India's Century: Opportunities and Challenges in the Path to Global Leadership

'To Realise India's Century, Need for a New Playbook'

"India can become central to a network of interlinked economies," McKinsey global managing partner Bob Sternfels told Vinod Mahanta in an interview, underscoring his belief in India's Century, his catchphrase from 2022."India can become central to a network of interlinked economies," McKinsey global managing partner Bob Sternfels told Vinod Mahanta in an interview, underscoring his belief in India's Century, his catchphrase from 2022. Alongside McKinsey India managing partner Rajat Dhawan, Sternfels spoke about opportunities for the country in a world of geopolitical flux, controversies, job losses and whether AI could disrupt the consulting business. Edited excerpts: India may be growing at 7-8%, but can that create jobs and sustainable livelihoods for the world's largest population of young people? Does India need a China-like growth model that invests heavily in manufacturing, real estate and infrastructure? Bob Sternfels: Two years ago, I spoke about 'India's Century' and I am more convinced than ever that it will become a reality. The key evolution in thinking is moving from aspiration that it should be India's Century to an acceleration that it will be India's Century, turning promise into delivery. India's path will be unique, integrating successful elements to create a distinct journey. There is much to celebrate, particularly in sustainable and inclusive growth. Investments in renewables rose 73% last year, and EV sales are projected to grow from 4% at the start of the decade to 60% at the end of the decade in India. Additionally, 100 million people are expected to become affluent, with 65% of the population moving towards the middle class this decade. Growth at 7% is the new norm and could be higher. The last two years have shown us enormous potential, but challenges remain. Youth unemployment for ages 20-24 is mid-40%, presenting a substantial reskilling challenge. Infrastructure has improved significantly, yet India spends only 3% of its GDP on it, compared to China's 9%. This raises questions about adequate investment for physical and digital growth. In R&D, India spends less than 1% of its GDP, while the global average is 1.8% and the US spends 3.5%. To realise India's Century, we must address reskilling, infrastructure, and R&D spending, focusing on quality to establish India as a benchmark in various sectors. India has to create a new playbook. Rajat Dhawan: India will forge a sustainable and inclusive growth path, which I would also describe as more balanced growth. This balanced model will have several key components. First, it will be consumption-led, particularly driven by digital consumption, supported by India's robust digital infrastructure, access, and payments systems. Second, it will be investment-led, focusing on infrastructure, renewables, and energy transitions. Third, there will be significant government spending and a strong emphasis on exports. This balanced approach contrasts with the China model, which was heavily dependent on exports and infrastructure investment, with less emphasis on consumption. India's path will integrate all these elements, leading to more stable and diversified growth. The third crucial piece is increasing overall productivity. To achieve a real GDP growth of 9-10%, only about 2.5 percentage points can come from labour pool growth, thanks to favourable demographics. However, the remaining growth must come from productivity improvements. How do you foresee factors like geopolitical tensions and shifting power dynamics influencing global business strategies and investment decisions in the next five years -- and can India benefit from these shifts? Sternfels: Absolutely, this is a pivotal moment for India to move from the aspiration of India's Century to its realisation. This transition offers India a chance to carve out a unique pathway. Rather than just diversifying away from China with strategies like China+1, India can position itself as a global connector, focusing on uniting the world. India can play a crucial role in rethinking and rebuilding resilient supply chains, becoming a major hub for manufacturing and logistics. Make in India can enhance global supply chain resilience. Additionally, India can link sources of capital with dynamic, consumption-led economic growth, creating economic bridges with the Gulf states, Central Asia, Southeast Asia and the US. By fostering these connections, India can become central to a network of interlinked economies. This role, defined by creating links and promoting collaboration, not only enhances India's global standing but also offers a unique opportunity for sustainable and inclusive growth, aligning with the broader vision of India's Century. Global CEOs say China is better on ease of doing business compared to India. Do you hear similar views in global boardrooms? Sternfels: It's getting easier, but it's still complicated. Let's be real -- operating in India requires stamina and resilience. We shouldn't kid ourselves -- no country offers friction-free growth. Every nation has its challenges, and we must acknowledge this. That