Siddhartha Roy (Economic Adviser to Tata Group) “Mauritian entrepreneurs have very important linkages in Africa”

BUSINESSMAG. You are the economic adviser of Tata Group. Tell us more about this group.

Tata is a $ 100 billion group which is present in several economic sectors namely steel, engineering including automobile, chemicals, power, ICT, hotels, retailing and financial services. As the economic adviser, my responsibilities are to look at all the economy related issues on which the board of directors needs to be informed.

Secondly, each company under Tata Group would be having its own issue which could be in the area of automobile or in a particular segment of an industry. These could relate to the change in demand pattern and also looking at new products. My job also consists of advising the Tata companies and trade bodies on the developments relating to regional trade agreements and World Trade Organisation.

BUSINESSMAG. Do you feel that with the global crisis companies tend to have on board more and more economists?

Not really. For example, at Tata Group we have an economic department since 60 years. Since then activities have become more consolidated and diversified. One thing that I must mention is that apart from the fact that it is a $ 100 billion group, it is considered to be the most respected business group in the country.

BUSINESSMAG. What does it take for a large group like Tata to improve its competitiveness?

Tata essentially is a conglomerate. We know that there have always been talks about whether a company should focus on its core business. But if you look at the emerging countries you will see that the holding company structure as well as the conglomerate structure occasionally provides you with an internal capital market.

There is also a synergy that is created through the various activities of the group and this would not be possible if a company is focusing on one segment only. So when you look at conglomerates in countries like in India, Mexico, Brazil and Turkey, you will find conglomerates that have a major role to play at every stage of development of a country.

BUSINESSMAG. In the face of the global crisis we are seeing that more and more companies are restructuring their operations to become more focus.

One thing we must keep in mind is that that each company is independent within a holding company set up. So each company is focusing on a core business. It is only at the apex level that there is connectivity.

“If the western economies can cure themselves it will add a couple of percentage of growth to the Asian and African economies because the demand will go up and exports also.”

BUSINESSMAG. As an economist how do you evaluate Asia’s economic performance in the global downturn?

If you look at what has happened in Asia since the 2008/2009 meltdown you will find that Asian economies are doing reasonably well. The two largest economies which are India and China also continue to grow reasonably well and the average growth rate of the region excluding Japan is around 5.5%.

Although all these talks on the slowdown, China will be growing by more than 7% and India will grow by about 5.5 to 6%. What I am saying is that this is not a bad performance for such large economies.

Looking at the long run you will see that most of them have very solid base of domestic savings. Take a country like India. It has a domestic savings of around 32% of GDP which in good years can go up by a couple of percentage points. If you get FDI inflow to the tune of 2 and 2.5% then the growth can be even better because the overall investment will be about 34.5% and in the good years it could go up to 36%. I think that a growth rate of 8 to 9% for India in the long run is not a problem.

BUSINESSMAG. Some analysts believe that the global recovery will be driven by the emerging economies. Do you share this view?

The recovery has to take place in the countries which are facing the problem. They have to grow their demand and output. We are seeing the effect of the problem in the west or in advance countries in other emerging and developing countries but the problem has not started in Asia or Africa. The problem is elsewhere so the solution has to be elsewhere.

In fact, if the western economies can cure themselves it will add a couple of percentage of growth to the Asian and African economies because the demand will go up and exports also.

BUSINESSMAG. So you don’t believe that countries like India and China will be the engines of growth?

They will be the engines of growth. That question is beyond doubt. But the real issue is the countries that have a problem need to find the solution themselves because we could be the engine of growth but how are we going to help the economies of Greece, Spain, and Italy?

BUSINESSMAG. What about Africa and its role in the global economy in coming years?

With the rise in purchasing power across Africa, African countries are going to provide the next trajectory of growth. As you are aware many of the economies on the African continent are growing by about 5% and there is also a lot more economic and political stability. There is also a growing focus on infrastructure development.

BUSINESSMAG. Mauritius pitches itself as bridge between Asia and Africa. How do you think it can benefit from the growing interest for Africa?

What has always amazed me is how Mauritius as a country has reinvented itself in the face of changing needs. It has done so in sugar, in textile and now that there are opportunities opening up in Africa it is positioning itself as financial hub in this part of the world. In addition, Mauritian entrepreneurs have very important linkages in certain part of Africa which Asian as well as African companies can leverage on.

The role of Mauritius is going to be more important in coming years. Your textile industry can spread across and this can happen in ICT as well. If you get into skill based industry like engineering probably, you will need more engineers but you can get them from somewhere else may be from India. There are so many infrastructure projects coming up and your linkage with Africa is surely an advantage.

BUSINESSMAG. Why would a firm like Tata, for example, use Mauritius to get into Africa when it can do it on its own?

As I told you, Mauritian entrepreneurs have certain linkages with Africa that others don’t have. It is also not a question of either or. It is a question of what can be done together to create synergies.

Bio data

Prior to joining the Tata Group, Siddharta Roy was with Hindustan Unilever Limited. He has a Master’s degree in economics followed by a Doctorate. He has nearly three decades of research and in-house consultancy experience in the areas of macro and micro econometric modeling, strategic planning, country/firm competitiveness studies, new opportunity identification and international business studies.

Siddharta Roy has been a member of Board of India Today Economists and RBI Committee on the Real Sector. Currently, he is a member of a national and an international panel of professional forecasters.