The newly appointed president of Confederation of Indian Industry (CII) Naushad Forbes is upbeat on the Indian economy as a whole. He singles out roads construction sector as doing well. Road developers are getting fresh orders and, for once, actual work is getting done on the ground, he said in an interview to CNBC-TV18. He gives a big thumbs-up to rural economy, which, in his view, has picked up pace.
As regards other sectors, especially those that are doing poorly, one can still see some star performers in them, he said.
Private investments are still a long way from being desirable. Only a recovery in demand will incentivise the private players to come forward and put down money, he said.
Further, this sluggishness in the investment cycle is because of legacy issues, he said, which is why banks aren’t willing to lend.
The solution to this problem will have to be found in labour reforms, among other initiatives, he said.
"Our goal should be to have more home-grown multinationals,” he said.Below is the transcript of Naushad Forbes's interview with CNBC-TV18's Shereen Bhan. Q: The CII just held its national conference and that usually is an occasion where you get corporate India together and do an informal dipsticks survey to get a sense of what industry sentiment is like. Some signs of a turnaround of a recovery visible now but what is your sense from your conversations with your peers?A: The sector where we have seen the greatest recovery and most progress is in road construction where many developers have been reporting for quite some time now that projects have not just been awarded but are moving on the ground, the deployment is happening. We have an associated councils which have many sub industry and industry focused bodies that belong to the associated council. We have a construction equipment manufacturers association as a part of this council. They have now for a few months been reporting very strong growth in orders for new construction machinery, especially road construction machinery and that is the best indicator if you like of the pickup in activity that we are seeing in that sector actually happening on the ground.We are also seeing some signs of greater confidence returning to the rural economy. It is still early days but I think the Budget announcements of investment in the rural economy have generated a lot of positive sentiment. There are expectations now of how this will start flowing through into the rural sector and we would expect some of those benefits to start showing up in orders both for consumer goods and industrial goods shortly.In terms of other sectors I think it is a very mixed performance. It depends very much on the firm. So, what we have seen over this last year is that every sector, even the sectors that have been in a sense most depressed have a few stars in them who have been doing very well. I think that is one of the key learning's which is that it is not so much that we should look at sectors that necessarily have to be doing very well but how can we see more and more firms doing very well. Over time those many firms will aggregate into a broader based recovery.Q: Can we then expect a pickup in private investment which we haven’t seen so far. Any pick up as far as the capex cycle is concerned as well?A: I think that is still a little time away. I think most firms still also report having adequate capacity in place. So, I think the concern very much is on the demand side. I think the first step is really to see a recovery in demand, that now seems to have started. That recovery in demand has to flow through consistently for a period of time before it absorbs all of the existing capacity that is in place. Once that happens then I think firms will start committing fresh investments for additional capacity, that is I think still some months away.Q: Is debt burden continuing to be the number one pain point, what about credit from banks and of course the high cost of credit and also the regulatory burden. If I could ask you to specifically point out the pain that industry is facing, how would you prioritise these?A: For some specific sectors like construction, many of the infrastructure sectors that is where the debt burden is particularly critical. It particularly has affected developers who have invested in various projects in the past and they have been struggling with either sluggish execution on the ground or projects that got stalled because the government wasn't able to deliver on its part and this is a legacy, this is not anything of the last two years but a legacy of not being able to fulfil the conditions of a PPP project for example which have then led to those projects being stuck. That then leads to an overall sluggishness in the investment cycle.So, I think the infrastructure sectors have been particularly hit by the problems of the banks. That shows up in the rest of the economy as well because of the reluctance on the part of banks to provide a lot of additional capital. Q: Let me ask you about a specific issue. There was a meeting held by the commerce minister, the board of trade meeting to discuss what can be done to try and revive and rev up exports which continue to be a dampener. Any specific recommendations where we should expect forward movement this oft repeated issue of trying to sort out the problems as far as special economic zones is concerned what can we really expect in terms of action after that meeting specifically on the export front?A: From a trade policy stance we should see us as a country move from a stance it seems to us largely defensive where we have been focussed on restricting the access of foreign firms to the Indian markets. That is okay, but we should be much more outward looking we feel and we should be much more focussed on how we can increase the access of Indian firms to foreign markets that are of interest to us. How do we grow, 100s or 1000s of Indian multinationals or multinationals with Indian roots, home-grown multinationals that has be our goal and to that end we then had a few recommendation. There is a need to see much greater activity in certain sectors where we have had traditional strength like textiles and garments but where as a country we have kind of lost out in the last few years. As wages in China have risen the garment industry have moved out of China but it has moved to Bangladesh, Vietnam, it has not moved so much to India. And for it to move to India we need to address broader economy wide issues, issues of labour reform, issues of logistics, issues of infrastructure and connectivity. These are the kinds of thing that will create more dynamism in that sector. In a sense there is a range of industries and sectors where some of where we are well represented and well on our way and have many things in place. Other things where we really need to begin the process of becoming more actively engaged on those supply chains throughout the value chain, whether it is making finished products, making components, developing the technology that underlies those sectors.
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