Richard Lesser at Idea Exchange: ‘It’s in India’s interest to be an innovator in the green economy space, China is already winning’

Richard Lesser, BCG Chair

Joydeep Ghosh : Does Trump’s tariffs throw the world into a different kind of turmoil?

I’d say three things. The first, there’s an important case in front of the US Supreme Court right now about the main provision President Trump has used around the emergency. He used different provisions for using different laws. Some of those are quite easy to defend and are not and won’t be challenged in court. But there’s actually a reasonable chance that those tariffs may be overturned. That wouldn’t mean all tariffs are overturned. And it doesn’t mean he doesn’t have other provisions he could use. But none of us know. So that obviously would change the dynamics around negotiations. It would then be a very different starting place. If, on the other hand, the Supreme Court affirms those tariffs and if there was an inability to negotiate between the two countries or between the US and other allies and business partners, then I think it will have meaningful impact on the business with the US.

But I say that with a couple of provisions. First, many of the items that are imported from India or Southeast Asia, China or Latin America are not going to be cost-effectively manufactured in the US. You’re not going to make children’s school apparel in the US or grow bananas in the US. So, in many cases what will matter is two factors, a big one and a small one.

On China’s industrial rise | One of China’s main assets is the whole integrated supply chain that’s very efficient. They have made massive investments in education, quality of engineers and scientists and R&D spending

The big one will be the relative tariffs. Are your tariffs higher than other countries who could manufacture the same items? Because that’s the competitor. And the second is that also means that costs for US consumers will go up because the likelihood is that those tariffs would be passed through to the US consumer and that will be a suppressant to demand and that will have some economic ramifications for the US economy. There are some sectors where that need not be true. In textiles, can you see the US as a major producer in a cost-effective way?

And the third point is that there was a risk at the beginning of the year that the US change in tariff policy, akin to what had happened in the 1930s, would lead to overall trade wars around the world; everybody ratcheting up tariffs. Most countries have made a strategic decision that whatever their negotiations are with the US, raising tariffs in response is not necessarily good for their own country’s strategy. So, we are less likely to descend into trade wars. Obviously, there’s a second big issue, which is the growth of China’s exports. But I think we’re early on to how that will play through.

(Left) Rich Lesser, Global Chairman, Boston Consulting Group, with Sandeep Singh, Resident Editor-Mumbai, The Indian Express. (Express photo by Sankhadeep Banerjee)

Anant Goenka : What is China doing right — one trillion dollar trade surplus? In an era where there are tariffs on them too, what can India learn from that?

In my view, China has put an enormous premium on upskilling and upgrading its industrial capabilities, be it in robotics or in integrated supply chains. If you talk to manufacturers around the world, they will say one of the main assets of China is that you have got a whole integrated supply chain that’s very efficient. So, you’re not just competing your plant against somebody else’s plant, you’re competing your supply chain against the supply chain in China. They have made massive investments and have done it in everything, from their education system, the quality of engineers and scientists, and increasingly in R&D spending, which is now de facto about the same level as the US, which was 3.6 per cent. The US is at about 2.7 per cent but the US is a 30-trillion economy.

The most striking chart I’ve seen recently was at biomedical R&D and how much of the new molecules for the bio-pharma industry are being sourced out of China. It has grown dramatically in the last 10 years. And that’s very innovation heavy, that’s not just manufacturing heavy.

Then, there’s an important second thing for many countries around the world, not just India. There’s this tendency to do things in a way that protects companies to a high degree or such that you pick your winners, you support them and create a sort of safe space. But if you look at the auto industry in China. They are not just picking a few companies and showering them with money. They are creating an ecosystem with investment and talent. They are encouraging cutthroat competition too, in which not everyone makes it, as a way to encourage a thriving ecosystem. For a country that we don’t associate as being a hard-core capitalist country, that is a very hard-core capitalist principle that they have brought in.

Anant Goenka : Do you think that China will eventually overtake America as the largest economy in the world?

I’m hesitant to make the prediction. I think China’s domestic economy is challenged, China’s demographics are challenged, but on the flip side, what China is doing industrially is extraordinary, be it in terms of raw capability or relative net exports, it shows enormous strength. So, China will continue to outgrow the US.

