A View of Modern India

October 2007 Dr. Hans Black

One can conjure up an image of India from news items and media coverage, but it will always remain just that: an image. On a recent visit, that image gave way to awe as I experienced the sheer immensity of the country. Many observers have played up the successes that India has enjoyed in recent years; the stock market, which was booming while I was there in September, is clearly a witness to that (the Bombay Stock Index, known as the Sensex, has risen 600 percent in the last five years). Along with China and Brazil, India has received a lot of attention as a developing country taking great strides toward the future; but as with these other two countries, there are also serious concerns and problems that cannot be overlooked.

Technology and technology-related companies — wireless communica-tions, broadband communications, software development and call centers — are the flagship of India’s remarkable progress, which can be readily seen in such cities as Bangalore and Delhi. The pace of development is fast and frantic, but not on the roads. Indeed, the quality of India’s infrastructure leaves a lot to be desired — its roads are poor and virtually non-functioning at the very best of times — and will need immense amounts of money to upgrade.

India is a country of staggering numbers and contrasts. The population is now above one billion, although no one really knows the exact figure as so many people simply cannot be counted; many of India’s poorest people are not included in any statistics. This is in fact a very serious problem as there is no accurate national registry of the population. The growth of the middle class is simply fantastic, as evidenced in the building activity. In various cities, neighborhoods where expensive apartments, homes and hotels are being built are next door to areas of extreme squalor where dogs howl in the night, often from hunger. As we drove through villages where water is pumped by hand from decidedly unhygienic sources, a nearby steel structure was able to accommodate both my cell phone and Blackberry with no difficulty whatsoever. I wish I could say the same for some parts of Vermont and New Hampshire.

Entrepreneurs, globally, are generally an optimistic lot, but nowhere more so than in India. It is exceedingly difficult not to bump into someone who does not have a new scheme or new project, usually technology-related, that delivers services and information to a growing group of affluent middle and upper middle class Indians. Prosperity breeds a lot of both competition and capacity, but one clearly gets a sense of disproportion. Just as the local market is clearly fully priced, and many are chasing after the same opportunities, one can walk through virtually any city and see a Vodafone shop on every block, while at the same time some other storefront, measuring perhaps 12 feet wide by 20 feet deep, will sell trinkets, Coca- Cola or anything else. Oftentimes these little storefronts can have annual sales measuring in the hundreds of thousands of dollars and are immensely profitable. Amidst the occasional rat seen scampering between containers of spices, commerce takes place very actively.

When meeting friends in India, one cannot help but be impressed with both their ingenuity and hard work, while at the same time it is discouraging to see how other basic aspects of their lives are wanting. A local genius may be designing software for a wireless company in California, but the government is not able to provide proper water and sewerage systems, to say nothing of transportation. In short, the party line always seems to be fantastic, but in many respects the execution is lagging. While mice scamper around airport waiting halls, dozens of security men are checking tourists for the third and fourth time looking for one can only guess what.

As impressed as one clearly should be, the overall situation seems to be incredibly overdone. Stocks are expensive, property prices absurd, and one is struck with similarities to the economy in Thailand in the mid 1990s. While there is no doubt that the country will continue to prosper, entry points in the future will appear at substantially cheaper prices. All it would take is a global slowdown or perhaps a major jolt, such as a bust cycle for the bubble that is now called China. Prices would drop, things would slow down and investors would be able to enter at substantially lower prices than they can at the present time. Unfortunately, the Indian economy is ripe for such a pullback as far too many are involved in such pursuits as the stock market, for which there are three business channels giving live quotes twenty-four hours a day with unending bullish interviews with so-called market experts. Our experience is that such opportunities are worth waiting for.