India's Growth and Low-Hanging Fruit

Stories of the fast growth of both China and India abound. There are of course many important differences in their growth stories, and one that is often mentioned is the generally abysmal state of India's infrastructure (roads, utilities, rural services, and so on). A recent BusinessWeek cover story, The Trouble with India, does a good job of describing this. There are many "online extras" linked from this page, that weren't in the print magazine too. But for me the most interesting bits of data were those in the chart "How the Global Giants Stack Up". Here we see Population, National Expressways, Major Airports, Electricity Production, Internet Penetration, and Port Shipments compared between India, China, and the US. I would have liked to have seen Europe and Russia included as two other "giants", but even just this three-way snapshot is interesting. India and China each have around 4 times the population of the US. The US has twice as many expressways as China, and more than 12 times as many as India. The US has more than three times as many airports as China, and 11 times as many as India. The US has 1.5 times as much electricity production as China, and 6 times as much as India. Internet penetration is nearly 7 times greater in the US than in China (and far less regulated!), and nearly 20 times greater than in India. China of course has far more port shipments -- two times as many as the US, who in turn as over three times as many as India. See the chart for the numbers.

These numbers are striking. I don't think India's growth can be accurately called a "bubble", in the way the Internet bubble was clearly a "bubble" several years ago -- and this article doesn't argue for such a label either. But the article, and these numbers, do lead me to think that India's growth is not sustainable at the 8-10% clip we have seen recently. I'm far from an expert on such matters, but it wouldn't surprise me at all if we see less growth in India at some point. Stating the obvious? Perhaps. But my point is that the reason for such slower growth will be because the "low-hanging fruit" will have all been picked. That is, generally speaking, I would assume that the easiest and most profitable ventures occur first. This is a univeral rule, but generally speaking if two ventures are similar but one has far fewer government hurdles, requires few if any bribes, doesn't involve building facilities and infrastructure in the surrounding area (hospitals, schools, roads, etc.), well, that venture will be the one undertaken. This leaves other areas of the country, and other more difficult projects, for a later day -- if ever. Hopefully the bureaucracy in India will continue to change, and many of the bigger and harder problems the country faces will be increasingly addressed over time, but doing so is the steeper hill to climb, and so I assume progress will become slow.

This is not necessity of course, but it is what I'd predict right now. The country -- like any country -- could of course get its act together, and make wise decisions across the board: economically, politically, socially, culturally, and so on. They could promote rational individualism, free markets, entreprenuerialism, and so on (in a word, capitalism) in a consistent way -- and thereby really turn around their country fast, including helping the hundreds of millions of poor. But alas, that doesn't seem likely any time soon.