. We need to figure out how to do things together. That is why public-private partnership is important.
You have worked more than 35 years behind the scenes with top executives at some of the world's most successful companies. What lesson would you give to small and medium entrepreneurs, who form the core of India's manufacturing sector?
We need to ask whether we are focussing enough on small and medium enterprises (SMEs), because these are the ones that are going to generate additional employment. It is important for us to nurture these enterprises.