We should not get mixed up between protectionism and nationalism: KPMG India CEO

In an interview to Forbes India, Arun Kumar, 65, chairman and CEO, KPMG India talks about the growing Indian economy, and the future of the consultancy firm in the country. Edited excerpts:

Q. How do you gauge the mood of business in India vis-à-vis the global scenario?
Almost every part of the world seems to be experiencing some growth at this time. India is going to benefit from it, and will be a contributor too.

I sense a fair amount of optimism in India. It is driven by increased consumer spending and spending on infrastructure. A year or two ago, there was general overcapacity in the private sector, and lack of lending from banks.

With growth in demand, it looks like there is relief in the overcapacity, which means it’s time for an investment cycle to start again. And as banks begin to resolve their non-performing assets and leverage problems, you can imagine a confluence of good events.

Q. How do you rate the government’s reforms to make business easier?
I definitely see a big focus on ease of doing business. An important measure has been the bankruptcy code. It brings the whole resolution process into the 21st century. That may not be widely appreciated, but it’s important. Also the ability to move the Commercial Dispute Resolution forward and [the implementation of] Goods & Services Tax, which is such a fundamental reform.

Q. What are India’s key strengths?
We have to maintain our growth momentum. If you look at the size of the Indian economy, it is $2.5 trillion, which is the same as the United Kingdom’s. Next year, we’ll surpass the UK’s economy, in dollar terms. That is going to create more demand; that’s going to have its own dynamic of fuelling further growth and we should just make sure that we keep the momentum going.

Q. What are the pain points we need to work on?
There are many pain points—skills development, quality of education are areas that need to be addressed. When you need to grow an economy of this size, you need a steady flow of extremely qualified people. We have a lot of people graduating, but not everybody is employment-ready. So skills development is a major area.

Q. What do you think about the current global atmosphere of protectionism?
It is a great concern; particularly distressing coming from the US. I was working with an administration [Kumar was director general of the US and foreign commercial service in the Barack Obama administration] that was focussed on having more common international rules of trade, reducing barriers, and addressing issues of the digital economy because a lot of trade now is not physical.

Yes, many of these areas could be improved because some of the agreements are 20 years old and need to be revised. But I’m not sure how approaching this with a protectionist point of view is in anybody’s interest.

Q. Will this impact Indian IT companies?
Indian IT companies today are embedded in the global competitive economy. It is not going to be easy to disembed them. The small body-shopping [firms] will be affected. But the big companies that provide services and solutions are now a part of the competitiveness of their clients. They are deeply embedded. So I wouldn’t worry too much.

Q. Protectionism and nationalism are going hand in hand. From an Indian point of view, is it a concern?
India needs to be a little careful because it is a beneficiary of globalisation. We should not get mixed up between protectionism and nationalism because it is in the national interest to have more global engagement. India has benefited since 1991 with increased global engagement.

Look at the Indian companies that are successful globally in a number of areas. It’s not just the bigger companies that you hear about. Nowadays I speak to so many medium-sized enterprises that have successfully executed global strategies.

Q. KPMG has been in India for 25 years. How do you compare with your peers?
We have a competitive market. The Big Four [Deloitte, PwC, EY and KPMG] and other advisory firms compete across the globe. I’m not obsessed about being the biggest.

We want to be the best at what we do. We don’t want to do everything. Our clients should feel that they can get the best solutions in the areas that we are focussed on.

Right now we have a strong presence in the financial services space. Another area of focus is what we call ‘special situations’, such as non-performing assets and the whole spectrum from resolution to restructuring. Also cybersecurity.

We have added significant talent in the corporate finance and mergers and acquisitions space too. We have reorganised it to bring all the skills together, whether it’s banking or transactions, support or tax. And [services to facilitate project funding for] government and infrastructure.

Q. Of late we have seen auditors resigning from companies because they were not satisfied with the quality of information coming from the entities. Should auditors be bailing out or is there another way?
I don’t know whether it’s called bailing out. If an auditor feels that they are unable to deliver a successful audit, under various circumstances, I think that’s what they’re saying.

Q. How do auditors balance chasing revenue targets with reporting with fairness?
You cannot have revenue issues cloud the auditors’ judgement or their decisions. On one hand, we need to be in business. If you don’t have revenues, you cannot be in business. However, the ‘quality’ of revenues is critical. One’s got to be thoughtful about what revenues one is interested in.

Q. What is your vision for KPMG for the next 25 years?
Our vision is to serve both large and medium-sized companies, to be a part of the India growth story, to help Indian companies go global, and have global companies come and succeed in India. I would want us to be leaders in that. We should do it through our culture, where our people feel empowered, enjoy their work, and collaborate. That’s the kind of company we’re trying to build.

We have done a lot of things [internally] to become more client-oriented. Encouraging collaboration is one of the most important things we focussed on last year. That will be the story going forward.

“Revenue issues cannot cloud the auditors’ judgement or their decisions; the ‘quality’ of revenues is critical.”