India's economy: The other tiger?

Source: Technology Digital

Date :29/11/2007 11:02:18

India is rising to economically rival China as a destination for inward investment, outsourcing and as a market in its own right. ExecUS investigates.

By Ruari McCallion

‘The Hitchhiker’s Guide to the Galaxy’ began with an observation about the Universe: that it is really big. That blinding glimpse of the fatuously obvious makes a kind of point that’s relevant to India, too. The distances are vast, the changes dramatic, the contrasts are deep.

The offshore energy fields of the south-east, off Tamil Nadu, and those off Gujarat and Mumbai differ from each other and are a world away from the tea plantations of the north. The chaos and bustle of Delhi and Calcutta contrast with the relative tranquillity of Goa. To talk of ‘India’ as a single entity with a unified range of opportunity is to misunderstand the country.

Competition

India is a democracy. China, its neighbour and economic rival, has centralised control over its economy and things happen because the Party wants it to. In India, everyone who has a voice uses it: agreement is necessary before progress happens. That potential weakness – the disparity, argument and need for consensus – can also be a strength. One person who has experienced this is Robert Berkeley, managing director of Express KCS, which provides outsourcing services to publishing houses in the UK, the US and other, primarily English-speaking markets.

“When you land at Beijing, it feels like a western airport. It’s quiet and your progress is smooth. Land at Delhi and you emerge into chaos,” he said. “It’s free-flowing. People leap into any holes they spot and start selling. Delhi airport reflects that [vibrant] culture. If you look, any centralised economic management system will ultimately fail. It can’t govern effectively because it can’t know everything. The Soviet Union tried and failed.”

The chaos that confronts the newcomer into Delhi, Calcutta or anywhere else in India is, then, a manifestation of opportunity. The same could be said of the poor power supplies and inadequate physical infrastructure but one could be forgiven for wishing for a degree of control, so that at least the lights would stay on without recourse to back-up generators and their expensive diesel fuel. Change is happening in India although not as fast as in China – it started later, has progressed more slowly but it’s increasing in pace.

There were false starts and attempts at reform going back decades; some more successful than others. The country can now feed itself, for example. While poverty and hunger persist, the last great Indian famine was in 1967.

Institutions and infrastructure

Economic reform began to look promising in 1980, when Mrs Gandhi made clear her desire to tap into the huge potential represented by NRIs – non-resident investors, Indians and those of Indian descent resident overseas. Restrictions on non-residents investing in private Indian companies had, till then, been total: it simply wasn’t allowed.

The potential was enormous: NRIs’ accumulated savings amount to something over $700 billion. But the process was not smooth. When active outside investors came along, the established families, which had run things pretty much their own way for ages, didn’t like it at all. The issue came to a head when…

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