What's Hampering India's Infrastructure Build Out?

Of all the periodicals that I scan on a monthly basis, World Trade Magazine is rapidly becoming one that I spend more time reading and less time skimming. One of their recent articles that offers a candid take on India’s infrastructure relative to China is a case in point why. Featuring an interview with two Intel Supply Chain practitioners, the piece offers candid insights into some of India's supply chain challenges.

Consider how "distribution in India is hampered by three major factors. One is obviously the transportation infrastructure itself, whether it is roads, rail or air. The second is the punitive taxation policies of the individual Indian states. Third -- and here India is closer to Brazil than to China -- India is arguably the largest democracy in the world. All of the Indian states are run somewhat independently, though there is a federal system. But, with that independence there is a lack of a national political consensus; that makes it difficult for any enterprise to operate nationally, especially a foreign enterprise."

Part of the challenge in India -- especially when compared to China -- is funding infrastructure improvements and making desperately needed and already specified improvements a reality. Consider that compared with India, "China has, over many years, financed its infrastructure development from its accumulated financial reserves; they are now probably sitting on something like $1 trillion in cash, so there's a lot of money for the central government to spend. In India, the government doesn't have the money ... [India's momentum is also] slowing down. With road infrastructure, India is about at the 60 percent mark of projects completed, but the remaining 40 percent are waiting to be bid. And, that’s not happening."

In my view, the future of India's manufacturing economy -- especially when it comes to serving export markets -- will entirely depend on the nation's ability to build out an enhanced national highway and rail systems as well as bringing its ports up to 20th -- let alone 21st -- century standards. As I've blogged about before, it's not exactly that India is discounting its infrastructure capabilities given the poor service it delivers. In fact, the opposite is the case, as India's port and rail costs are among the highest in the world (I find this last point especially fascinating since India port labor FTE costs are probably 1 / 100th of what the Longshoremen charge in North America for their grossly overpriced services).

Jason Busch

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