The Elephants in the Room Hidden Risk and Opportunities in India Vol. 2 TABLE OF CONTENTS 1 The Asian Century Could Belong to India 2 John West, Director of Asian Century Institute 2 A Decisive Time for India’s Banking Sector 5 David Bergeron, Partner at Oliver Wyman, India Amit Deshpande, Principal, Oliver Wyman, India 3 Is India Overplaying its Demographic Dividend? 8 Ritesh Kumar Singh, Corporate Economist and former Assistant Director of the Finance Commission for India 4 Evading M&A Risks in Emerging Asia 11 Ashish McLaren, Director of Valuation Advisory Services at Duff & Phelps, Singapore 5 Robo Advisers: Why No Mass Adoption Yet? 14 Subhajit Mandal, Director at LumenLab, Singapore 6 Booming Health Care Industry in India is Not All Good News 17 Anupa Naik, Vice President, Employee Health & Benefits at Marsh India 7 How Can Asian Pension Systems Deal With Aging Populations? 20 David Knox, Senior Partner at Mercer Australia 8 Medical Tourism in Asia-Pacific Growing Rapidly 22 Bart Van den Mooter, Principle & Founder of TforG—an IQVIA company 9 Navigating HR Challenges in India 25 Shanthi Naresh, Senior Principal and Leader, Career Business for Mercer India Ruchika Pal, Principal, Career Business for Mercer India 10 How the IT Sector is Impacting India’s Real Estate 28 Abhinav Joshi, Head of Research at CBRE India Sachi Goel, General Manager of Research at CBRE India 11 South and Southeast Asia’s Infrastructure Steps Up 30 Abhishek Dangra, Director in S&P Global Ratings‘ Asia Pacific Corporate Ratings 12 Can India Become the Next Renewables Powerhouse? 33 Ron Somers, Founder and CEO of India First Group 13 Glaring Insurance Gaps in Asia-Pacific 35 Michael Owen, Head of GC Analytics—Asia-Pacific at Guy Carpenter 14 Infrastructure Activity in India: Shifting Tides 38 Patrick Adefuye, Head of Real Assets Products at Preqin INTRODUCTION The articles contained in this publication have been selected for the way in which they represent key economic and social issues which organisations in India have to contend with. India recently regained the title of being the fastest growing major economy after a period of uncertainty following major government led policy changes. There is some optimism that the reforms have laid the foundations for double digit growth in the future, but there are many challenges which need to be navigated by businesses along the way. This compendium collates knowledge and expertise from the world’s leading experts to provide practical and timely insights on the various risks and opportunities associated with India’s rapid economic growth and societal development. All articles first appeared on BRINK, the digital news service of Marsh & McLennan Companies’ Global Risk Center, managed by Atlantic Media Strategies, the digital consultancy of The Atlantic. BRINK gathers timely perspectives from experts on risk and resilience around the world to inform business and policy decisions on critical challenges. BRINK ASIA Compendium 1 ECONOMY THE ASIAN CENTURY COULD BELONG TO INDIA John West Executive Director of Asian Century Institute India has never managed to achieve the Indian economy has performed Google (Sundar Pichai) and PepsiCo three decades of 10 percent annual very well these past 25 years, (Indra Nooyi). Indian companies economic growth rates like China and the prospects for continued such as Infosys, Mahindra, Mittal, has. But in all its long history, India development may be very good. Reliance, and Tata have succeeded has never had a centralized regime famously in global markets. The like China has had for over 2,000 India is a country with huge Indian movie industry produces years, which could provide strong potential. For instance, Indians more films than any other country. political leadership. “No single who have migrated to the U.S. and And the Indian Premier League person can change India. You speak their descendants, on average, earn is the world’s most lucrative and 320 different languages,” once said $88,000 a year, compared to $66,000 popular cricket tournament. Singapore’s former Prime Minister for all Asian Americans and $50,000 Lee Kuan Yew. This diversity for Americans overall. Indian makes governance in India more success stories in the U.S. include the complex than in China. However, CEOs of Microsoft (Satya Nadella), 2 mmc.com THE COMPLEX INDIAN emerging power, is highly dependent There are strong on its enormous population. STORY reasons to be India has suffered from rising The Indian economy was, for many inequality like most Asian countries. years, a chronic underperformer. optimistic about Economists Jean Drèze and Amartya During India’s first four decades Sen observed that India looks “more of independence, the economy India’s future— and more like islands of California chugged along at the “Hindu rate of in a