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'Nobody wants to start an industry in India'
“We are one of the very few emerging economies in the world with a current account deficit. That is because nobody wants to start an industry in India. You can't get permissions, and once you get it, politicians interfere all the time,” says Dilip Kapur, Founder & President, Hidesign.
Kapur started his business with just Rs 25,000 in 1978. Today, his leather business is an international brand worth more than Rs 150 crore (Rs 1.5 billion) with 84 exclusive showrooms (72 in India and 12 international) and a distribution network of over 2,000 stores in 23 countries. More than 1,500 people work for Hidesign.
After doing his Masters in Economics and PhD in International Affairs from the prestigious Princeton University, Kapur started designing leather bags as a hobby and then turned his passion into a successful business enterprise.
“Because we started off as rebels, we were able to create more innovative things. Whether it is in music, literature or even in business, rebels have innovated,” says Kapur.
In an interview with Shobha Warrier at Hidesign’s Pondicherry factory, Dilip Kapur talks about the trials and tribulations of being a manufacturer in India, the current economic scenario and prospects for the Indian economy.
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'Nobody wants to start an industry in India'
How do you assess the current Indian and global economic situation?
Today the global and Indian economy are connected. But as India is such a huge country it does not necessarily mean we should be dragged down by the global economy. But blaming the global economy for our economic problems is rubbish. We should blame ourselves.
That is why I feel disappointed. Our current account deficit is massive. We are one of the very few emerging economies in the world that has a current account deficit.
That is because nobody wants to start an industry in India. You can't get permissions, and once you get it, politicians interfere all the time. This will remain a major issue.
Some economists say that India can be the services capital of the world. Can you ignore manufacturing and rely only on services to grow?
We are such a huge country so how can we go on living servicing other people? At this stage of our economy, industry is very critical.
As India becomes less competitive, it will not be attractive for services. Many American companies have started doing back end work there itself. Also, you don't need so many people to run the services except a few cases like the hotel industry.
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'Nobody wants to start an industry in India'
Do you feel manufacturing has to be the backbone of an economy?
I have nothing against services. How will you do services when you don't have good infrastructure like roads, power and connectivity?
As a manufacturer, how have the last few years been for you?
The consumer in India is full of optimism and confident of a better tomorrow. He is reluctant to shop. So, for people like us who deal directly with consumers, do not see a problem. Hidesign has only been growing.
As an industrialist, I don't see any of the ups and downs the nation experiences. Our consumers are only increasing. I will give you the numbers and then, you will see there is no recession in India. In 2013, we have registered 39 period growth compared to the same period in 2012. Our growth at Shopper’s Stop is 69%. Do you call this recession time? (laughs)
We hear that Indian consumers are crying about inflation, and you say, Indian consumers are on a buying spree. Is it not because your target consumer is from the upper strata of society? Does not your growth reinforce the theory that the rich are getting richer and the poor getting poorer?
Quite possible. Also, the aspiration levels of the upper middle class also are increasing. Ten years ago, our customers were actors, CEOs and foreigners living in India.
Today, the upper middle class in India also buys our bags, and not just the upper class. If a woman is single and earns Rs 30,000 a month, she still aspires for a Rs 5000 bag! That is why I said the aspiration levels have changed.
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'Nobody wants to start an industry in India'
From when have you started seeing this change?
In the last 5-6 years, we have started seeing major changes.
That was the time recession started globally...
But it had had no effect on our company except in the UK. UK was our biggest market till 4-5 years ago, and now, India is our biggest market, more than double the size of the UK.
After the recession started, for the first time now, we have started seeing growth in the UK market.
Do you feel the global economy has started looking up?
Yes, consumers are feeling optimistic. I feel people are getting used to the idea of lack of growth. Their expectations are coming down. The optimism with which they looked at the world has gone. The west has seen only good prospects after the World War 2 and they expected only growth every year.
Now, they are getting used to the idea of bad years. The consumer binge you see in India, you don't see in the West.
It is a different story in Asia for a producer like me. But let me tell you, when China was booming, it was not a consumer boom, it was an investment boom. But here, our consumers are buying but there is no investment in India. That is the difference between China and India.
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'Nobody wants to start an industry in India'
Do you feel China will soon topple the US to become the number one economy in the world?
They will be the biggest economy with a huge population. As far as per capita income is concerned, it will take 100 years for them to be at par with the US. Chinese economy is also slowing down while American economy is so rich with many innovative ideas.
Is innovation the key to growth?
When you are wealthy, it is. When you are poor, you can copy, which the Chinese are doing in a brilliant way.
For the mass market, the Chinese have done wonders. Their industries have done wonders.
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'Nobody wants to start an industry in India'
Where do you see India in the next 5 years?
Recently, The Economist asked, when China becomes very expensive, will the industry look at India as the next place? They had serious doubts as it is not easy to run industries here.
It is extremely complicated here because of lack of infrastructure, government regulations and red tape and labour problem.
Despite all this, India is growing. That is because of the human power and its talent. Ours is also a consumer-led economy and not investment-led economy.
We are so far behind that we can only grow.
How tough has it been for you as a manufacturer?
It has been very tough. The government and the labour are two difficult parts of running an industry here.
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'Nobody wants to start an industry in India'
Have you seen any difference in red tapism post liberalisation?
No, I don't think there is a single department in the government that has been made redundant. I don't see any difference.
Perhaps, liberalisation made a difference to the Birlas and the Tatas but for the small and medium industries, I don't think there is any change.
That is where the heart of all economies lie whether it is in China, America or Germany. It is the small and medium ones that innovate and create employment opportunities and help the economy grow.
Which is the most attractive market for Hidesign?
To build a brand, you need to find a way in Asia. For a brand like ours, it is much easier to break into the Asian market and our future lies here.
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'Nobody wants to start an industry in India'
How do you see the performance of the Indian leather industry?
Largely, it is an export oriented industry so it is not doing well because of the global recession.
Many are suffering. And, most importantly, Indian companies are not building brands. We are one of the rare brands. You have to invest time, people and money to build brands.
For the leather industry that produces for the western and European brands, it is not the local market that matters as they supply to all the major international brands.
If you don't build brands, you are dependant on others. If you are dependant on the international economy, you are in trouble.
How much has the leather industry been affected by the fall in the rupee’s value?
It helps me in my exports and hurts me in my imports! Overall, it doesn't matter to me and Hidesign. To Asia, it matters a lot.
From the general perspective, it will jack up the inflation again in India. Oil price will go up. When oil price goes up, price of every other commodity goes up.
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'Nobody wants to start an industry in India'
Did you ever find a contradiction in what you do now? You started off as a rebel, against the Vietnam war and now you sell your brand to the upper crust of the society.
Yes, there is a contradiction. But many of us who thought we could change the world, did not succeed. Finally, we joined the world. But I have kept my values intact, like anti-racism, anti-pollution, etc.
Because we started off as rebels, we were able to create more innovative things. Whether it is in music, literature or even in business, rebels have innovated.
Look at Steve Jobs who was a hippie! Richard Branson was a hippie.
What is the role of capitalists in a society?
Wealth creation is the job of individuals and not the job of the government. Wealth distribution is the government's job. I would say you need both the creator and the distributor.