India: Guarding Its High Growth
Unlike China, India faces and will continue to face major infrastructure problems for the better part of the next decade. Though growth may soon scale the double digit mark (officially projected to be 9% during 2011-12) the infrastructure bottlenecks will keep getting more complex, as demand growth in every sector will continuously outstrip the supply.
The primary reason behind this is the inability of the Indian Government to think big. Unlike China which invested in 16 lane highway projects years before the turn of the century, India infrastructure still trudges on with grossly inadequate 4 lane and 6 lane roads.
So the investor or the infrastructure company who will be associated with India’s growth story, must prepare himself for a long haul ahead, where every year or two he will be called upon to add two more lanes to a bustling highway, with traffic bursting at its seams. That will squeeze investment appetite and margins,and slow down projects .The flip side is that the India operation make companies globally competitive , battle ready for the smaller emerging economies.
Conservative thinking is still a norm in India, be it the public or the private sector. Tata Motors India’s indigenous automobile company, bought into the top British luxury car brand Jaguar, but not for India’s domestic market where they now make the world’s cheapest car, the $2,000 Tata Nano.
The Tata brand image makes a serious effort to associate itself with the common man, and not with the high end consumer in India, and is focussed on the high volume,high growth, competitive small car and commercial vehicle segment. Typically a 12 Ton Tata Truck even today is conservatively designed and often found carrying up to 20 Ton load on poor roads.
In a way, the stifling has been a savior, because every sector in India, is growth hungry today, as the economy steps out of the recession; hence demand is definitive and sustainable. Still western corporations move circumspectly, and China attracts 10 times more FDI, leaving the Indian marketplace alive to the doughty Koreans and home bred entrepreneurs managing western joint ventures. The tightfisted policy that invests only 7% in infrastructure development in spite of a healthy 33% domestic savings, limits India’s potential severely despite making it a safe destination