The world is currently preoccupied with China's run to the economic top of the world, but the China bulls could be all wrong. Whereas China has liberated the economy but still suppresses any political oppposition, India is all different.
Searching for words that could adequately describe the dynamics of the world's biggest democracy leads me to the term "mind-boggling."
Having criss-crossed India exactly 25 years ago for a very short 18 months I am amazed of the economic progress in this nation of one billion people that now grows at a solid 7% p.a. while an obviously smart central bank succeeds at keeping inflation at bay without hindering long-term growth. Memories of a time when India followed a leftist-oriented austerity policy, punishing imports with duties of up to 300 %, immediately fade away. While GDP per capita is still a paltry $3,100 and put India on rank 149 among 226 countries, the capital has become a truly international metropolis.
An ongoing liberalization of the banking sector will be sped up further. Only recently authorities decided to extend the number of licenses for foreign banks from 20 to 100 and industry observers expect more steps that will help the domestic banking sector grow out its infancy and become more efficient. With an average staff of 153 in every bank branch and physical check delivery the potential for rationalization is simply enormous and should even keep the state-owned banks - which comprise the majority of banks - in the black.
In comparison to China India's banks are not burdened by a myriad of non-performing industry loans while consumer loans fuel a surge of domestic demand. Queues in front of the sales-desks of car and bike dealers prove that the Indian consumer has money to spend and having accidentally gate-crashed a private party of the Indian upper crust flaunting their wealth in a hotel that charges $350 and more per night I am baffled by the easy-going lifestyle of those transforming the Indian subcontinent from a poorhouse into a powerhouse.
While I have always harbored the suspicion that India may surpass China one day - simply for the fact that Indians can strike their deals in the lingua franca of this world, English - intense discussions with my friends at Business & Economy, India's biggest econ magazine opened my eyes for the immense intellectual potential that is surfacing here. Where else in the world could I have met 21 year young MBA's that already have a track record of successful ventures with more than a handful of exciting and unique projects waiting in their drawers for short- and medium-term realization? I am proud to be a member of their team of exclusive columnists that is made up of such controversial and well-known thinkers like Noam Chomsky, Marc Faber, Thomas L. Friedman, Jeffrey Sachs, Joseph Stiglitz, Jack Welch - and Toni Straka
An openness in discussions I have always missed in other Asian cultures seems to be the visible expression that Indians want to work with and for the rest of the world.
While the hand of government can still be felt in many areas - blocking progress by unnnecessary regulations that mainly secure the jobs of government employees - India still has come a long way.
Some Micro Impressions
- 25 years ago it was the norm to wait 8 years for a telephone line and a 3-minute international call was $5. Today it took me 15 minutes and less than $20 to get a SIM card for my mobile, 500 minutes local talk time included (international calls are 30 cents per minute, cheaper than in Europe.)
- 25 years ago Indian airways was the sole domestic carrier. Today you can choose between 10 private and low-cost carriers.
- 25 years ago there was no Coca-Cola. Today environmentalist groups may succeed in a new ban of the brown liquid because of pesticide levels that exceed Western standards.
- 25 years ago it took an hour and up to 17 forms to cash a travellers cheque. Today it is done in less than a minute.
- 25 years ago a typical lunch cost 5 Rupees or a half-dollar. Today it is 25 Rupees - or still a half-dollar. Inflation! What inflation?
- 25 years ago there were no foreign brands and Indians had the perception that all locally made goods were inferior. Today you can get whatever you want - and Indians have found out that foreign does not always mean better. A long list of Western and Japanese companies that have failed to satisfy the needs of one billion incredibly quality-conscious consumers and consequently faltered shows that Indians cannot be fooled for long.
- 25 years ago I could not have ordered a Tanqueray & Tonic but only “3 Star Whisky” that made you blind. OK, attribute this to my holiday mood.
India's middle class now numbers 300 million or about the same as the whole US population. Middle class is defined by having a monthly income of 5,000 Rupees or roughly $110. The line of poverty is drawn at 875 Rupees for a family of four per month!
Considering minuscule price levels - I hired an air-conditioned taxi all day long for meetings and sightseeing for 650 Rupees or less than $15 - this money can go a long way. If you wonder how taxi rides can be so cheap I point you to the use of liquefied natural gas (LNG) that powers all public transport and also helped lift the veil of smog from most parts of Delhi which is also called the garden city.
Although 400 million people lead a life on the edge of marginality without access to health services - and education - prime minister Manmohan Singh knows that he and his government have to strive to improve their living conditions to keep this country as peaceful as it is.
Never mind the travel warnings of the US embassy here and the tight security around Independence Day celebrations on August 15. Nobody here is anti-American but it is certainly a different story when talking about the changes to the world the Bush administration - here widely considered as fascist - has brought.
Indians get enraged that the USA currently tries to block their adavances in nuclear power energy production. Indians have a hard time to understand why Pakistan - haven for Islamic fundamentalists like the Taleban - can proceed with all its nuclear ambitions and India should be deprived of the cheaper energy it urgently needs to stay on the path of peaceful economic expansion. I have a hard time too to understand the reasond behind this issue.
Why are Afghanistan and Iraq being bombed back into medieval times while the so called ally Pakistan goes as unharmed as Saudi Arabia, home to 15 of the 19 terrorists alleged to have conducted 9/11? Never mind the fact that the US government has not come up with an explanation how kerosene burning at 900 degrees Celsius could melt the steel pillar of the WTC's which had a melting point some 500 degrees higher. As long as pigs can fly we have to believe the official story.
Energy is a major issue as frequent blackouts - called brownouts here - remind you several times daily that India lacks a couple of gigawatts. Although substitute generators do a wonderful job - my computer never crashed - they unnecessarily add to the cost of doing business. As probably do the armed guards posted next to every ATM.
Investing In India
Looking at this amazing country from an investment perspective I feel tempted to allocate more funds for Indian share purchases. Keeping a macro view I have been invested in India since early 2006, sharing all the joy when the Sensex, India's leading stock market index, raced to all-time highs and now sharing the fears that higher interest rates in the wake of energy-induced inflation may bring the advance to an intermediate halt. But hey, in the long term we are talking one billion consumers, most of them still craving for the basics of a 21st century life.
Indians themselves see it more relaxed, although, and they have every reason for it. A centuries-old tradition to buy gold as a store of value - heavily subsidized by the gold sales of Western central banks - cushions recent paper losses on the Mumbai (formerly: Bombay) stock market. The figure will never be available but I assume it can be safely bet that no other nation's populations holds as much gold as the Indians do, having snapped up more that 600 tons of gold in the last years. And now they are moving into platinum as well, I hear.
Allright, before I get too agitated and apply for a work permit I finish here and retreat to my Yoga course in the vicinity of the Dalai Lama's home in Dharamsala. The computer stays here in Delhi. Namaste.