An Interview with Ram Narayanan

November 2022

Edward Tse (hereinafter Ed): Hello, everyone. My name is Edward Tse. I'm with Gao Feng Advisory Company. We are a strategy and management consulting firm with roots in China. Today I’m very delighted to have with us a very good friend who has appeared on this show before. He has incredible insights. Today, Ram, you are somewhere in India, right?

Ram Narayanan (hereinafter Ram): Yes, I'm in Mumbai, India.

Ed: It's great to have you again. I haven’t interacted with you for quite some time. Friends, Ram comes from a very unique background. He is an ethnic Indian but has spent quite a bit of time in China. So he knows the Chinese way of doing things, from the business standpoint, as well as from the cultural perspective. And as an Indian, he has incredible knowledge about India. So we have always talked about China, India, the relationship between the two countries and their impacts on the rest of the world. Considering the constantly changing dynamics of power equations in the world, it would be good to have an update on our views on India, China, and their impacts on the rest of the world. This in fact needs to be done on an ongoing basis. So today I’m delighted to have Ram on our show again so he can share his insights on some of the relevant topics. But before we get started, Ram, could you briefly remind our audience again about your background? I know that since you showed up last time, you have switched to a different company, so please give us an update on where you are.

Ram: Yes, thanks for the introduction and warm welcome. My name is Ram Narayanan and I think Ram is easier to pronounce. I work as Director of Market Development at Vedanta Limited, a major global player in metals and mining businesses.

I'm based in Mumbai, the business capital of India. I’ve been in this company for slightly less than a year. I have spent more than twenty-three or twenty-four years of my career in various businesses. I worked for a long time with a globally known company called the Reliance Industries. Here I worked for more than 13 years, in the fields of business strategy, running a subsidiary in Malaysia and also some other projects. We specifically focused on energy and petrochemicals.

Before that I had been in the metals and mining business, mainly in aluminum. Interestingly, for three years before that, I worked in the beautiful city of Shenzhen in China, in optic fiber and cables businesses. I've travelled all across China and done business in China, from the northern to the southern and western regions. So I have lovely memories. When I moved to China my wife also moved with me. We both have great memories of living in China, especially the lovely places in Shenzhen where we lived. We travelled across China, looking at various historical places. That's my background. In fact, one of the things I always say is that India and China are so similar. Both countries have long histories and deep-rooted cultures. For example, in some of the educational institutions in eastern parts of India, we have had a lot of Chinese scholars. India and China are very similar in many ways. Both have large populations and are big and growing countries. China has developed quite a lot.

In terms of educational background, I took my business degree from London Business School and there too I had several Chinese friends. Basically, I’m a chemical engineer with an MBA degree and have worked in the fields of metals, chemicals and optic fibers. So that's my background. And I look forward to having an interesting conversation. Thanks, Edward.

Ed: Thank you, Ram. I know that you have a very broad view of the business world. So your focus is not just on micro-management of a company. As you are aware, geopolitics has been evolving very rapidly in recent years and it is a constantly changing landscape now. India and China figure in this changing picture in very prominent ways. So from your standpoint, how do you see India and China? What would be the role of these two countries in the context of constantly changing geopolitical equations? Should they be working together? We are potentially in conflict in some areas. How do you see the relationship between the two countries going forward?

Ram: That's a great question. In the last 7 to 8 months, India and China have followed almost similar foreign policies with regard to Russia, independent of what the western world wants or believes. For example, India and China both are major importers of Russian oil. China has done it, and India too has done it. So India and China have asserted their independent stand in foreign policies in the last one year or so in the midst of the changing geopolitical scenario. That’s basically the underlying fact. There are a few areas of conflict which hopefully will get resolved soon. Now, if you go beyond the last 2 years, especially during the time of COVID and beyond that, or if we take the last 15 or 20 years, India and China both have experienced rapid growth, though China has grown much more and at a higher rate. It has become the second largest economy in the world with India being number five right now. And very soon, maybe India can become number three or number four. So China and India have grown. They have large populations. China has followed an infrastructure-led and export-oriented strategy. India has a policy of focusing on services. Recently on manufacturing also, for exports. Of course different strategies have different growth paths. But if we go back like 30 years and look at India and China, we were way behind the western countries. And today, India and China are prominent among the top economies in the world. From a political point of view, both India and China have solid leadership. In China, it is Xi Jinping. And in India, we are led by an equally strong person, Narendra Modi. That's in fact another factor that has led to very proactive and independent foreign policies being followed by the two countries. Now looking from a geopolitical perspective and from the economic point of view, India and China together account for close to 25 to 30% of the global GDP. And, India and China account for almost 25% of the global population.

