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Full Potential Revival & Growth

Charting India’s medium-term journey

The disruption caused by the COVID-19 pandemic is an exogenous shock for the Indian economy. But this can also be a transformative moment for India as it presents the opportunity to redefine our business ecosystem, rethink our approach to growth, and reconfigure our economy.

Our report, ‘Full Potential Revival & Growth - Charting India’s medium-term journey’ outlines key themes and an execution approach in nine core sectors that can revive and grow the economy in the medium term. The report is based on interviews with business, public sector and citizen leaders, sectoral analysis, and a country-wide survey. It concludes that by removing frictions that have hampered growth historically, through joint action, convergence between sectors and institutions, creation of enabling platforms, a fast revival and subsequent higher growth is possible. This requires a Full Potential Mindset in organisations, citizens and leaders.

Decoding the impact of Covid-19 on India Inc and understanding the new emerging paradigm - PwC India

Full Potential Mindset

"Hidden possibilities in an individual, organisation or a country not understood before. Potential brought to light through a new event, shock or sudden change in circumstances".

of companies who say significant value was destroyed in their latest acquisition lost more than 10% of key employees following the transaction.

of buyers whose acquisition created value say they prioritised value creation from the start.

of buyers surveyed who say their latest acquisition created significant value also say it was part of a broader portfolio strategy rather than opportunistic.

Full Potential Revival & Growth - PwC India

Demand
- Engaging all sections of society: Identify shift in consumer mindset; renewed focus on middle class; adopt digital front-ends to drive demand
- Stimulus, decentralisation and infrastructure: Decentralisation of demand; stimulus support; digital and physical infrastructure
Supply
- Shift in operating model: Digital operations; work from anywhere
- Supply chain re-arrangements: Shift of global supply chains; digital supply chains; self-reliance and localisation
Resources
- Natural, financial and data capital: Unlock land and other natural resources; mobilise savings potential; harness full potential of data
- Human and cultural capital: Edu-tech to drive skilling and employment; focus on decentralised employment; mainstreaming cultural strengths
Institutions
- Reforms and governance: Undertake land, labour and infrastructure reforms; become more easy to do business with; foster trust among government, enterprises and citizens
- Sustainability: Focus on environment sustainability; performance measures

The crisis created by the pandemic is being experienced by 1.35 billion Indians; this experience can also trigger joint action.
There is a realisation across all segments, sectors and geographies that by working together, using technology platforms and our vast human resources, rapid revival and subsequent growth is possible.
The whole-of-society approach using platforms for resource efficient revival needs to be considered both within and across organisations.
Using the power of collaboration and relevant data will help bring about reconfigurations towards medium-term shifts, while deploying less resource and enabling faster revival and growth.

By removing frictions exposed by the COVID-19 crisis, and deepening, widening and heightening the economy, India could get back on an even keel faster. Further digitalising and formalising the economy, will make it more productive.
If USD 2.9 Tn was the annual base economic capacity of India at the beginning of the crisis, then returning to that base is just the first goal.
A second, more important ambition is to unlock the country’s full potential so that its post-revival growth is faster. Removing frictions to fast track key activities over the next 3 years can create a growth rate of 9% as an ambition.
Executing this entails that each one of us, as an organisation, citizen, or leader, has a full potential mindset to adapt and realign with the new normal. Some organisations may have to restart, while remaining need to rethink and reconfigure themselves for faster economic revival and growth.

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Executive summary

Demand

Economic activity in India is concentrated within select states of the country. States within the northern, western and southern parts of the country contribute to 70% of the GDP with 48% population. This indicates an opportunity to ‘deepen’ and ‘widen’ demand towards the hinterlands of the country. A gradual decentralisation in demand, however, has been underway before the pandemic. A greater economic resilience, lower pandemic impact, and stimulus support along with reverse migration could further accelerate this shift in the medium term.

