Recent media reports indicate that extensive deliberations are being held by top policymakers in Modi Government to chart a roadmap for India to have its own league of globally competitive consulting companies.
The consulting footprint in India, especially that for the Government projects, be it Central or that of the States, is marked by sheer dominance of Indian subsidiaries of foreign consulting companies. From drafting of Detailed Project Reports (DPR) to undertaking feasibility studies, developing roadmap for disinvestments, to advisories in the realm of policy initiatives or financial matters, an overwhelming dominance of the foreign consulting companies is a norm than an exception. Those advisories do not come cheap.
The Foreign Consulting and Advisory Companies mint revenues running into thousands of crores.
A recent report published in The Economic Times stated that the Indian subsidiaries of Big Four consulting and accounting firms, namely Deloitte, PwC, EY and KPMG, performed better than their ‘global counterparts’ in terms of ‘revenue growth’ in FY24, and are projected to earn a staggering ₹45,000 crore in combined revenue for FY25. In FY24, their revenue was estimated to be between ₹38,500–38,800 crore. A lion’s share of this revenue comes from consulting work.
Striving for Self-Sufficiency:
Advisories from foreign consulting companies may have contributed their bit, but perhaps time has come for India to look beyond them. With a $4 trillion nominal GDP, and aspiring to be a $10 trillion behemoth by 2035, India has traversed a treacherous and challenging road in the last one decade, to metamorphose itself from being part of the infamous club of ‘Fragile Five’ in 2013, to be among the ‘Major Four’ economies of the world by 2025. Its quest for ‘Atmanirbharta’ or self-sufficiency, based on the lessons learned through the tumultuous phases of COVID pandemic, and Ukraine-Russia War, and surviving in a world of perpetual supply chain disruptions, is an outcome of realisation of the importance of developing resilient supply chains.
Therefore, as a logical sequel to its strides to simultaneously getting more integrated with global supply chains, even while firmly enhancing its strategic autonomy, it was a forgone conclusion that India’s next wave of impetus would be towards pushing for tech sovereignty and building cutting-edge desi consulting companies to spearhead the consulting and advisory work, especially that of Government projects.
Scaling Up Consulting Competency:
Generally, validation of a project becomes easier when it is backed by detailed studies done by well-known advisory entities. This is exactly why successive Governments preferred to rope in consulting companies. Absence of domain knowledge in specialised areas may also have been a reason for officials to increasingly depend on consulting companies for guidance.
But the most fundamental issue that needs to be addressed is whether these consulting giants execute anything that is ‘rocket science’ and which cannot be done by an Indian entity. Credibility invariably takes time to develop, but essentially, if India has to scale up its in-house consulting competitiveness, it has to give more space to its own desi entities.
Surprisingly, almost the entire spectrum of personnel, or the workforce, in most of the Big Seven consulting companies operating in India are of Indian origin. This means that the entire repository of institutional knowledge is already here. Many such senior-level professionals do exit top organisations to start their own niche advisory companies. But how many of them get a level playing field in big-ticket government projects, or whether they are pushed away by the deeply entrenched giants is something that has to be checked upon.
Developing an Ecosystem:
Developing an ecosystem for spawning a whole array of consulting companies that can compete and carve out their space against the foreign giants would invariably take time. However, once the Government has already decided to initiate the process, and given the fact that among the people involved in the process includes the likes of Sanjeev Sanyal and Shaktikanta Das, backed by the conviction of PM Modi, the success in the same is a certainty. Who would have thought a decade back that India’s private sector would emerge as game-changer in defence production, EV sector, contract manufacturing or even space sector?
Backed by policy reforms, it certainly did happen, as was envisioned by Modi Government.
Developing Building Blocks:
To kickstart the whole process, or rather jumpstart, Government of India may initiate the following: It may mandate all the IITs, NITs, IIMs, and other premier institutions to incorporate Special Purpose Vehicles (SPV) for the purpose of project consulting work. Many among the IITs and IIMs in India are already engaged in consulting and project-specific advisory work. All that is needed is to institutionalize it and run them like separate legal corporate entities, to be run by professional management, where the incumbent parent institutions can become the majority stakeholders, and employing students, professors, or even external domain experts on a professional basis in those entities.
Push Banks for Advisory Work:
Likewise, Government of India can ask all the Scheduled Commercial Banks including both in private and public sector domain, to invest in creating robust advisory divisions. The insurance or Mutual Fund business model of banks can be replicated here, albeit with restrictions on foreign stake initially. The same can be directed to the Development Financial Institutions, insurance giants like LIC, top NBFCs, and even some PSUs for niche consulting. Many of the banks like ICICI Bank and SBI already have divisions dealing with capital markets, which they only need to scale up as holistic entities. Further, Govt may even ask the industry associations like FICCI, CII, ASSOCHAM, PHDCCI or sector specific associations like NASSCOM to set up similar advisory SPVs. Not just that, there is a large array of credible think-tanks in India who can also be roped in to set up similar consulting entities.
Additionally, Government of India can float a few Consulting SPVs with around 26% stake and allowing Indian private sector to bid for stakes in it. Spawning a large base initially may be needed. After that, market will take care of it through consolidation and evolution of the better ones.
A Startup Policy for Consulting Startups?
In addition to this, Govt may actively consider having a special policy for consulting and advisory startups and ensure that a certain proportion of the government projects for DPR, and policy advisory work is earmarked for them. Modi Government’s startup policy itself has been incredibly successful in transforming India into the third-largest ecosystem for startups in the world. The same template can be applied for creating a consulting ecosystem as well.
Brace for Pushback?
Even though Modi Government’s vision in this sphere is commendable, it is for sure that there would be pushback, be it direct or discreet. It would not be surprising if some of the ‘Big Daddies’ in the consulting arena have already cultivated an ecosystem to ensure that their pre-eminence, and indispensability, remains unaffected. But with Modi Government firm on making India self-sufficient in this sphere, it is for sure that major policy cleanup would happen here too, if needed, as it happened when it ended the stranglehold of the defence dealers in the corridors of power.
That was the first step towards charting India’s path for Atmanirbharta in Defence production. Objective here is not to embargo foreign consulting entities from Government Projects but to create enough space for Indian companies to emerge as well.
— Pathikrit Payne is a Senior Research Fellow with Dr. Syama Prasad Mookerjee Research Foundation
