Sir Martin Sorrell, the CEO of WPP, the marketing communications giant, says global companies are sitting on as much as $2 trillion (Rs11 lakh crore) cash instead of spending because of an overwhelming sense of caution.
As a result, their focus has shifted to the very short-term, quarter-on-quarter, instead of a year or more, he said at an event on 'How the world views India -- opportunities and challenges, 2013 and beyond' organised by the Bombay Chamber of Commerce and Industry on Friday evening.
The ad maven predicted 2013 will be a difficult year with not many significant events scheduled. "2014 looks better with big events happening including in Russia and Brazil," he said.
According to him, there are four potential Grey Swan events – events that are possible but are considered unlikely, to differentiate them from Black Swan events that are entirely improbable – facing the globe: the euro zone crisis, the Middle East crisis, the repercussions of change of guard in China and America's gargantuan debt burden.
While the euro zone is witnessing better growth, increased levels of success and lots of smiling faces, politically, it's a minefield, while the Middle East has become totally unpredictable, he said.
In China, the new leadership's strong message on corruption has instilled great confidence, he said. “Within two years, major changes are expected there,” he said.
Lastly, with $16 trillion debt, Sorrell doesn't know what is really happening in America.
“The new administration will have to get its act together fast. And they can't keep ignoring the Gorilla in the room. There has been a significant erosion in confidence, and most companies have missed their topline forecasts earlier. The post-October period is looking better, though,” he said.
Meantime, Sorrell said India remains better placed than other nations because of easy accessibility, increased growth, success rate and, again, smiling faces.
“India is a vital destination, more important than other countries because the access to companies here is significantly easier compared with many other nations. Populous, rapidly growing countries like India will contribute to global growth,” he said.
Sorrell said today India has a series of successful companies and a good number of big names globally are Indian – praising what Tata Motors did with Jaguar Land Rover or what Mahindras, Ambanis, Mittals have done.
“However, I find visits to India very disturbing. The abject poverty outside the pristine campuses in Bangalore is unnerving at a mental, psychological and emotional level. In fact, this is the reason why I like going to China more. It is not that there is no poverty in China but just that they have done a better job at concealing it with the investments in infrastructure,” he said.