INDIA AND CHINA ARE STRONG ECONOMIES

Aman Dhall & Amit Sharma, February 15, 2009
The Economic Times

Naina Lal Kidwai, Hongkong and Shanghai Banking Corporation’s group general manager and country head of India, was in New Delhi last week for the launch of 'Indian Summer', a six-month-long exhibition at the British Museum starting May to explore Indian culture.

The 51-year-old shares her thoughts on, among other things, how the Satyam fiasco could have been averted and the lessons in corporate governance that the episode teaches.

When do you expect the revival of the world economy? Which countries do you feel would see this first?

The whole world's economy is in turmoil and there is no sign of revival right now, at least in the West. The general vision is two years. Our economist predicts an upturn in the Indian economy as early as October this year. And mind you, our economist has always been a bear!

India and China are strong economies. We have GDP growth of 7% and we are fortunate enough to be able to protect ourselves from the carnage. At the same time, the resilience of the US is laudable in the way that the world's largest economy is trying to fight the crisis. I feel that as the dollar becomes cheaper and labour costs come down, emerging markets such as India, Indonesia and Vietnam will be pockets of growth.

India's challenge lies in investing in projects that we need for domestic consumption. For example, our energy policy needs to be clearly defined; more energy efficiency techniques need to be brought in. Imagine, the validation business alone can employ a lot of people. We have the people and the infrastructure to make things happen, we only need to make sure that the quality of the output does not drop.

Do you think the Satyam fiasco could have been avoided?

The Satyam case has impacted a number of people who trusted the company including its employees and stakeholders. With hindsight, I feel that we all need to be sharper in analysing such things.

The number of suitors for Satyam shows that it is very much a viable story. I was impressed by the way the agencies and the government acted on the Satyam episode. That is more important and shows the right intent.

What's your opinion on the Indian corporate governance standards?

The episode indicates that the corporate governance regulations in India are solid. We have Indianised the best corporate governance practices from around the world. The issue is not regulation but companies following the spirit of corporate governance. Companies need to become sustainable and good community players.

History shows that stock markets reward companies with good corporate governance practices. As investors, we need to get savvier and start looking at companies’ sustained performance over the long-term rather than scanning the quarter-to-quarter results.

What are the positives you see the current slowdown? What have been your key takeaways from the last 14 months?

The slowdown has harmed everyone but at the same time, it does have some lessons to teach. For one, it teaches companies not to fritter away their capital in buying companies that are not from their sector of core competence.

I also feel that in the downturn, the golden rule of coming back to basics is going to be glaringly obvious. Everyone has to focus on operational improvement, cash reserve, priority, future and leadership. It is a good time to hire top talent at reasonable prices. Talent that had been unaffordable in a booming economy is getting increasingly affordable and that is a good thing for recruiters.

The slowdown will test the resilience of the Indian industry. India has done well in every downturn and for every failed enterprise; there are also some success stories to boast of. Time has come for companies to rise up to the challenge and prove themselves.