Did India’s business leaders misjudge the current slowdown?

India’s business leaders are a puzzling lot. They have been telling us all is well in their recent annual reports and have rated every budget, every policy highly. And suddenly quite a few are shouting that nothing is well and clamoring for immediate stimulus.

Sudeep Khanna of Mint writes this scathing piece on Indian business leaders:

For years, Indian business leaders have been generous in their rating of the domestic economy even while holding out visions of a bright future for their companies.

Well, the future is here and it is not pretty. All the relevant indices of economic growth are blinking an alarming red and the optimism of the past has given way to despair. None of this is news, nor can business leaders protest that they have been caught by surprise. Yet, for some reason, corporate chieftains have been sending signals that negate the reality on the ground.

A 2017 PwC survey, “Inside the minds of CEOs in India”, reported that 71% of India’s CEOs “are very confident of their company’s prospects for revenue growth over the next 12 months as opposed to 64% in the previous year”. As late as June 2018, for KPMG’s fourth annual India CEO Outlook, 91% of the 125 CEOs surveyed said they were confident about their company’s growth prospects, while 81% were confident about the growth of the industry they are a part of.

The contradictory messages that emerge from such surveys are truly baffling. Just a year on from such surveys, many of the same CEOs are decrying the lack of demand in the economy and asking the government for a stimulus. Are we to assume that India Inc.’s denizens speak with a forked tongue or that they don’t have a surer grip on the business environment?

Indeed, the real surprise is why they are shocked at the economic slowdown that is upon us and is now acquiring menacing proportions. After years of insisting that they are okay, barring a slight loss of pace thanks to demonetization and the GST flap, they have set upon the alarm bells with ferocity.

What makes this ostrich-like behaviour truly bizarre is that, like a gathering storm whose fury is visible long before it unloads its havoc, this slowdown has been in the works a long, long time.

This is nothing new though. All across India’s business history we see this repeat. They rarely call “a spade a spade” and praise whoever is in power. Only when things hit the ceiling, suddenly they change ways and cry together….

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