How to improve infrastructure in India?

While I have been advocating investment in India, but one of the things that frustrates me as that when I try to dig opportunities there, the sad state of infrastructure in the country is a serious risk. The moment you land there, you realize that India has a long way to go. And I am not even talking about other things that make doing business in India so difficult - widespread corruption and clueless bureaucrats.

I do not intend to use this post to whine about inadequate infrastructure in India or the nuisances of doing business there. On the contrary, let me point out how you can make a difference this year at TiECon.

As I had mentioned in a previous post, I am particularly delighted to know that we have a few folks attending who can actually do something about the infrastructure. That's right; we have several members of Indian parliament who will be attending.

While each one of you may have your own wish list and you are welcome to discuss it with them, but here are two broad guidelines on what you must definitely try to highlight:

1. No infrastructure, no investment: Unless the state of infrastructure improves, you will NOT consider making major investments. Like any risk management analysis will point out, a country that cannot provide reliable sources of power, transportation network, and telecom is low on the attractiveness ladder. It is not that we are playing hardball - it is just the way we have to manage our investment risk.
2. Deregulation and privatization to encourage investment in infrastructure: When investors allocate capital for infrastructure that should have been provided by someone else (not necessarily the Government) at a much lower cost, nobody wins. In other words, when companies set up their own mini power plants at their facilities, everybody loses. Therefore, the lead on this has to come from the policymakers in form of deregulation and privatization.

UBS did a report in which it found that ROCE in India during the 1998-2003 period was 17% versus 11% in China (the actual number may actually be much lower due to subsidized capital in China), and the productivity/competitiveness in India is far higher than that in China, but it still lags China in attracting investors. We should tell policymakers the reasons.

- By Jay Dwivedi

Photo courtesy: Tom Maisey (Used under creative commons license)