said, we should celebrate the significant advancements India has made to facilitate business operations. However, in our quest to accelerate India's Century, we must recognise that there is still room for improvement. The current level of friction is not ideal, and there are numerous next-generation opportunities that can be addressed, likely through public-private partnerships, to make doing business in India even easier. By continuing to tackle these challenges, we can truly embrace a model of sustainable, inclusive, and balanced growth. While it is easier now, it's not easy enough yet. How has McKinsey's business in India performed? Sternfels: As I begin my second term, my goal is to connect with our clients and colleagues in India, reaffirming that India is a top global priority for McKinsey. Our India office is a top performer globally, excelling in multiple dimensions. We've transitioned from advising to partnering with clients, with India leading in performance-based arrangements. We remain committed to growing our India office, investing heavily to serve local clients and expand our global client capability network hubs. Dhawan: What we've built in India over the past 28 years has essentially been doubled in the last four years alone. The McKinsey ecosystem in India has evolved in a way that has further helped us differentiate the firm in India and solidify our position as the preeminent firm here. We were always leading, but the gap has widened even more. In the past few years, McKinsey has been under fire, whether it is working for authoritarian regimes or opioid-related work. In South Africa, it is facing criminal charges for corruption. Does the firm need a reorientation in terms of culture? Sternfels: As a global managing partner, it's essential to uphold the values that have sustained us for 100 years while reinventing ourselves. We emphasise humility and courage -- remaining humble yet boldly innovating and learning from our mistakes. We've invested nearly a billion dollars in risk and compliance. I've brought in experts from outside -- like the global compliance leader from Walmart and Apple's head of internal audit. In my second term, I focus on three key ideas: Distinctiveness over growth, unrivalled development, and global partnership. We aim to be better, not just bigger, turning down engagements that don't meet our distinctiveness criteria. We ensure our people grow more here than anywhere else, fostering continuous growth and humility. Despite rising nationalism, we remain committed to a global partnership, transcending borders and seeking the best talent worldwide. McKinsey has fired hundreds. Are these layoffs due to poor demand for consulting services in developed countries, cutting flab or performance-related issues? Sternfels: Just to be clear and on the record, we've taken steps to ensure an efficient operating model for our non-client-facing teams, similar to what we advise our clients. We reassessed these roles worldwide and reset that model. This approach is healthy and allows us to reinvest in intellectual property, R&D, and bringing our people together. On the client-facing side, we've maintained our commitment to meritocracy. Some aspects of this have become more public, which surprised some people, but we have always had ratings distributions and a clear policy in place. People come to McKinsey because of this meritocracy, where performance is rewarded based on merit. However, I want to emphasise that we are continuously working to ensure that our meritocracy is also inclusive. We've made significant progress to ensure that everyone, regardless of their profile or background, receives the same level of sponsorship and mentorship across the firm. Will AI disrupt consulting, or will consultants end up making more money from it than anyone else? Sternfels: Well, if you take a longer view, the consulting industry is nearly 100 years old. We invented it, and it has continuously disrupted itself. This continuous disruption is part of our DNA, and it's something we will keep doing. The latest disruption is generative AI, and those who don't embrace this change will disadvantage themselves. That's why we are leaning in so heavily on this front. We've assigned two of our top leaders, Ashutosh Padhi and Rodney Zemmel, to focus on reinventing ourselves through this process. BCG has been growing rapidly. Do you think McKinsey will be able to maintain its lead? Sternfels: I keep coming back to this notion of our true north. Our true north is not about growth; it's about distinctiveness. We're not focused on whether our growth rate is the fastest. Some competitors publish their growth rates, but we don't because our objective is to ensure that our work is better. At the end of the day, I am obsessed with making sure McKinsey is known for its distinctiveness, not for its growth. If we achieve that, everything else will fall into place. Our goal is to stand behind the quality and uniqueness of our work, providing unparalleled value to our clients. Fundamentally, we are not about our own success. Our mission is to help our clients succeed. When our clients are successful, we are successful. We don't seek the limelight; we want our clients to shine.

