Naushad Forbes, co-chairman of Forbes Marshall, is the new president of the Confederation of Indian Industry (CII). In an interview with HT he talks about issues such as credit growth, reforms in taxes and labour, and the industry’s expectations. Excerpts:
How do you look at the credit growth situation? RBI recently announce a rate cut, but banks are struggling with the NPA problem.
As demand starts picking up, and companies absorb all of the existing capacity, they have to start investing in new capacity, which would require loans. In a sense we still have a little bit of window to sort of the NPA problem before that actually happens.
Credit growth will not happen only through an interest rate cut, it is part of that broader package of liquidity growth. You need banks to sort out their NPAs, demand needs to rise in the economy, inflation needs to come down, the deficit needs to be under control – when they all go together, we start seeing that virtuous circle of investment and credit growth.
There has been a lot of hype about Make in India. What is your take on the outcome so far?
There has been a 30% increase in FDI, and there is a shift to manufacturing. You can credit that to the Make in India initiative and its active marketing. The final outcome seems to be very positive. We are just at the beginning. More success stories will inspire more companies to come and make in India.
For instance, take Foxxcon’s announcement of the billion-dollar investment that will lead to a million jobs in 10 years. It is a potential game-changer as electronics hardware manufacturing is an area where are weak and not present in the global supply chain.
How do you look at progress in GST? Shouldn’t have the industry involved in more dialogue?
We worked with the government and opposition. When you have opposition it is easy to deal with it, but here the problem is dealing with it when you have an (in-principle) agreement.
The only thing that is keeping it from happening is politics. When we met the opposition, they were really supportive of getting it passed. It is a political stalemate. We keep working on it.
But you should not underestimate the progress too. Initially there were many objections. Then it came down to three, out of which two have been agreed to, though not officially. Only one remains now. I think if both parties wanted to pass the legislation, they will sort it out easily.
Labour is a major issue with industry. How do you look at the reforms?
The government has gone for an interesting approach as it is a politically contentious issue and very difficult to move ahead. It is encouraging states to go on with their own labour legislations, and recognising them. Five states have done it, including West Bengal. Other states like Maharashtra and Tamil Nadu have started taking about it. I think it is a productive way of going about.
Is anything happening at the industry level on this?
A lot. We have an ongoing dialogue with trade unions in CII, for over more than 2-3 years. Intention is how do you build flexibility and enable industry to create jobs with confidence, and how do you shift the economics for industry to invest in people and job creation instead of investing in machines and automation. The dialogues are productive.
The unions are recognising that there are new sectors of the economy opening up, the difference between shop floor and non-shop floor jobs is blurring all the time, and the fact that intermediate solutions like contract labour are not going to help anyone as industry doesn’t invest in training contract labour, and the contract labour is not unionised.
CII has also formulated a set of fair and reasonable guidelines for the industry to follow to deal with contract labour and labour in general. We are going for a national rollout.
But today many manufacturing processes are becoming less labour intensive...
The actual manufacturing process in some industries is becoming less labour intensive. But what is beyond the manufacturing process – like logistics, support function, engineering, servies — is where a lot of employment is created. Those require different skillsets and completely different labour practices. Currently all of our labour practices are totally focused on the shop floor. In fact, the recent changes in apprentice act recognised this.
We need to look at the overall job generation, as manufacturing-plus. For instance in Delhi the largest growth in employment in the last five years was in the number of drivers. In a way it is a reflection of the increasing production of cars.
You said you expect an 8% GDP growth this year. Isn’t that too optimistic?
We have a solid reason to base that optimism. We expect a good monsoon this year. It would lead to recovery in rural demand and agricultural growth. When agriculture recovers, it bounces back and makes up for the previous years. So we expect a solid, strong, positive contribution to overall GDP growth from agriculture this year, which is where the increase over past two years will come.