Stiffled investment restricts India's high growth potential

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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 stiffled investment in India's infrastructure will unknowingly push back India by a few years,and severly impact the potential of matching China's scale and volume.

The primary reason behind this is the inability of the Indian Government to think big. Unlike China which invested 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, a reason why highway projects under the NHAI moves at a snails pace despite growing demand .The flip side is that the India operation will make any multinational corporation globally competitive and innovative, 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, did buy 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 $2000 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 concentrates in the high volume high growth intensely competitive small car and commercial vehicle segment . Typically a 12 Ton Tata Truck even today is conservatively designed and found carrying up to 20 Ton load on poor roads.


In a way, it has been a boon, because every sector in India, is growth hungry today, as the economy steps out of the recession. Hence demand is definitive high and sustainable. Still western corporations are moving circumspectly, and China continues to attract much 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 despite 35% savings rate, limits India’s potential severely despite making it a safe destination