We have this tendency to want to draw straight lines and make projections. Certainly, China is building an incredibly robust economy, a very sharp industrial base and it needs to also think about how to translate that into local consumption demand. It has a lot of work to do there.

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Anant Goenka : And in renewables and science?

Well, that’s a part of it. With the World Economic Forum, we just published our annual report that basically says if you look at the green economy, it’s about five trillion dollars of spend on a 100-trillion dollar global economy.

That’s a meaningful chunk. It’s five trillion dollars of spend growing at the second-fastest rate

About 78 percent of that spend is in mitigation, electric vehicles, low emissions energy, solar wind, battery. About 22 percent is in adaptation and resilience. And the projection is that by 2030, it’ll be more than the seven trillion dollar part of the global economy. China is doing exceptionally well in that part of the economy because they are winning on all three fronts. They have the largest base of manufacturing. They have the largest base of deployment, 60 per cent higher than the next biggest region of the world. And their innovation engine is now doing extraordinary well. It should be a place where India too has the incentive to go. The wealth of this country’s growth is extraordinary and it will need much more energy. There will be much more desire for transport. Electric vehicles are getting closer. You can put in the right infrastructure and charge for energy, particularly because there is so much sunshine here. So, India has every incentive, whether it is to be a world economic powerhouse or to support its own country, to address the impact of climate change. It is in India’s interest to be a vibrant, strong producer, competitor and innovator in that space. It’s a big part of the economy and China is winning.

Richard Lesser, Global Chairman of Boston Consulting Group (BCG), speaks during an Idea Exchange interview, at Mafatlal office in Mumbai on 15 December 2025. (Express photo by Sankhadeep Banerjee)

Anant Goenka : But we seem to have no interest. There is no political will because the votes come for development, for roads, for airports. It’s just not there in the vocabulary.

But energy and transport, I would have thought, would be things that people will look into. I don’t want to speak for what India should do. I’m just saying that this is a five trillion dollar part of the global economy, growing to seven trillion. And China by all data is doing very well. And one would have thought that India could be a part of this.

Joydeep Ghosh : There’s been the debate in recent times that AI will replace people? Then there’s a school of thought which says that there will be newer skills that people will have to adapt to.

It’s not an ‘or’ question, it’s an ‘and’ (question). AI will both encourage and force people to adopt broader skills and give young people more power to deliver value in their jobs. And AI will be able, particularly Agentic AI, will allow for some roles to be substituted by agents, jobs that were historically done by people. We should never frame it as in, will it allow people to grow in skills and build new capabilities or will it substitute? It’s going to do both. To a substantial degree, I suspect.

On US-India negotiations | The US and India are in an intense negotiation, both sides have strong interests and both advocate for those interests, it’s a tough negotiation. Both have a lot of reasons to want it to conclude in a positive way

Sandeep Singh : How do you see India taking advantage of AI?

It’s important to think about how it’s going to participate, how it’s going to encourage responsible usage because AI comes with all sorts of risks if it’s not deployed in a responsible way.

This is not a, ‘do we use AI or not?’ I don’t see how not to embrace AI. It will be a gift but at the exact same time it will fundamentally change the economics of many industries. And a lot of those jobs are in the service economy of India, be it coding or customer service.

Sandeep Singh: But can it play the role of a catalyst in the higher growth rate that India is on?

A hundred percent. There is no doubt that AI can be an accelerant to productivity growth. Be it for faster learning, building capabilities that didn’t previously exist, or in its education system, AI can be a massive support. But it comes with a challenge that we have to acknowledge, that in many cases it will be taking on work that people could do, and in some cases that may be a good trade-off. For instance, in the US, there’s a massive nursing shortage. So if you could add tens of thousands of equivalent low-cost nurses who could be making phone calls to elderly people, keeping in touch with them, checking on medical usage or things that you just can’t afford to do with nurses there, what a gift to helping people live longer, healthier lives, and so you would make that trade-off. But, in other sectors, such as coding, the advances being made are absolutely extraordinary in terms of its capabilities. So you are talking about opportunity and challenge at the exact limits. It’s going be very complex, both for business leaders and for governments to navigate through this complexity.

