RECESSION AND THEREAFTER – Interview – Dr. Naushad Forbes

Pune: Naushad Forbes, western region chairman of the Confederation of Indian Industry (CII), is upbeat about the course the country’s manufacturing sector will take in the third quarter. The sector will, however, have to undergo a vast change in terms of resource optimisation, process of manufacturing and the way a manufacturing facility exists, Forbes told TOI.

Forbes said the experience of the last five or seven years has given a boost to the confidence of the manufacturing sector. “Early in this decade, when India was emerging from the downturn caused by the Asian crisis, there was a fear of getting wiped out by China as China scored over India on cheap labour and the capacity to handle large volumes. That fear is now gone and the Indian manufacturing sector is confident that it can deliver the best in the world at a competitive cost.”

This, according to Forbes, is the factor that will push manufacturing to centre stage and make it India’s growth engine. There will be, however, a paradigm shift on the operational front as minimal manufacturing will come to fore, thereby implying that the scarce resources will be optimally utilised, he said.

“Tata Nano has demonstrated that a low-cost product with high quality standard can be delivered. This philosophy will have to percolate into other sectors. That will trigger a wave of new products that will use low-end engineering and will yet be relevant for the Indian masses,” he added.

Forbes pointed out that the recently announced financial results of many city-based companies for the second quarter — July-September 2009 — show that they have earned substantially higher profits than they did in the first quarter. The tightening of belts is complete and the businesses are now looking at how they can improve, he said.

“Productivity growth is the highest during any recession and the one that hit us last year is no different. Every manufacturing unit observed the way it operated and found every possible opportunity to cut costs, capital expenditure was frozen and human costs too were controlled significantly. The trend of high profits on a flat or low turnover tempts us to ask — Did the recession end a little too soon?” Forbes said.

On the human resource front too things are looking up, Forbes said, citing surveys done by the CII. In 2001, engineering students preferred IT and finance as the top two sectors to join and manufacturing came third. Two years ago there was a tie-up between IT and finance and now manufacturing is brushing shoulders with IT as an equally preferred career choice, he said.