India fights hard against recession
WPI: What effect has the GFC had on your respective businesses?
A: Sudhakaran: I will answer this question as the head of my plumbing contracting company ESSENCO (the other cap I wear is of the president, Indian Plumbing Association).
Quite frankly, despite the GFC, the figures in our profit and loss account for the fiscal year that ended on March 31, 2009 looked reasonably healthy. True, we could not achieve the projected improvements over the previous year and the profit margins were affected to some extent. However, the volume of work in hand has been steady. This is because of the large construction boom we had just prior to the GFC when large contracts were secured. We are still busy executing those contracts.
WPI: What effects do you feel the economic downturn has had on the plumbing community at large?
A: Sudhakaran: The plumbing industry in India is unique, in that hardly 10% of the total size of the industry is shared among members of the organized sector that involves reputed consultants and contractors. The rest of the works are undertaken by just about anyone.
The GFC’s major impact in India has been on the real estate sector. While this is a large market, only few of the real estate developers employed established consultants and contractors. While manufacturers and traders of plumbing products were hurt to some extent due to the slowdown in this sector, consultants and contractors had only marginal concern.
WPI: What measures have you implemented within your businesses to counter the downturn?
A: Sudhakaran: Despite the GFC, the focus on construction of projects like hotels and hospitals still remain largely unaffected. There is tremendous shortage of hotel rooms in most Indian cities resulting in hotel rooms in a city like Bangalore being more expensive than in New York, Paris or Tokyo. One can witness a boom in construction in these sectors currently with International and Domestic investments. Concentration of companies like ours is now on these projects.
WPI: What can the plumbing community do collectively to combat the GFC?
A: Sudhakaran: Globalization is probably the answer. For example, irrespective of the crisis in the world economy, the Indian economy is still projected to grow by 6% in the current fiscal year. Our plumbing industry still has room for manufacturers and traders of world-class plumbing products. Many overseas firms involved in architectural practice, project management, etc have established in India during the past five years or so but none in the plumbing industry.
India could be just one example!
WPI: What markets do you feel have been worst hit? Why?
A: Sudhakaran: As mentioned previously, mainly the real estate sector. Housing for the financially lower strata of the Indian society had become unaffordable during the boom days because the builders concentrated on high-end residences and commercial spaces and made unrealistic pricing the norm. There is still huge demand for residences from the lower middle-class in particular. Thankfully, the builders have now realized this and have started catering to affordable housing.
WPI: Has there been any industry upside to the GFC?
A: Sudhakaran: Yes indeed. Taking advantage of the construction boom and the sudden discovery of the prospects in the plumbing industry, several ‘cowboys’ had entered the arena. The slowdown will naturally result in a correction since the men will be sorted out from the boys!
Secondly, due to the crisis faced in their home countries, renowned manufacturers from Europe, USA, etc have started showing interest in the Indian market. The fact that almost all those who came have tasted success, proves the acute shortage of technically sound plumbing products in our domestic market.
WPI: When do you predict the markets to turn around?
A: Sudhakaran: Continuity of our federal government ensured in the recent national elections has given hopes of a total financial revival in India within months. We are fortunate to have some of world’s best economists handling the nation’s finances during such interesting times. The decision in the annual fiscal budget to provide a huge impetus on development of rural economy, healthcare, education and infrastructure will mean that the construction industry will remain busy. We are unlikely to have enough homes, offices, hospitals, hotels, schools and highways in the immediate foreseeable future!