Nesil Staney : Will stablecoins change the way currency is viewed as part of geopolitics or will it purely remain a financial market’s issue?

I think it will enable some people to take a financial view. But in some parts of the world, governments that are used to controlling currency very tightly. This legislation is brand new and it is too early to judge how it really plays out. Assuming that the underlying assets are well protected and backed up appropriately, many things that were written into the legislation, only time will tell if they succeed.

Joydeep Ghosh: With the US under the Trump administration showing scepticism toward climate change, how is the rest of the world reacting to it?

I’ve observed several things from several vantage points, because I am the chief advisor to the World Economic Forum’s Alliance of CEO Climate Leaders. Most companies have not stepped back from climate comments. That’s less true in the financial space, because your assets and lending are tied to what’s happening. But nobody wants to be caught in the politics of this.

The truth is the world is off track by 1.5 degrees. By 2050, we will be close to, if not at two degrees. That has three implications. One, weather patterns will be affected, be it heat, flood, drought or wildfire. Two, there is a premium on adaptation and resilience. Every country will need to think very strategically.

We have done some wonderful work. One of the pieces of work I’m very proud of with BCG has been working with the Foreign, Commonwealth & Development Office (FCDO), which helps different countries across the world to model through the economic impacts of increasing temperatures and understanding where is the highest ROI to invest in resilience. I think those investments in adaptation and resilience will continue to increase.

Thirdly, we can assume in a world where temperatures are rising to some degree and no one has a crystal ball and no model is perfect, but that’s the most likely scenario — then the attention this issue gets is unlikely to go away over time.

It’s hard to believe this isn’t one of the parts of the global economy where you have tailwinds behind you because the impacts will continue. I’m not saying to not invest in tech or advanced biology that also have tailwinds, but this is likely to be one of them.

Shubhangi Khapre : Īs there an underlying current of mistrust between the US and India due to assertive leadership, or is it just a static position of the two nations protecting economic interests?

Two things. One is the US and India are in an intense negotiation, and when I’ve talked to experts on both sides, both have strong interests and both advocate for those interests, it’s a tough negotiation. Both sides have a lot of reasons to want it to conclude in a positive way. My personal hope is that they will, but nobody knows.

President Trump’s first term, I thought he had the best relationships with Prime Minister Modi and Shinzo Abe (Japan’s PM). Both did the best job of being able to assert their own country’s interests but also work in a very collaborative way. I know it doesn’t feel that way right now but it’s my hope that we’ll be getting back to a productive relationship.

Kshipra Petkar: Do you think the AI bubble is over-hyped or are we still in the early days?

First of all, I worry about the phrase, AI bubble, because I think it lumps things together that should really be separated.

Our expectation is that independent of whether we have the right amount of data centre capacity, many companies who are learning how to use AI to drive mean equal value — not just about giving people new tools, but actually reshaping workflows and inventing new business models — are going to be at the core of their strategic efforts over the years ahead. And we’re early on in that, not late in it, and there’s no bubble there.

And that’s really important to distinguish because most people are just so focused on the data centres, but most businesses aren’t living in building and operating data centres. They’re living in the real economy of their logistics chain, their customer relationships, the ways they create and grow new businesses. That’s their world. In all of those spaces, AI has a meaningful role now.

Sukalp Sharma: We have seen that India and the global south have complained a lot about inequitable access to climate finance. What can the developed world do to make it more equitable for countries like India?

I’ll speak bluntly here. I don’t think we’re providing the financing that people were hoping for to support the energy transition. And I think based on the last two to four years of conversation that it is unlikely going to change anytime soon. We won’t talk about the reasons for it, but I think that that’s the reality.

The most critical thing, therefore, using a Bill Gates expression is, we need to lower the green premium of these technologies so that people do it not because they’re receiving financing to do it, but because they’re actually cheaper technologies to invest in.

And, there, I can think of some financial innovation where we can provide some risk-tolerant capital, even small slices of risk-tolerant capital, maybe through multilateral development banks or other institutions which may help make it easier to deploy capital.