India Roundtable

QUESTION: India is building highways, airports and power stations at a faster rate than ever before. But it often seems as if the progress does not match the infrastructure needs. Is enough being done, and if not, how would you fix the problem?

Carol Bartz
Carol Bartz
Executive Chairman of the Board, Autodesk
A 2005 study by Morgan Stanley concluded that, "the single most important macro constraint on the Indian economy, holding back its average growth, is the low spending on infrastructure." The study shows that India's spending on infrastructure sank to a 33-year low in 2003 - 3.5 percent of GDP, or $21 billion. By contrast, in the same period China's spending on infrastructure was 10.6 percent of GDP, or $150 billion.

Clearly, India is starving its infrastructure growth budgets. But there are success stories - including telecom and ports. The telecom sector is booming. In 2006, the mobile phone market grew by about 55 percent. The Economist predicts that India will have 500 million phone subscribers by 2010. Mobile phone technology is allowing India to skip building out a hardwired, countrywide telephone system. The modernization of ports is another success story. Turnaround times to unload and load ships have been cut by more than 50 percent.

The success of telecom and ports share two common themes - dramatic reductions in government regulation, and privatization that's encouraged foreign investment. These success stories reveal India's larger problem: outdated, inefficient regulation and heavy-handed government intervention.

India gained independence in 1947 and began an extended period of centralized economic planning. They looked to the policies of the Soviet Union as a model of how to build an economy. To India's credit, this ended in the early 1990s.

But did it? Suffocating bureaucracies, even in decline, can still be a very potent barrier separating opportunities and progress. Telecom in India is flourishing - in large part because government got out of the way of progress.

For India to truly live up to its economic potential in the 21st-century, it needs to do two things. First, spend more money on infrastructure. And second, and much more importantly, India needs to lift the heavy hand of regulation, government control and the social need for broad consensus, a.k.a. "a bone for every barking dog."

With a clear line between opportunity, progress and results, global capital - which is abundant and adventurous - can be a strong partner in building India's infrastructure.

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