So we have soft power as well as hard power. If you combine the two, India and China can gain a lot of synergies. Now let me broaden the details. India and China have a big bilateral trade going on. In India, especially right now, one of the major growth areas in the last 3 to 4 years has been technology-oriented companies, like the fintech companies. And many Chinese companies have been predominant and big investors in this kind of companies in India.

And secondly, the Indian government is following a production linked incentive scheme across various industries. For example, textiles and mobile phones. Right now, they're looking at semiconductors in a big way. China has a lot of experience in these kinds of industries. Therefore, Chinese companies can play a significant role here. That is number three. Number four is in every country across the world, they want to diversify the supply chains. India and China are in proximity geographically and the way they run businesses are similar. Companies can look at India as an alternate base for their businesses. Therefore, they can mitigate the risk for those who are talking about a China plus one strategy. How can everybody move away from China given the way the supply chains have been built in China? Some Chinese companies are looking at Vietnam right now because Vietnam is geographically close to China. They can look at India too. They can invest in Indian companies and work with the Indian government too. This can be a major source of supply chains to the world. So essentially, by collaborating with each other, India and China can control a significant part of the global GDP and a good part of the global supply chains. The last point is that China is becoming a knowledge-based economy. India is also doing the same, and India has a huge pool of talent, and a young workforce, which can have great synergy with a knowledge-based economy. By collaborating, we can control the supply chains and the soft power that makes the knowledge economy across the world. So that's the way I believe India and China can and should work together. I think they can have the most significant growth ever in the history of the world.

Ed: If you were the CEO of a large western multinational company, you ought to look into the future. Of course, day-to-day operations are important, but looking into the future, it will be important to imagine or reimagine the future. And what you're saying is that the future looks like one where India and China will play an important role. But there will be other actors as well. The West will continue to play a very important role. If you're the CEO of a large multinational company, and you think about the future of the world, what does the future look like to you and where will China and India fit in that picture?

Ram: Yes, that's a great point. There will be other factors also like what we saw last year. The Western nations, especially the USA and Europe, have a big stake in global geopolitics right now. This will continue because they're still big economies as a whole. And secondly, we have seen a lot of collaborations the western nations are forming with other countries. India is a part of one such alliance. China has been driving other alliances like the Belt and Road Initiative. All these different kinds of alliances will be there. If I were the CEO of a Western multinational company, I will recognize the fact that the Western nations are looking at India and China in a big way. Still, they'll have a role to play in forming different balancing alliances, which would redefine the way businesses can work together. So, I would hedge my bets in a different way. I'll be looking at both India and China. One is from a geopolitical perspective, as there will be different pulls and pressures from different angles. For example, there might be some push against China in one particular matter. There may be some push against India in a different way. So, I would look to invest and place my bets on both India and China. Also from a supply chain perspective, I shall divide risk between the two countries. Supply chain risk is number one. Number two is that both these countries have a huge market. Therefore, I would place bets on both markets. Number three is that in case of any geopolitical events, as a company, I would mitigate my risk. Therefore, I would look at both countries in the same way. In terms of local strategies, they might be slightly different because of different cultures, operating systems, political systems, and legal systems. But essentially, I would mitigate my risk by placing my bets on both India and China. If I can take your question further, if I were the CEO of a Chinese company or the CEO of an Indian company, then also I would do the same. There are so many synergies between the two countries.

Ed: You have mentioned the supply chain a few times already, and many people are saying companies are taking supply chains away from China and transplanting them to India. Is that what you're saying?

