Indelible India

I was in India for 2 weeks for the first part of June 2011. While most of my trip was personal, I was amazed by the progress of this country and dismayed by the scale of chaos, the government corruption and the disparity between the middle class in cities and the poor and suffering rural class. It was two full years since my last visit and the change was shocking and I was awestruck.

The good ...

- Huge investments in infrastructure to support the growth. It is expected that India will spend about $1 trillion in infrastructure over the next 5 years. This is on top of the billions that cities like Bangalore have already spent on metro and road infrastructure.

- Indian companies are flush with capital. They are going on an acquiring spree. From Tata Motors which acquired Jaguar to Manipal Group which acquired Colonial Candles. there has been a resurgence in both the global outlook and risk taking. These acquisitions during the down times of 2008 and 2009 are apparently paying dividends. Tata Motors is over-seeing a stunning turnaround of Jaguar.

- Malls and more malls - Indian society has not been known for spending until the last two generations. India's household saving rate is 34.7% (In contrast China is a whopping 38% and U.S a dismal 3.7%. src:BW ). You do not see any evidence of savings if you visit the malls in every other corner. There are teeming crowds through out the day that do not mind dropping Rs. 40,000(approx $10000 on an iPad or Rs 360(approx $9) for a movie ticket. Yes... you get a madras coffee for under $1.00 but you can get premium coffee for well over $5.00 in one of those pricey coffee shops in a mall. Indian consumer has come of age and with willingness to spend cash (Cash still remains the prominent mode of transaction - not credit cards).

Congestion: Wow! Accustomed to a 45m commute everyday on Highway 101, you would think I should be able to bear the congestion. Hell no! The congestion was a couple of orders worse in Bangalore. And chaos ruled the roadways as construction of Metro (most major arteries have been dug up), lack of ettiquette and the estimated 4m automobiles that clog the road daily take a toll on productivity and quality of life.

Corruption - Indian government agencies have always been highly corrupt. Underhand deals with baboos(read beaurocrats) and politicians are a way of life in India - you typically get asked to pay underhand for any legitimate need- from getting a driver's license to a permit to build a business. But the scale of scams are reaching billions of dollars and the saying "greed has no limits" rings so true in India. From the recent telco spectrum auction to infrastructure buildout for the commonwealth games there have been corruption leading to billions of loss. The scale of corruption is astounding... One surmises that the trillion dollars marked for the infrastructure in the next 5 years, about a third of that money will be lost due to corruption. In case you did not know how it works here is the skinny on it...

Company A bids to build the infrastructure at inflated price. Mysteriously Company A wins over its other competitors and funnels a major portion of the award to politicians and the beaurocrats. Typically culprits of the scams that are caught go scott free or with a rap on the wrists..

The ravages of growth: Unbridled growth has resulted in paucity of vital resources - water, electricity and clean air. Pollution in Bangalore has grown primarily due to transportation which contributes to 20% of Particulate Matter(PM) 10 and 50% of PM 2.5. This is due to a mix of old polluting automobiles and the rise in automobile ownerships per capita. Power allocation and water supply have seen disproportionate reduction to rural areas to address the needs of cities. All in the name of growth

Inflation: Inflation is at around 9% and GDP growth is around 8%. The impact of inflation due to growth and consumer spending habit have made the have nots suffer even more. The gap between the 350m middle class and an equal number of poor malnourished city and rural class have increased. With no meaninful welfare schemes for the indigent and the old, inflation is worsening the already severe class gap and this could lead to unrest. The lack of value for life is appalling as you walk the streets. The tide of economic growth in India seems to have skipped the lower class and politicians at best have doled out cash during election times but not set long term policies to ensure their progress.

Incredible India is the tag line used in promotions by the Indian government - primarily to promote business and tourism in India to outsiders. While I am not an outsider - but an insider looking from out, I felt India has the promise to be incredible and all VCs and corporate strategists I meet every day agree. However India still has to address her problems - primarily to enforce the rule of law, have social accountability and and have a sustainable growth strategy with infrastructure to support it. Even if India is not incredible yet, my recent vacation left an indelible mark and I came encouraged by the indian entrepreneurship and pschye that overcomes its shortcomings. Stay tuned for some more of my indian vignettes...