China, China everyone, India anyone? ( 1210 hrs)
China-envy is reaching a fever pitch as nations struggle to compete with the world's most dynamic economy. The China-all-the-time mindset is making it difficult for others in Asia to get attention, according to Bloomberg columnist William Pesek Jr.
"Nowhere is that truer than India. Even though Asia's third biggest economy may grow more than 7% this fiscal, India is struggling to get on to more executives' and investors' radar screens. Those who ignore India may regret it," says Pesek.
"Many of India's attributes are being taken for granted, especially among corporate executives," he added.
China bulls aren't necessarily wrong, but ignoring India's long-run potential, however, could be one of the biggest mistakes executives and institutional investors make in the next decade, he writes.
"India has myriad problems. Even if the country grows at 7.1% as groups like NCAER expect, it may not be fast enough to raise 400 million of its one billion people out of poverty. New Delhi says it needs 8% growth over the next decade. Dodgy infrastructure and notorious bureaucracy continue to steer away the kind of long-term investment China gets loads of. Yet, India is no longer a basket case, and it's likely to be one of the great investment surprise stories of the next decade.
"Where India has an advantage over China is the nature of its economy. China's is a political one and its success comes from a top-down approach to things. India, for all its problems, is a bottom-up economy in which entrepreneurs are pushing the government to reform and streamline. That tension could give India an edge in the long run."
China's boom isn't hollow, per se, but it's heavily dependent on foreign direct investment (FDI) - the economy mostly serves the demands and needs of foreign-owned firms in foreign markets. It explains the dearth of internationally known Chinese companies that operate on a global scale and market their products abroad.
"You would be hard pressed to find a global investor who hasn't heard of Indian software firms like Infosys Technologies or Wipro. Ditto for drugmakers like Ranbaxy and Dr. Reddy's. The presence of such names explains why India is attracting increased institutional investment, while China isn't.
"The question is how much China's rise shakes India out of complacency and catalyzes officials to modernise the economy. Privatisation minister Arun Shourie, whose progress in selling state assets has impressed many investors, warns that China's economy could surpass India's by six times over the next 15 years if the current pace of reform continues.
"Shourie argues that India's improving growth environment offers a moment of opportunity but only a moment. It's an important point. New Delhi's bureaucracy gets in the way of that opportunity. Entrenched bureaucrats resist change because of political differences, not sound economics. While that's true anywhere, not every nation is dealing with such crushing poverty.
"Once India begins attracting more foreign direct investment, its comparative advantages over China -- like entrepreneurial and management skills -- might be reinforced and boost Indian growth."
One sign of hope is the rupee's rise. "It indicates a sense of economic maturity and confidence. It's attracting capital into Indian markets, boosting stocks, reducing interest rates and allowing the central bank to keep borrowing costs low. It is also prompting the government to step up plans to repay more high-cost overseas debt before it matures."
The columnist concludes by saying: "China is going places, but so is India."
business-standard.com |
