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July 2018
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US China (The Total Investment & Insurance Solutions)
India will not directly be
affected in case of a global trade war but the second order effects could
impact the economy, said Kevin Sneader, global CEO of McKinsey in an interview
with ET. While restrictive tariffs might not hurt the economy as much, factors
like rising commodity prices could hurt the trade more. The Total Investment & Insurance
Solutions
The newly elected CEO of the white-show consulting firm chose to visit India in his first overseas trip after taking over the corner office on July 1, 2018. “I wanted to be in Asia and I wanted to be somewhere that matters to the world in terms of size and importance. I have been coming to India regularly. This opportunity was find out what’s happening in India,” said Sneader, who was the firm’s Asia chairman before being elected to the top job on February 24 th 2018.
The newly elected CEO of the white-show consulting firm chose to visit India in his first overseas trip after taking over the corner office on July 1, 2018. “I wanted to be in Asia and I wanted to be somewhere that matters to the world in terms of size and importance. I have been coming to India regularly. This opportunity was find out what’s happening in India,” said Sneader, who was the firm’s Asia chairman before being elected to the top job on February 24 th 2018.
In his first interaction to
any media after taking over as the firm’s managing partner Sneader said India’s
growth rate at 7.5 percent, fastest for any major economy is encouraging.
“Global CEOs I speak to feel that GST and demonetisation might have created
minor short-term hiccups but overall there is a general sense of optimism.
Investors are looking at opportunities in India that weren’t there a few years
ago,” he said.
But the fact remains that dark clouds of a trade war hover over the horizon as countries like US and China harden their stances. “I think it's worth putting this in context. If you take the US-China trade relationship, US exports to China are about $125 billion while imports from China amounted to $500 billion. If we go by the first round of tariffs announced in mid-June, then business worth $100 billion out of a $635 billion trade relation was affected and that wasn’t much. That wasn’t a trade war but the real issue is the escalation after the June 18 announcement of tariffs on $200 billion of China’s exports and that changes the game. That would mean tariffs on nearly half of China’s exports to the US and that’s a big issue. At the moment we aren’t in one but we definitely are on the brink of a trade war,” said Sneader. The Total Investment & Insurance Solutions
Given the rising uncertainty in the business environment, is it time for Indian CEOs to re-look at their strategic plans? “I think it’s a bit late if they are starting now. All CEOs have to plan for different economic environments. We are in an unprecedented period of synchronous growth; the whole world is growing. IMF had a forecast of 3.5% growth in January, revised to 3.7% in April.
We were seeing that steady uptick but our surveys show that sentiment has started to flatten. It's not bad, it's just more cautious. I think everyone should be prepared for all eventualities. Because the other side of this, of course, is that if the unexpected happens--trade war clouds disappear--that will give a big boost to the global economy. You should be prepared for that too,” he said. The Total Investment & Insurance Solutions
But the fact remains that dark clouds of a trade war hover over the horizon as countries like US and China harden their stances. “I think it's worth putting this in context. If you take the US-China trade relationship, US exports to China are about $125 billion while imports from China amounted to $500 billion. If we go by the first round of tariffs announced in mid-June, then business worth $100 billion out of a $635 billion trade relation was affected and that wasn’t much. That wasn’t a trade war but the real issue is the escalation after the June 18 announcement of tariffs on $200 billion of China’s exports and that changes the game. That would mean tariffs on nearly half of China’s exports to the US and that’s a big issue. At the moment we aren’t in one but we definitely are on the brink of a trade war,” said Sneader. The Total Investment & Insurance Solutions
Given the rising uncertainty in the business environment, is it time for Indian CEOs to re-look at their strategic plans? “I think it’s a bit late if they are starting now. All CEOs have to plan for different economic environments. We are in an unprecedented period of synchronous growth; the whole world is growing. IMF had a forecast of 3.5% growth in January, revised to 3.7% in April.
We were seeing that steady uptick but our surveys show that sentiment has started to flatten. It's not bad, it's just more cautious. I think everyone should be prepared for all eventualities. Because the other side of this, of course, is that if the unexpected happens--trade war clouds disappear--that will give a big boost to the global economy. You should be prepared for that too,” he said. The Total Investment & Insurance Solutions
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