Ram: Yes, I think this is what has happened in the last 2 years. One is because of COVID. Another is the geopolitical scenario, with China, Russia, and India coming in. The third thing is also in terms of shipping routes. Therefore, western countries are looking at what they call a China-plus-one strategy. But as I told you earlier, no company can completely move away from China because so much of in-process has been built up and so much has been supplied and built over the last 20, 25 years. It won't be prudent for any company to move away. They are only looking at the alternatives. For example, some of these manufacturers can be looking at Vietnam. Textile companies are looking at India, and electronics companies too are looking at India. The Indian government is welcoming all these companies. But the fact is that's a big growing pie for the global economy in which India and China can play a role together. That's what I said earlier. There are many companies that are coming to India to derisk. But essentially, if these companies look at China plus India together, they have a great advantage. So I think that's the way many companies are looking at the situation, even though they might put it to the media in a different way. For example, if I look at one of the businesses which I worked in earlier, textiles, the Indian government has got a Production Linked Incentive (PLI) scheme which promotes manufacturing. China, along with Bangladesh and Vietnam have made up the Asian textile supply chain so far, so now India will also grow in the same chain. But essentially, as we know, these companies have already been in businesses that are present in China and these people can come and invest in India. Why not work with both of these countries together? It's a sort of a win-win situation for both the companies and countries essentially looking at India plus China as a mitigation strategy rather than moving completely away from China, which I don't think is very easy to do, and I don’t think it's prudent to do.

Ed: Very good Ram. You also mentioned briefly how you think India's economy will develop going forward. Can you elaborate further on your analysis of the economy in India?

Ram: Sure. Let me divide the Indian economy into three different parts: services, manufacturing and agriculture. Now in India, as I told you earlier, growth path has been somewhat different compared to China. India focused on IT services and IT export has become a big business out of India, while China has had a manufacturing-led growth. So 60% of the Indian GDP is accounted for by services, about 32% by manufacturing and the balance by the rural economy. Now, services businesses will continue to grow in India. The government is now saying that we should focus more on the manufacturing industry. Therefore, as I told you, the Government of India is now implementing the production linked incentive scheme, where about 18 sectors are being supported by the government by way of subsidies to build a manufacturing base in India. There are a lot of things to be learned from China on this. For example, China has some mega textile plants. Now in India, the textile industry value chain is highly fragmented, operating in different parts of the country. Therefore, the Indian government is trying to do something that China did by having these mega textile parks and also trying to have some mega industrial parks like what China did in Shenzhen, where I lived. The Government of India is not only focusing more on manufacturing, but also on ultimately increasing its services base. That is number two. The third thing is that in India, one great thing that has happened is the technology backbone. Today financial transactions are being increasingly done through a technology backbone, which is something known as UPI, unified payments interface. And more and more people are moving towards technology and digital transactions, as compared to cash transactions. This has been integrated with a biometric scheme which was started 10 years back. So a technology backbone is being laid across India which will ride on the services trend that has been built and this shall give a boost to manufacturing. Therefore, the Indian government is today focusing on manufacturing, not only for meeting demand in India, but also for the world, and making it a manufacturing powerhouse, besides services. That's the way they can go.

Ed: Fantastic. That sounds like a very good plan. You have spent quite a bit of time in China before, so you know China's business landscape, as well as the Chinese culture. You have already touched quite a lot of similarities between Indian culture and Chinese culture, and you see the strengths of the two cultures, right? From your analysis, what do you think the Chinese economy would evolve into? What would we look like, say, 3 or 5 years down the road?