Create value

Supply

Triggered by the pandemic, organisations are focusing on reconfiguring their global supply chain diversification to build resilience and diversify risks. India, with 18% of global population, contributes to 3% of the global manufacturing output. India now has an opportunity to focus on enhancing its industrialisation intensity to become self-reliant and thereby also strengthen participation in global trade.

Protect value

Resources & Institutions

COVID-19 has propelled us to reimagine the importance of data for solving real life problems. Creation of data cooperatives with voluntary pooling of data by citizens, enterprises and government can unlock the true potential of data by enabling insight and action.

A triangle of trust between citizens, enterprises and government has the potential to break ideological barriers. It can result in building synergies through collaboration that offer unprecedented avenues helping India in faster economic revival and growth. This crisis has provided an opportune time to cement this triangle of trust by creating a common goal that benefits the nation.

Protect value

Sectors

Consumer & Retail

Healthcare and Pharmaceuticals

Logistics & Infrastructure

Power and Mining

Automotive and Industrial Products

Financial Services

Technology and Education

Government

Agriculture

MSME

Consumer & Retail

Five key themes driving revival and growth in the Consumer and Retail sector in the medium term are:

Shift in consumer behaviour in the new normal
Decentralisation of demand with higher contribution from semi-urban and rural centres
Digital front-ends for interacting and servicing customers
Accelerated adoption of digital technologies across the value chain
Re-evaluation of retail portfolio and consumer experience

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Healthcare and Pharmaceuticals

Five key themes driving revival and growth in the Healthcare and Pharmaceuticals sector in the medium term are:

Increase in adoption of virtual care
Health expense coverage for the missing middle class
Self-reliance in Active Pharmaceutical Ingredient (API) manufacturing
Increase in data collaboration and analytics
Creation of a pharma innovation ecosystem in India

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Logistics & Infrastructure

Five key themes driving revival and growth in the Logistics & Infrastructure sector in the medium term are:

Shift to multi-modal transport to reduce logistics costs and dependencies
Increased private-sector investment in infrastructure by overhauling risk management
Data collaboration and protection efforts to reduce information asymmetry and inefficiencies in logistics
Accelerated adoption of digital technologies across an integrated logistics value chain
Institutional and governance reforms in factors of production critical to drive and sustain growth

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Power and Mining

Five key themes driving revival and growth in the Power & Mining sector in the medium term are:

Shift in consumer behaviour (Prosumers) and increased empowerment due to front-end digitalisation
Increased power demand due to decentralisation, stimulus and flagship government programmes
Need for power procurement strategy to be in sync with demand requirements across regions
Self-sufficiency to enhanced focus on effective utilisation of India’s natural resources
Improved revenue assurance and operational efficiencies to overhaul distribution companies (DISCOMs)

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Automotive and Industrial Products

Five key themes driving revival and growth in the Automotive and Industrial Products sector in the medium term are:

Opportunities in global supply chain rearrangement driven by risk diversification
Shift in consumer behaviour in medium-term due to health and economic reasons
Accelerated adoption of digital front-ends for interacting with and servicing customers
Decentralisation of demand in hinterland driven by migration, stimulus and relative insulation
Data as a critical asset to drive growth by improving customer and process levers

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Financial Services

Five key themes driving revival and growth in the Financial Services sector in the medium term are:

Catering to the ‘needs’ of the lower class and MSME sector through formal credit
Easy access to ‘credit’ for the middle class through incentives, regulatory and new products to cater to their ‘wants’
Shift from risk-averse mindset by tackling regulatory and psychological barriers across Financial Services
Data interoperability, transparency and reliability to simplify risk and process agility
Drive long-term finance market by easing regulations and managing project risks

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Technology and Education

Five key themes driving revival and growth in the Technology and Education sector in the medium term are:

