India – BRIC or brick?
India: land of enchantment
India: exotic home to Ganesh and Shiva
India: home to a billion consumers, and 3rd largest GDP
India: foolish or Foolish investment?
Many, including TMF, have described it as a lucrative place for US multinationals to do business, and an economic opportunity ripe for the picking. It is (by US standards) a poor country striving towards an abundant middle class, and they are going to need to buy stuff; lots of it. A good place for investors, to be, yes?
But I wonder.
I have watched with interest: twice in as many days the electrical grid over half of the country has simply collapsed, leaving hundreds of millions in darkness for several hours at a time. In fact, blackouts are a part of everyday Indian life, and most are prepared for it.
What's up with that? I have read news wire stories with interest, and have noticed that:
**electrical generation is 8-9% short of demand
**1/3 of all electricity generated is siphoned off illegally
**¼ of all Indian homes have no electricity at all
**electricity generation (along with the coal to fuel it) are government monopolies
**blackouts are so common, economists can calculate the inflation caused thereby
**the infrastructure needs hundreds of billions of $$$ (or its equivalent in rupees)
I have heard India described as a socially stratified country rampant with prejudice. Dealing with corruption is a daily task, especially if you are in business. It is also burdened by an old, inefficient, Soviet-style bureaucracy that pervades every aspect of economic life. It is difficult for me to see much evidence of an underclass striving mightily for middle-class-dom and a materially abundant lifestyle. I am becoming increasingly skeptical of the idea that India is an economic volcano just waiting to be uncorked.
No, no, I am not suggesting that you short ETF's or mutual funds based on India or anything of the sort. I would, however, temper your dreams of India as a tree full of ripe fruit, just waiting for you to pluck the sweet, juicy morsels.