‘You cannot expect 8% GDP growth without having infrastructure’

Germany-based global powerhouse Siemens, with revenues of €83 billion, has been present in India since 1867 and was instrumental in laying the first Indo-European telegraph line connecting London with Kolkata, leading to transmission of a message in just ‘28’ minutes, making it a worldwide sensation in the 19th century. Siemens Ltd. MD & CEO Sunil Mathur talks about company’s growth in India and the way forward. Edited excerpts:

We [have] had a very long history with the country. In all the cycles, in all the different business scenarios over here and are today publicly listed. I am very proud to have Deepak Parekh as our chairman over here. Today, we have 22 factories in the country and 57 offices throughout the country. We are basically a mirror image of the global parent here in India. So, everything that the parent company has as an offering... we have got all our businesses that our global factory has. So, effectively all the visions and all the ideas that are being talked about by the government and the PM [Prime Minister]..., we have got our digital factory, process industries, mobility, energy management, power generation.

Look at the growth rate, we have been growing 10-15% every year. Look at the increase in top-line and profitability over the last five years. It is a fair point to mention that you start; you have to start somewhere, the needs of the country [are] also involved.

Until not very long ago, digital factories were not a subject, right? Now, we talk about digitisation. So, we bring in the digital offerings that takes time. Until some time ago, power generation was a big issue. So, when the country was making power generation-making power plants, we were building a lot of power plants in the country. But the country doesn’t make the power plants every year, right? You have the same thing in transmission and distribution. So, therefore, it is wrong to look at the growth in the country on the basis of turnover. If you look at the turnover 10 years ago, the turnover would have been high as the power plants were being built. Two years ago, a HVDC project came up, the turnover goes up over there. But the bottom line is, is the company growing? Yes, it is growing. Is it growing faster than what it is growing in Europe? Absolutely, both in terms of top-line and bottom line.

I will give you my logic for the $ 1.5 trillion calculation. [The] PM has said that he wants to increase the share of manufacturing in GDP from 15% to 25%.

These are numbers everybody knows. GDP today is $2 trillion, and 15% of that is $300 billion. Let’s assume that in 7-8 years, $2 trillion will become $4 trillion with 7-8% growth. So, 25% of $4 trillion is $1 trillion. So you got $1 trillion minus $300 billion, which is $700 billion of addition to GDP through manufacturing output. If you have to do an output of $700 billion, at least two times of that amount is the capex required which is roughly $1.5 trillion. So that is my calculation. Right or wrong we can debate it. Right? But I am saying that if we are to believe the vision of the PM, I have no reason not to believe it. So, the extent of the opportunity for manufacturing has got to be $1.5 trillion.

I think it’s not entirely correct to think that the companies don’t have [the] capacity to invest. Yes, there are some companies who don’t have right capacity because they invested unwisely in the past and I don’t want to get into that. The government have to invest to make infrastructure. You can’t expect a GDP growth of 8% without having infrastructure.

That is clear. You want steel. You are looking at cement, you are looking at electricity. We are present in all that. If this has to come, you need steel companies to invest, you need cement companies to invest. You need a complete turnaround of the discoms. We know that and we need the transmission lines to be better, we need power generation to be more efficient. You know, 30,000 – 50,000 megawatt power plants are reaching end of life over 30 years. How do you replace them? You can’t replace them only with renewables.

You need fresh power plants. That is a whole amount of capex that has to come into the system. So, you can’t reach 8-plus percentage of growth unless you concentrate on infrastructure, which will drive industry. And, there are companies in the country that are already investing seeing the potential in the future.

So the next story is $1.5 trillion capex, which are the countries around the world is doing? Nobody. It is only India who is doing that kind of capex. One thing is clear, with that amount of capex, India will not be able to sell in India. That much consumption will not be in India. If you are spending $1.5 trillion and you can’t consume the output, you will have to export it. If you are exporting, who are the competitors you are competing against? International players and what are the international players doing? Industry 4.0, digitalization, increased efficiency. So if we have to compete with them, we have to introduce it, right? So who is going to come competing with us in India. Those same international players will come competing with us in India and will start competing with us. If they come into India, what is the value add they will bring in respect of the Indian companies? Industry 4.0, digitization. So at the end of the day we have to be doing that, come what we may have to bring in digitalization.

I like it I don’t like it, it is coming. I cannot change a global trend. Right? If that is coming, I got to start preparing for it now. That is the extent of opportunity we have in India and Siemens has in India on digitalization. We are present as leaders globally in Industry 4.0. We are the only ones which have a platform called the Mindsphere. We know how the machines work because that’s our core business. Regular IT companies knows how it works across the board. But they don’t have machine knowhow. So if you combine machine knowhow and marry it with horizontal knowhow and combine it with data coming out, we can understand and IT Company can’t. We can understand we interpret that data, extrapolate it give you benefit out of that and tell you if you do this your efficiency can improve. This is the extent of the market we are having open to us.

So, very clearly, we are looking at digitalisation, public sector as well as private sector. We are looking at transmission and distribution, we are looking at smart grids, and we are looking at smart cities. So there is a lot of potential there. Power generation at some point of time has to come back. It’s slow right now. But it has to come. Because as I said, you have to invest in your existing plant reaching the end of life. So, we are looking at the a lot of areas. Digitalisation is definitely a big growth area. All these areas I am talking about. I think our HVDC lines can come. I think our discoms can become more efficient than what they are right now. The potential of the country is huge in smart cities. We are talking about 100 smart cities. We have only scratched the surface right now or what can be done in smart cities.