Demand acceleration due to high digital adoption across sectors and their value chains
Decentralisation of adoption as demand deepens in the hinterlands
Increasing penetration of infrastructure to boost demand for ed-tech
Reforms and regulations to enable accelerated growth
Acceptance of work-from-anywhere (WFA) model enabled by structural changes

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Government

Seven key themes driving revival and growth in the Government in the medium term are:

Accelerated digitalisation of government services
Infrastructure to meet decentralised demand
Focus on mobilising land as an asset for capital generation
Adoption of data cooperatives for unlocking data potential
Shift focus on hotspots of reverse migration for employment
Fast track land, labour and infrastructure reforms
Reforms to improve ease of doing business

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Agriculture

Six key themes driving revival and growth in the Agriculture sector in the medium term are:

Growing market demand for better traceability
Increase in labour productivity in agriculture sector
Predictive models and technology to improve crop yield
More collaboration b/w government and enterprises to increase spend on R&D
More efficiency in extension mechanism for dissemination of information to farmers
Effective water management by use of technology for driving sustainability

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MSME

Five key themes driving revival and growth in the MSME sector in the medium term are:

Increased adoption of digital channels to enable formalisation
Removing frictions in the last-mile credit delivery
Potential of data to ease current MSME-related frictions – access of credit, growth
Focus on creation of localised employment
Fostering a business-friendly environment

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believe there is room for improvement when presenting upside opportunities to buyers.

of those who say their last divestment created significant value also carried out sell-side due diligence.

of divestors surveyed believe they could drive more value from a sale by engaging with the management team more closely.

In addition to interviewing leaders from enterprises, government, entrepreneurial and societal sectors, we also administered a survey of 1,500 citizens in June 2020 across metros, urban, semi-urban and rural India covering ~35 questions pertaining to current and medium-term impact of the pandemic. Most of our study participants (~50%) were working youth in the age group of 18-26. We also captured a wide profile of people in business – women entrepreneurs, private businessmen, agriculture-focused businesses, MSMEs and government employees, amongst other professionals (Figure 1).

These participants clearly highlighted COVID-19’s detrimental impact on their income levels, with almost 79% stating that their current income levels have been impacted. Most highly impacted respondents came from metropolitan and urban (60%) areas, while respondents from semi-urban and rural areas were relatively better off (Figure 2).

However, despite this impact, majority of the respondents (52%) were hopeful of an economic recovery within the next 12 months, while 36% believed a recovery within 2 yrs. (Figure 3). This optimism permeates in their view that the crisis can pave way for better digital enablement, collaboration, reforms and improved focus on the common man.
A large number of respondents see this as an opportunity to shed past behaviours, plug key frictional gaps and lay a strong foundation for full potential recovery and growth.

Voice of the nation

Client
speak

“Governments need to find ways to improve their asset utilisation; municipalities, for example, need to improve utilisation of empty schools and idle real estate during and beyond this crisis period.”

- Amit Chandra, Chairman, Bain Capital India Office

Full-potential-revival and growth

Our research has found that given the chance to do the deal over again, two-thirds of dealmakers admit that, more than anything else, value creation would be a priority right from the start.

30% of organisations say they prioritised rebranding on Day One – something that all but 2% later admit should not have been a priority. Of course, branding is important, but it is more important that the business behind the brand is built on a sound, strategic plan.

What were your priorities on Day One and what should they have been?

Reinventing the future

This is a transformative moment for India. Returning to USD2.9 Tn, the annual base economic capacity of India at the beginning of the crisis, is just a first goal. The more important ambition is to unlock the country’s full potential so that its post-revival growth is faster. By removing frictions exposed by the COVID-19 crisis, and deepening, widening and heightening the economy, India can get back on an even keel faster. By further digitalising and formalising the economy, the country can make the economy more productive. Holding a mindset of ‘full potential’ will spur leaders to use this crisis to remove frictions, at speed, in any organisation or institution for greater overall economic output thereafter.

Full Potential Revival & Growth

Demand

Supply

Resources & Institutions