April 11, 2016 12:12:39 am
Even as the government expects the country to clock optimistic growth rate of close to 8 per cent, the newly elected CII President, Naushad Forbes believes that it might not be sufficient to create enough productive jobs to keep the gears of the economy well oiled. In an interview with Pranav Mukul and Sandeep Singh, Forbes said that while job creation is a concern, 9-10 per cent growth rate is desirable as a lot of employment is created when the economy grows at that rate. Excerpts:
While the economy has been growing at over 7 per cent, job creation has not picked up. How big a concern is it for the industry?
It should be a big concern for everyone, and I think it is a concern for both the government and the industry. We hear about demographic dividend but that is all dependent on us creating good jobs. That brings us down to input and skills and also on pick-up in demand and GDP growth rate. It is said that 7-8 per cent GDP growth rate should be okay, but we’ve found that in the years when we grew at 9-10 per cent, we created lot more employment. It’s not a linear relationship, something seems to kick in when one goes above 6 per cent. At 9-10 per cent, we start creating a lot of employment across a lot of sectors and that’s what will deliver inclusive and widespread growth. If you look around in Delhi, the largest job creating profession in the last five years has been drivers. That’s okay, but we should be creating a lot of jobs in manufacturing and manufacturing employment will grow when the economy grows at 8-9 per cent.
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RBI Governor recently said that naming defaulters will chill business activity. How do you see that?
We have no concerns over going after wilful defaulters. We also don’t think that pressure on wilful defaulters will actually set any kind of chill among investors. If anything, it will attract the right kind of investors. However, we would certainly have an issue with naming defaulters because it’s important to make it clear that when we talk about defaults, there is a moral issue, there’s a legal issue and there’s a business issue. From a business perspective, going bust is not a crime. If you take risks, you will have some casualties. Those casualties maybe because of a wrong decision or something stupid. But being stupid is not a crime, doing something illegal is a crime. And if it’s illegal then we should go after that.
While interest rates have come down, government is saying that the industry is not investing. What is stopping the industry?
We are now probably in the fifth year of relatively low demand growth year-on-year and in times of relatively low demand growth, companies focus on internal efficiency more than anything else. In that process you add some capacity of say 5-8 per cent year-on-year. So over these five years, companies have probably added 30 per cent to their capacities. As demand growth has been less than that, the companies today have significantly higher capacity than the demand. We are now at a stage where we are starting to see a pickup in demand, but it will take some time before there is enough demand to absorb this capacity and then turnaround the investment cycle. Lower interest regime, then, will only foster courage for that change to happen sooner. But I think from an investment cycle point, it is an issue of demand coming first.
Do you see demand coming back soon?
We are seeing the first signs of it. In certain sectors such as road construction sector, as part of the government’s road building programme, construction equipment used in roads has seen very buoyant demand in the last six months. So, infrastructure spending and rural demand being triggered by road development, a good monsoon and recovery of agricultural growth will be two good engines for growth in demand. We are quite positive that we will see growth in demand and we expect that this year to be significantly better in terms of demand and somewhat better in terms of investment.
Which sectors could do better with some impetus from the government?
I think the government has done what it needed to on infrastructure and on rural demand and that was the right initiative. It’s unreasonable on our part as industry to expect the government to somehow improve demand for one’s product and that is not its role. The government’s role is to focus on areas where it can make a direct impact such as infrastructure, rural demand, rural income and worrying about broad policy stance.
What has been the most disappointing factor and which factors can drive business sentiments?
One thing that has depressed sentiments is the lack of passage of GST. While it could have boosted both domestic and foreign investor sentiment, everyone is clear that obstacles to GST are political. The government has done several things to improve on the ease of doing business but most of the improvement has been at the central level within a particular department. I feel that there are many inter-departmental issues that can be worked upon. Another area is dealing with regulators, where the end result is a logjam when a regulator indicates something, which is contrary to what you’re hearing from the government and that creates confusion. Third is to move the reform process and ease of doing business process at the local level.
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