Ram: China today is the second largest economy in the world, and has reached a tipping point. Anyway, it's a developed economy as we reach a tipping point, where I think the growth has to be led through a knowledge-based economy, focusing more on innovation. Because China started growing through manufacturing exports, a fantastic infrastructure was built. But at the same time, one thing that has happened is the population. The lower labor cost that was the strength of China is declining because the population is ageing. India is slightly behind in terms of rise of average age because the Indian population is still very young.  For China, the government is doing well in moving more towards a knowledge-based economy, focusing more on innovation. Manufacturing is already there, but focusing more on innovation. Innovation can build upon the manufacturing base as China looks forward to growing in the global economy and building its soft power. China is looking to be a top knowledge superpower on top of its manufacturing prowess, which has been high so far. That's a very good way to look at it. I always give the example of Huawei because when I lived and worked out of China, it was just an equipment manufacturer. Today, it's the world's leading supplier of telecom technology. The second company ZTE was also an equipment manufacturer and is now a powerhouse. Therefore, today China also wants to lead in technology products and looks at all the different industries like automobiles, where it is one of the world's leading markets, particularly for electric vehicles. Today I'm dealing with the battery market in my particular line of business. Yesterday I was speaking with someone with whom I shall be transacting 60% of my business in China because we have to sell our products to the battery manufacturers. Battery manufacturing will predominantly be in China because of China's EVs manufacturing base. So to summarize, China is moving forward to be more of a knowledge-based and innovation-led economy, being built on top of its existing strength, manufacturing. That's the way I'm sure the Chinese government too is thinking. 

Ed: Thank you, Ram. It's been very useful input, a very enlightening input from you. I have one last question. One of the most asked questions in China these days is how come so many Indians are able to make it to the top in the western world. In the business world, we know CEOs of many large western companies, especially in the tech sector, though not only in the tech sector, are people of Indian descent. And it's not only in business. We also see this in other areas including politics. Like the new prime minister of the UK. The Chinese are wondering why the Indians are able to make it to the top. As an Indian who also knows the  Chinese culture, how would you explain that phenomenon?

Ram: Let's look at one of the strengths of India. In the last 40 or 50 years, there's been a lot of focus on education. After independence in 1947, the Indian government built a lot of good global scale institutions like Indian Institute of Technology and other good educational institutions. Secondly, I think the aspirations of the middle class in India have always been to get a good education. And how do we enhance our knowledge and skill sets? By working abroad? In fact, I also worked abroad. So that is number two. And the third thing, I think one of the good points has been that India has a large English-speaking population, probably that is one of the ways they've been able to adapt to the culture especially in some of the western countries very well. Since junior school, I've been learning, reading, and writing everything in English. In fact, more of my education is in English than in any other language. That is number three. There is one more interesting point which I would like to point out. My father was in a transferable job, and I moved all over India. Every Indian state has a different culture. It's like a different country altogether. For example, I am from the southern part of India, but I have spent most of my life in the northern part of India and now in Mumbai for the last 20 years or so Therefore, it's like we moved to different countries whenever we moved as children. I think that's another great learning point for us. These are the 3 or 4 different reasons why I think Indians are doing really well. Indians and Chinese are extremely capable because we are developing economies. So we had to learn and work more to achieve our goals. I think we are more hard-working from that point of view. I think hard-working people achieve more and have aspirations to achieve more. So probably, these are a few major reasons the Indians are making it to the top. Maybe there are more reasons, certainly in the next talk, I'll answer this question.

Ed: Before letting you go, if some of our audience would like to get to know you, given your insights and your incredible experience in China and India, how could people find you? Do you have a website? Do you have an e-mail address? How should people find you?

Ram: Yes, sure. My website is under construction and it should be up and running in another 10 days. I'll mail it to you, so you can put it up. It's called penoram.com. My e-mail is ram.narayanan11@gmail.com and I am on LinkedIn as well. So these are the three ways through which I can be reached. I am more than happy to interact with people who want to reach out to me.

Ed: Excellent. It's been a very good input, Ram. Thank you. We'll ensure that people will get to know your coordinates and stay in touch. We'll be talking again.

Ram: Certainly, and it's always a pleasure talking to you. And you also have vast experience and incredible knowledge about the global markets. I look for all your articles published in China, especially since many of my views on China are influenced by your articles. So it's always a pleasure talking to and reading about you. Certainly, we will stay in touch, and I look forward to meeting you soon.

Ed: Thank you, Ram. Have a nice day.