Global Investing

Power failures shine light on India’s woes

Half of India’s 1.2 billion people have been without power today,  bringing transport, factories and offices to a grinding halt for the second day in a row and sparking rage amongst the sweltering population. That’s embarrassing enough for a country that prides itself as  a member of the BRIC quartet of big emerging powerhouses along with Brazil, Russia and China.  But the outages will also hit economic growth which is already at 10-year lows. And the power failures, highlighting India’s woeful infrastructure, bode poorly for the government’s plans to step up manufacturing and lure more foreign companies to the factory sector.

India urgently needs to increase production and exports of manufactured goods. After all, software or pharma exports do not create jobs for a huge and largely unskilled population. India should be making and selling toys, clothes, shoes –- the things that helped lift hundreds of millions of Chinese, Taiwanese and Koreans  out of poverty and fuelled the current account surpluses in these countries.  At present, manufacturing provides less than 16 percent of India’s gross domestic product (30 percent in China, 25 percent in South Korea and Taiwan)  but the government wants to raise that to 26 percent by 2022.  Trade minister Anand Sharma, in London last week, for a pre-Olympics conference, was eloquent on the plan to boost manufacturing exports to plug the current account gap:

In coming decades, India will be transformed into a major manufacturing hub of the world.

Unfortunately, without better infrastructure — roads, electricity and ports — that will remain a pipe dream.  Above all, factories need power. (Most workshops in India must resort to costly back-up power supplied by diesel generators)  While India has indeed pencilled in a $1 trillion investment target to revive infrastructure, half the funding is to come from the private sector and a flagging world economy could scupper those plans.

One hope remains — that this week’s embarrassment galvanises the government  into some bold reform moves.  As Jeff Glekin, my Mumbai-based colleague from Breaking Views writes:

How to Spend It – for sovereign wealth funds (2)

On our way to a meeting in London with a senior official of a sovereign wealth fund from an emerging market country, my colleague and I came across a van from a company called Sovereign Recovery.

How timely, we thought, given the billions of dollars emerging sovereigns have had to pour into local markets to revive their economies hit by sudden drainage of foreign capital by the credit crisis.

 The company, of course, is not engaged in any of sovereign economic recovery work — they are motor engineers who have contracts with leading transport operators including Transport for London.

On Bankers and Busing

Bankers are having a rough time of it lately.  It is not just that their companies are collapsing beneath them and their bonuses are the subject of global hate and derision. They also have to put up with the barbs of journalists (who are very familiar with being at the bottom of the popularity pile).

The latest example comes from Tim Dowling, scribbling away for Britain’s Guardian newspaper.  Mr Dowling has penned a useful primer for bankers who suddenly find themselves living in the real world.

You can read the complete guide by clicking here.  But Global Investing’s favourite tip concerns the use of London’s celebrated buses: