Is India not an economic miracle?
Peter Foster, a foreign correspondent of The Telegraph, UK, has reteriated what a recent issue of The Economist had said – that India is ‘Too Hot to Handle’. But then The Economist is quite prejuduced about India (it opposed the nuclear deal). I don’t even want to go into what The Economist has said here because I feel the magazine has a blinkered view of India and many know it. Let’s see what Peter has said, a journalist who tells ‘the story of emerging India.’ He believes that ‘investor confidence (both foreign and Indian)’ does not match ‘with some of the ground the realities’ in India. One of the points he makes is about infrastructure, which he feels is just not good enough.
True, India’s infrastructure is developing very slowly. To western eyes this seems shocking because they keep comparing us to China. But China is not a democracy and a lot of things happening there are happening due to sheer ‘force.’ On the other hand, India is building infrastructure at her own pace and though we crib and complain, most of us acknowledge that life has improved. If we don’t complain enough it is perhaps because we are used to traffic jams and power cuts. Complacency is becoming a problem.
Changes need to happen, yes. India needs to get proper infrastructure in place and this will happen. It’s already happening. And those who are patient will be ahead in the race.
Peter also mentions that the Indian economy is ‘a bit toppy.’ He gives an example:
An Indian acquaintance of mine who is selling up her flat in the UK to move out and live with her husband and baby in Delhi for good. She’s considering investing in the Delhi housing market, which led to a discussion about the relative values of property in Delhi and London. London prices, as any recent first-time buyer will tell you, are mad but Delhi’s are in many respects madder still. The price of good residential property in Delhi has more than doubled in the last couple of years and continues to sky-rocket as lots of money chases too little property – the builders at the bottom of my garden notwithstanding. The result is a micro-bubble which is pushing prices into the la-la land. Another Indian friend reports looking at a house in the West End suburb of Delhi recently priced at 8 crore (80m) rupees, or nearly one million pounds. Now we’re not talking about a classic Lutyens Bungalow here but a normal, Indian concrete box with all attendant problems of intermittent electricity, dripping plumbing and fizzing electrics. I find myself unable to rationalize these prices – a million quid is still a good war chest in the London market, a city which, for all its faults and failings, offers a far higher quality of life than Delhi. How can a suburban house in Delhi – a city where it’s unbearably hot for six months of the year, a city with dengue fever and dangerously high levels of particulate pollution – be worth a million quid?
Well, one of the reasons for the crazy real estate prices is that real estate is still developing – the demand is higher than supply. And there is a lot of black money flowing – this aspect is usually neglected when it comes to real estate. The high level of corruption in India has given people a lot of extra cash to stash. Also the large number of Indians abroad are also prospering and they too invest in real estate in India. Many are doing so simply for the investment.
There are also some strict rent control laws in some places which again reduce the supply. It will all be rationalised in the long run. Those who are patient will reap the fruits.