A Com­pre­hen­sive In­sider’s Look

Norway-Asia Business Review - - News - By Eric Baker

There is a feel­ing among some an­a­lysts that although Thai­land and In­dia took dif­fer­ent paths to get to their cur­rent lev­els of eco­nomic devel­op­ment, they both need the same thing to break through to the next level — in­fra­struc­ture in­vest­ment. Pra­math Raj Sinha, se­nior ad­vi­sor of In­dia for the Al­bright Stone­bridge Group, a global strat­egy and busi­ness ad­vi­sory, as well as a keen ob­server of the sub­con­ti­nent for decades, is sym­pa­thetic to that hy­poth­e­sis. In­dia is an un­usual case study, in that it went straight from agri­cul­ture to de­vel­op­ing the ser­vice sec­tor, un­like most mid-level economies, such as Thai­land, that turned to man­u­fac­tur­ing. “The In­dian gov­ern­ment has re­cently put a lot of money into de­vel­op­ing in­fra­struc­ture for the first time since lib­er­al­is­ing 25 years ago,” said Mr Sinha. “One key dif­fer­ence be­tween Thai­land and In­dia is the size of the pop­u­la­tion, and you can’t lift your econ­omy up to the next level of devel­op­ment with­out man­u­fac­tur­ing. In­dia went straight from farm­ing to ser­vices and the IT sec­tor. But you need roads, power, wa­ter, rail and land rules in or­der to de­velop. “The good news is that there is great mo­men­tum to change this un­der Prime Min­is­ter Modi. The feel­ing is the coun­try has great po­ten­tial if in­fra­struc­ture in­vest­ment can un­lock it, but the scale of public funds is limited. That means In­dia needs to en­cour­age pri­vate in­vest­ment. “The prob­lem stems from pre­vi­ous gov­ern­ments try­ing trickle-down eco­nomics, which did not work. The gap be­tween the haves and have-nots in­creased greatly so the gov­ern­ment had to do some­thing about this. It took the easy way out and went with doles to the poor­est seg­ment of the pop­u­la­tion, which took away public money that could have been used for in­vest­ment. “Our oil im­port bill grew be­cause we do not have our own sup­ply, which led to huge deficits. The Modi gov­ern­ment is try­ing to curb the deficit over the next few years, while still try­ing to build up in­fra­struc­ture. This is where pri­vate in­vest­ment be­comes key, as pre­vi­ous ef­forts have all been public-pri­vate part­ner­ships [PPP], and all have failed mis­er­ably. In­dia has very com­pli­cated PPP laws and a lot of the projects were de­layed be­cause of dis­putes about money and trans­parency, keep­ing pre­cious pri­vate cap­i­tal un­used. “Great strides can be made just by un­der­go­ing sim­ple in­fra­struc­ture im­prove­ments in the power grid and dis­tri­bu­tion to con­sumers in In­dia. If you look at the early days of the US in the 20th cen­tury, a lot of growth came from ba­sic in­fra­struc­ture gains. Mr Modi is try­ing to un­lock those gains now through pri­vate in­vest­ment. “Some in­fra­struc­ture im­prove­ments have al­ready been made. Most of the ma­jor air­ports in In­dia now are world­class. Our mo­bile tele­phony net­work in­fra­struc­ture is also world- class. The coun­try has 1 bil­lion mo­bile phones now and 3G is ev­ery­where. We’ve shown how suc­cess­ful you can be in in­dus­tries if you open them up to in­vest­ment and lib­er­alise them. “If only we could repli­cate that suc­cess with roads, power and wa­ter. The main ques­tion is how quickly and eas­ily we can solve th­ese in­fra­struc­ture bot­tle­necks, be­cause the de­mand is there. “Although the busi­ness com­mu­nity is op­ti­mistic about Mr Modi, for­eign in­vestors have a gen­eral feel­ing of un­met ex­pec­ta­tions with In­dia. Ev­ery­one has been talk­ing about the prom­ise of In­dia for decades, but there were al­ways

“There is a mas­sive push for re­new­able en­ergy in In­dia. We could

quickly be­come one of the largest so­lar en­ergy pro­duc­ers in the world”

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