Future Generali

How can labour driven businesses pivot in times when labourers are moving back to their homes?

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Rakesh Wadhwa:

There've been an Exodus of labor from rural to urban centers in search of better prospects and jobs. And now it's reverses happening because of health and people are taking flight of safety. Do you see a change in the manufacturing setup here that more manufacturing hubs will be created closer to home for in these rural areas, given that labels may find it difficult to come to work any time soon?

Lloyd Mathias:

There are two realities. One is at a mass scale like I said earlier I think there will be some realignment of manufacturing. Our manufacturing was concentrated around one or two big centres. There are a lot of companies looking at having diverse manufacturing locations. But should you have two big factories or should you have no 25 smaller factories? You will not get the same economy of scale but you would face less disruption. So there is going to be a fragmentation of manufacturing as a reality. It might have a slight cost implication but it's long term considered better for the resilience of the business. So that's the macro level.

I recognize that today a lot of small and medium enterprises a lot of the small setups industrial estates, a lot of the migrant labor has moved back. There's no switch on button that on June 1st they're all marching back should the lockdown get lifted. So this impact is going to stay longer. I do see the possibility of a lot of local manufacturing also possibly wind around. So looking at different States looking at multi-locations. So this whole business of mass migration into the cities I think some part is going to be tempered down. So it will be important for companies of manufacturing units to look at segregating and spreading their manufacturing at various locations of the countries and also sourcing labour from areas where they have to spend less. This is not just good for the business. This will also be socially Relevant for the community. A lot of regional political parties say that says you must hire people from that particular state. So I think one level it caters to that need.

The second part is also a good thing because if a company it's deep roots in a community where it operates it always pays back in the long run and you get the Goodwill of that community coming back. So I do think there will be a fair amount of change. I do see the possibility of a lot of that realignment happening. And I do think that a lot of the labor that migrated out won't come back in a hurry. Some of them will look at alternate avenues of employment of going back to your farming work.

So I think that will have to be taken. It will count as you go forward and plan. As regards to spike in price, don't think that's going to happen to an extent, markets will continue to be competitive. You don't have the luxury of taking the price hike. Companies will need to find efficiencies even as they segregate manufacturing.

 

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