sea of sub-Saharan Africa.” And growth” of about 3.5 percent (or 1.3 the country could it is true that beyond the glitter of percent in per capita terms) from high-tech Bangalore, Bollywood the 1950s to the 1980s. Despite a well emerge as and Indian cricket, India remains a vibrant democracy, India’s economic rural country, with two-thirds of its Asia’s leading policies drew more inspiration from population living in the countryside. the socialism of the USSR than the However, it is also undeniable that power. capitalism of East Asia or the West. India has made immense progress. A financial crisis in the early 1990s triggered a wave of economic liberalization and reform. During RECENT DEVELOPMENTS the following 25 years, the Indian In the 2014 national elections, the economy has averaged 6.5 percent Bharatiya Janata Party—under annual growth and is currently the leadership of Prime Minister the world’s fastest growing large Narendra Modi—came to power. economy with a growth of around 7.5 Prime Minister Modi has been percent. India’s GDP per capita more leading the country for over four than tripled over this period, with years. His pro-business leadership the information technology sector and impressive reforms to date playing a leading role. helped India climb 29 positions to Thanks to India’s positive economic 100 out of 190 surveyed countries developments, the share of the in the World Bank’s Ease of Doing population living in extreme poverty Business ranking. The OECD (less than $1.90 a day) has more judges Indian policies to not be than halved over the past decade to “competition friendly;” however, around 20 percent. But this amounts it does note a positive trend for to some 270 million people who barriers to entrepreneurship and are still suffering in “Incredible trade and investment. There has India.” And despite this impressive been another positive trend in the achievement, almost 40 percent World Economic Forum’s Global of the Indian population is caught Competitiveness Report where, between $1.90 and $3.10 a day in after five years of decline, India has a situation of near poverty. The bounced back over the past two years Indian government desperately to 39th place out of 138. needs to raise more taxes to provide However, India’s human capital basic services to its citizens. In fact, development is hampered by one of the OECD reports that less than the worst education systems in Asia. 6 percent of Indians pay personal By some estimates, half of the Indian income taxes. population is functionally illiterate. India’s GDP per capita remains less Even at the elite level, not one Indian than half that of China and about university figures in the world’s top one-tenth of America’s. India’s 200. India spends next to nothing ranking as the world’s third largest on public health. Improving human economy, as well as its status as an capital will be critical for taking advantage of the half a billion young Indians who will enter the labor BRINK ASIA Compendium 3 force over the next decade. Already East” policy, these efforts are being economy is growing faster than more than 30 percent of Indian concentrated on the eastern side of China’s, a trend that could continue. youths aged 15–29 are not employed, the country, which is close to fast- Further, India’s population will pursuing an education or in training, growing Bangladesh and Southeast overtake China’s in 2022 and could highlighting the immense challenges Asia. Special economic zones be approximately 50 percent higher of reaping the demographic dividend and economic corridors are also by 2100—according to the UN— of its youth bulge. being developed. providing immense demographic dividends if human capital A major element that has been The timing is right for India to development is prioritized. lacking in India as compared with become an industrial power, East Asia has been the development as China is now suffering from In short, India is a slow burner of a strong manufacturing sector. increasing wages and investors such compared with China, but it is India’s manufacturing sector has as Japan are looking for new low- moving decisively ahead. The Asian been stuck at around 15 percent cost locations. This is where Prime Century could well belong to India. of GDP. Today, industrialization Minister Modi’s business-friendly could play an important role in policies are helpful. For example, the This article first appeared on India’s development, since it faces implementation of a national goods BRINK Asia on May 14, 2018. the challenge of creating jobs and services tax will help transform for masses of semi-skilled young a fragmented India into a common people entering the labor market market. The government has also and transforming this demographic liberalized some policies for FDI, bulge into a dividend.