Also read: Return to 'Normal' growth? Unlikely till 2017
Sorrell also continues to have a bullish stance on India despite observing a lack of self-confidence in the upper echelons of business in India. "Despite the lack of self-confidence, the Indian economy still functions. It is still growing at five percent. We would give a right teeth to get a projection of five percent. Our left and right arms are in the UK and we cannot get to 0.5-1 percent," he adds.
Below is the edited transcript of Sorrell's interview to CNBC-TV18.
Q: Reports suggest that you are here to boost India's self-confidence?
A: No, I was here to kick the tyres. It was just that everybody seemed to need a boost when I was here. I come and all the clouds are dispelled and currently England are 146/2, so what is wrong with that?
Q: How much of a problem do you think the kind of negative sentiment that prevails in India affects business? How does it affect your business, because it is reflection of business sentiment, isn't it?
A: When we look at India, it is sort of interesting. Our business here is about USD 500 million. We will not quite get to USD 500 million of revenue here with 12,000 people by the end of this year, but next year we will definitely be over USD 500 million.
If I look at this year, we are up about 10 percent organic growth excluding acquisitions and the impact of currency which has now become significant in context of India.We are going to spend the next glorious two or three weeks in New York going through the preliminary budgets. If I have to look at next year and look at what my colleagues have said when last I have been in India, they are forecasting maybe a similar level for next year actually before we have gone through it. They tend to be a bit conservation a little later.
So despite the gloom and despite this lack of self-confidence that I detect here, particularly in the upper echelons of business in India, the Indian economy still functions. It is still growing at five percent. We would give a right teeth to get a projection of five percent. Our left and right arms are in the UK and we cannot get to 0.5-1 percent.
Q: When you compare the size of the Indian economy and when you look at what 5 percent as compared to the real growth, that would result from a 5 percent growth and in real terms what you have got with a 9 percent growth. That is when the problem arises.
A: Yes, except it is all about relatives. Brazil has surpassed not only in terms of playing football but also in terms of GDP. Brazil is the sixth largest economy in the world, it is bigger than UK. Somebody says if India continues to grow at 5 percent, we are growing at 10 percent so twice the GDP rate. If India continues to grow at 5 percent and Britain continues to grow at 0.5 percent, India would be in same positions as Brazil shortly. So these things are about relative growth. What has happened in the world is that the absolute growth rates have gone down, but the relative difference between India and the UK or India and the US has remained the same.
So that is why I find the lack of self-confidence. Obviously there are political issues. You got an election coming up that causes uncertainty. There are tensions clearly between the Congress party and the BJP. It is a very difficult situation. There are clearly big issues as far as corruption is concerned. There are big issues as far as regulations are concerned. People say measures are going to be put in place like retail and then, they get blocked. Bills that are sitting in Parliament undealt with. So this causes tremendous uncertainty and anxiety. However in a longer term, what is driving the Indian economy is the rise of the middle class and lower middle class. That is what is driving Brazil, Russia and China too.
Q: In this prevailing 5 percent growth scenario, given the way your business is doing in India, given that it is inching close to USD 500 million, given that China as USD 1 billion, how soon before India closing in onto the USD 1 billion for WPP at this growth rate? How many years?
A: This is a dangerous thing to say. If I could compound it, I would give it somewhere between 10-15 percent. This year a lot of people would say has been an average year. I think it has been a pretty good year for us and I would say we expect 10 percent. A good year might be 15 percent if I was being a little more expansive, if England were 350/2 maybe I would be even better, more optimistic.
However, one could say 10-15 percent, so then you are talking about six to seven years as being the target. It is very dangerous to say that, because things like that have a habit of pouching you in the backside. Acquisitions cannot give us the growth. In a market like India if we are growing at 10 percent that means the organic growth is USD 50 million. You cannot find acquisitions. You might be lucky if you find an acquisition at USD 10-12 million or USD 5 million. It is interesting that when our competitors announce acquisitions, none of them give any detail. None, zero.
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