To realise India's century, need for a new playbook: Bob Sternfels, McKinsey global managing partner

McKinsey's Sternfels and Dhawan discuss 'India's Century,' focusing on sustainable growth amidst geopolitical flux, highlighting renewable investments and EV sales growth. Challenges include high youth unemployment, low infrastructure spending (3% GDP vs. China's 9%), and reskilling needs. Sternfels sees India as a global supply chain hub through 'Make in India' and economic bridges. Key areas include reskilling, infrastructure enhancement, and R&D boosts. Growth models involve consumption-led and investment-led strategies, supported by digital infrastructure and government spending. "India can become central to a network of interlinked economies," McKinsey global managing partner Bob Sternfels told Vinod Mahanta in an interview, underscoring his belief in India's Century, his catchphrase from 2022. Alongside McKinsey India managing partner Rajat Dhawan, Sternfels spoke about opportunities for the country in a world of geopolitical flux, controversies, job losses and whether AI could disrupt the consulting business. Edited excerpts: India may be growing at 7-8%, but can that create jobs and sustainable livelihoods for the world's largest population of young people? Does India need a China-like growth model that invests heavily in manufacturing, real estate and infrastructure? Bob Sternfels: Two years ago, I spoke about 'India's Century' and I am more convinced than ever that I will become a reality. The key evolution in thinking is moving from aspiration that it should be India's Century to an acceleration that it will be India's Century, turning promise into delivery. India's path will be unique, integrating successful elements to create a distinct journey. There is much to celebrate, particularly in sustainable and inclusive growth. Investments in renewables rose 73% last year, and EV sales are projected to grow from 4% at the start of the decade to 60% at the end of the decade in India. Additionally, 100 million people are expected to become affluent, with 65% of the population moving towards the middle class this decade. Growth at 7% is the new norm and could be higher. The last two years have shown us enormous potential, but challenges remain. Youth unemployment for ages 20-24 is mid-40%, presenting a substantial reskilling challenge. Infrastructure has improved significantly, yet India spends only 3% of its GDP on it, compared to China's 9%. This raises questions about adequate investment for physical and digital growth. In R&D, India spends less than 1% of its GDP, while the global average is 1.8% and the US spends 3.5%. To realise India's Century, we must address reskilling, infrastructure, and R&D spending, focusing on quality to establish India as a benchmark in various sectors. India has to create a new playbook. Rajat Dhawan:India will forge a sustainable and inclusive growth path, which I would also describe as more balanced growth. This balanced model will have several key components. First, it will be consumption-led, particularly driven by digital consumption, supported by India's robust digital infrastructure, access, and payments systems. Second, it will be investment-led, focusing on infrastructure, renewables, and energy transitions. Third, there will be significant government spending and a strong emphasis on exports. This balanced approach contrasts with the China model, which was heavily dependent on exports and infrastructure investment, with less emphasis on consumption. India's path will integrate all these elements, leading to more stable and diversified growth. The third crucial piece is increasing overall productivity. To achieve a real GDP growth of 9-10%, only about 2.5 percentage points can come from labour pool growth, thanks to favourable demographics. However, the remaining growth must come from productivity improvements. How do you foresee factors like geopolitical tensions and shifting power dynamics influencing global business strategies and investment decisions in the next five years -- and can India benefit from these shifts? Sternfels: Absolutely, this is a pivotal moment for India to move from the aspiration of India's Century to its realisation. This transition offers India a chance to carve out a unique pathway. Rather than just diversifying away from China with strategies like China+1, India can position itself as a global connector, focusing on uniting the world. India can play a crucial role in rethinking and rebuilding resilient supply chains, becoming a major hub for manufacturing and logistics. Make in India can enhance global supply chain resilience. Additionally, India can link sources of capital with dynamic, consumption-led economic growth, creating economic bridges with the Gulf states, Central Asia, Southeast Asia and the US. By fostering these connections, India can become central to a network of interlinked economies. This role, defined by creating links and promoting collaboration, not only enhances India's global standing but also offers aunique opportunity for sustainable and inclusive growth, aligning with the broader vision of India's Century. Global CEOs say China is better on ease of doing business compared to India. Do you hear similar views in global boardrooms? Sternfels: It's getting easier, but it's still complicated. Let's be real -- operating in India