What Godrej has to say about protectionism

Adi Godrej, 76, chairman of the Godrej Group, has moved into his role as chairman emeritus of Godrej Consumer Products and Godrej Properties, even as he remains on the board of Godrej Industries. While he has handed over the mantle of leadership of the two companies to daughter Nisaba and son Pirojsha, he is a regular at his office in Godrej One, Vikhroli, Mumbai. In an interview with ET Magazine, Godrej spoke about the Indian economy and his companies. Edited excerpts:On consumer and real estate demand in IndiaConsumer demand is growing well. GST is increasing consumption. GST rates on consumer products are lower than in the past, which is encouraging consumption. I expect overall consumer demand growth to be good.Real estate is a little complicated because the new RERA has come, and there are a lot of changes. But with the economy doing well, I expect real estate to also pick up.On the rupee and the current account deficitThe rupee has slid in the last couple of weeks. But for five years before that the rupee was quite steady. If you look at a five-year picture, the rupee is not doing bad. Current account deficit has gone up a little, but our foreign exchange reserves are very good. And now the government is taking steps to correct the current account deficit.On GST implementationGST has gone off very well. It has added to growth. It has helped reduce prices in many areas. From the very beginning in July 2017, GST rates on toilet soaps were lower and we passed on the benefits to consumers, and demand has increased. GST has been well implemented. The government has corrected some earlier infirmities and it is a great reform and will help India considerably in the future. It is helping already.On the opening up of Indian economyWe, at Godrej, have always been for the opening up of the economy. Even before 1991, we had advocated openness. Even now we advocate open trade, no protection. Competition is the best.On Chinese imports coming in at lower costsWhy should they come in at lower costs? We, at least, do not face any Chinese competition. In soap, hair colour, where are the Chinese products? In fact, we export our oleo chemicals to China.On Indian competitiveness versus Chinese companiesOne has to be competitive. Indian businesses, for various reasons, are sometimes not competitive. Earlier we had restrictions that did not allow private companies to expand. There used to be a licence for everything. Now there are many other restrictions like in the movement of goods. GST is a good development: now there will be free movement. We used to have taxes when we moved goods from one state to the other. Even today our corporate taxes are the highest in the world, especially for large companies. For small companies, steps have been taken to make them competitive. We (large companies) pay more corporate tax than the Chinese companies. And the government had announced that it would bring the corporate tax down to 25% but it has done that only for small companies, not the large ones. The ones that compete globally are the large companies. Then we have labour restrictions. So these are some of the reasons our competitiveness is affected.On the Godrej Group companies growing globallyWe expect good growth both from our Indian businesses as well as from our international businesses. We are mainly in developing countries; they are growing much faster than developed countries. At the same time we keep looking for new opportunities for acquisitions, we keep looking at new geographical entries, we keep looking at growth all the time.On the sale of the UK business and global focus on emerging marketsThe UK business was our first acquisition in Godrej Consumer Products. It’s an old acquisition. The main reason we acquired it was that the same owners had hair colour businesses in Africa. We thought it would give us an entry into those businesses, which it did. Later we acquired the same owner’s African hair colour businesses. So it was very useful. Now there is no purpose in continuing in a developed country.On becoming a carbon-neutral groupWe have recently become carbon-neutral. It has also saved us costs. The cost of alternate energy is cheaper than it used to be and in the long run it will be much cheaper than carbon-emitting energy like coal or oil. We have a mangrove forest. Then we use a lot of solar energy at our plants. We have also gone for water recycling. We also recycle waste into energy. We have a large operation in palm oil manufacturing. We are the largest in oil palm cultivation in India. In our factories, the palm waste, which you get after the palm fruits are crushed for oil, is recycled to produce energy. In Godrej Properties, all our buildings are certified green buildings. We have also created a CII Green Business Centre — and now India has the largest number of green buildings outside US. Our headquarters, Godrej One, is platinum-certified. In Hyderabad, we converted plastic into oil.On what has changed at Godrej over the yearsFirst of all, we have grown tremendously. When I joined the business in 1963, the total turnover of the business was `10 crore. We have gone into new areas, value-added areas. We have done a lot of R&D. We have globalised, with manufacturing operations in a lot of countries. In Godrej Consumer Products, for example, we have higher per capita sales in countries like Indonesia, South Africa, Kenya, Tanzania, Nigeria, Ghana, Argentina, Chile, Uruguay, than we do in India. We have globalised a lot and we have size and scale in our operations.On how the group uses modern management training and practicesI went to a management school in the US, when there were no management schools outside America. The IIMs had not yet started. I did both my undergraduate work and master’s from the Sloan School of Management at MIT. So I was able to bring in a lot of management practices which have been very helpful over the years. We have expanded them, added to them. I also started recruiting graduates from IIMs, many, many years ago. We started having management trainees; they have all grown through the companies. For example Balram Yadav, who was recruited from IIM-Ahmedabad, has become the managing director of Godrej Agrovet.

By September 29, 2018 at 11:00PM

Read More