requires stamina and resilience. We shouldn't kid ourselves -- no country offers frictionfree growth. Every nation has its challenges, and we must acknowledge this. That said, we should celebrate the significant advancements India has made to facilitate business operations. However, in our quest to accelerate India's Century, we must recognise that there is still room for improvement. The current level of friction is not ideal, and there are numerous next-generation opportunities that can be addressed, likely through public-private partnerships, to make doing business in India even easier. By continuing to tackle these challenges, we can truly embrace a model of sustainable, inclusive, and balanced growth. While it is easier now, it's not easy enough yet. How has McKinsey's business in India performed? Sternfels: As I begin my second term, my goal is to connect with our clients and colleagues in India, reaffirming that India is a top global priority for McKinsey. Our India office is a top performer globally, excelling in multiple dimensions. We've transitioned from advising to partnering with clients, with India leading in performance-based arrangements. We remain committed to growing our India office, investing heavily to serve local clients and expand our global client capability network hubs. Dhawan: What we've built in India over the past 28 years has essentially been doubled in the last four years alone. The McKinsey ecosystem in India has evolved in a way that has further helped us differentiate the firm in India and solidify our position as the preeminent firm here. We were always leading, but the gap has widened even more. In the past few years, McKinsey has been under fire, whether it is working for authoritarian regimes or opioid-related work. In South Africa, it is facing criminal charges for corruption. Does the firm need a reorientation in terms of culture? Sternfels: As a global managing partner, it's essential to uphold the values that have sustained us for 100 years while reinventing ourselves. We emphasise humility and courage -- remaining humble yet boldly innovating and learning from our mistakes. We've invested nearly a billion dollars in risk and compliance. I've brought in experts from outside -- like the global compliance leader from Walmart and Apple's head of internal audit. In my second term, I focus on three key ideas: Distinctiveness over growth, unrivalled development, and global partnership. We aim to be better, not just bigger, turning down engagements that don't meet our distinctiveness criteria. We ensure our people grow more here than anywhere else, fostering continuous growth and humility. Despite rising nationalism, we remain committed to a global partnership, transcending borders and seeking the best talent worldwide. McKinsey has fired hundreds. Are these layoffs due to poor demand for consulting services in developed countries, cutting flab or performance-related issues? Sternfels: Just to be clear and on the record, we've taken steps to ensure an efficient operating model for our non-client-facing teams, similar to what we advise our clients. We reassessed these roles worldwide and reset that model. This approach is healthy and allows us to reinvest in intellectual property, R&D, and bringing our people together. On the client-facing side, we've maintained our commitment to meritocracy. Some aspects of this have become more public, which surprised some people, but we have always had ratings distributions and a clear policy in place. People come to McKinsey because of this meritocracy, where performance is rewarded based on merit. However, I want to emphasise that we are continuously working to ensure that our meritocracy is also inclusive. We've made significant progress to ensure that everyone, regardless of their profile or background, receives the same level of sponsorship and mentorship across the firm. Will AI disrupt consulting, or will consultants end up making more money from it than anyone else? Sternfels: Well, if you take a longer view, the consulting industry is nearly 100 years old. We invented it, and it has continuously disrupted itself. This continuous disruption is part of our DNA, and it's something we will keep doing. The latest disruption is generative AI, and those who don't embrace this change will disadvantage themselves. That's why we are leaning in so heavily on this front. We've assigned two of our top leaders, Ashutosh Padhi and Rodney Zemmel, to focus on reinventing ourselves through this process. BCG has been growing rapidly. Do you think McKinsey will be able to maintain its lead? Sternfels: I keep coming back to this notion of our true north. Our true north is not about growth; it's about distinctiveness. We're not focused on whether our growth rate is the fastest. Some competitors publish their growth rates, but we don't because our objective is to ensure that our work is better. At the end of the day, I am obsessed with making sure McKinsey is known for its distinctiveness, not for its growth. If we achieve that, everything else will fall into place. Our goal is to stand behind the quality and uniqueness of our work, providing unparalleled value to our clients. Fundamentally, we are not about our own success. Our mission is to help our clients succeed. When our clients are successful, we are successful. We don't seek the limelight; we want our clients to shine.