and now The Economist*
On the WSJ’s Davos blog: “Is India Overheated?” Balaji wrote a great comment in reaction to Stephen Schwarman (CEO, Blackstone Group)’s “outsider’s perspective”. But first the “outsider’s perspective” (as reported by Christopher Emsden):
“A couple of years ago, he said, his company decided to start investing in India. He liked India because it was a democracy, the legal system was well established, and the costs seemed low and the potential seemed high.
But when Blackstone tried to find an office in the commercial capital of Mumbai (formerly Bombay), the only space it could find was a hotel room. (”And I thought hotel rooms were for sleeping, not officing,” he said.) Employees, wired into the world, wanted wages competitive with what they would earn elsewhere. And even the investment climate seemed somewhat overheated, with high multiples. Land prices alone, he was told, are more than 10 times what they were 18 months ago.
“Overheated?” asked Mr. Schwarzman, who describes himself as a big India booster. “You decide.”
Here is what Balaji wrote in response:
“…When it comes to India, perceptions rule rather than the actual statistics. Indians whine that there is very great income disparity. Take a look at the gini coefficient and India has much lesser disparity than most countries*** in the world including US & China.
So, if people are allowed to comment on a nation’s health just by the perceived lack of facilities in the airports and cheap offices, then India is surely overheated.
Look beyond the narrow perceptions, and you will see what drives a group that starts the highest number of companies in Silicon Valley, that occupies top executive positions in major boardrooms of the world, that excels in the world’s top universities. And no, India is not propelled by oil & tin & Wal-Mart products. So, any comparison with Brazil, China & Russia is not warranted…”
Balaji then pinpoints the underlying factor sustaining the Indian growth story…something which I think is often ignored but is probably India’s greatest asset and strength – its HUMAN CAPITAL.
“…In a lot of ways, India’s strength is similar to that of early America. English, Movies & Democracy are just one part of the game. But, the biggest part is that both countries place their thrust on its entrepreneurs. This is where India’s long term future is. If this one is set alright, all the remaining including lack of infrastructure can be set right.
An example is the Telecom infrastructure. Just a few years ago, India had a highly pathetic telecom sector with the lowest teledensity. Enter Mittal, Reliance, Birlas, Tatas to compete with state majors, now it is on its way to become one of the world’s top telecom sectors. Growth is fastest, coverage is excellent and services are increasing day-by-day.
Thus, currently Indian infrastructure might be shabby. But, it has some of the best Indian business minds working on it, including the Tatas & Reliance, Essar, Jindals. Railways & Aviation have already clocked significant change and roadways/ports/power would follow suit, in light of a lot of developments happening currently including the India’s nuke deal.
In the long run, lets see how any body makes money by betting against India and all those overheating pessimisms.”
I could not have put it any better…
P.P.S. See also one of my previous posts on a related topic (re. Venture Capital in India, China)
* See Nanubhai Desai’s comment on this topic which he starts by saying, “I didn’t know whether to laugh or cry when I saw the cover of the new issue of The Economist”…and this comment by Edward Hugh (on the same topic) in which he says, “The Indian phenomenon is a huge one. India will quite simply become the biggest developed economy ever (the only real debate is about when), and since India is the planet’s most populace country, and global population sometime later this century will start to turn south, India will become a unique phenomenon, there will never be the like of this again..”
** I have never been to Davos and don’t read the FT…so I am not even sure I am qualified to comment on these things…but then that’s what blogs are for 🙂
*** See this post for comparative GINI coefficients: India is estimated to be between 33 and 37 (this study reports it at 38) , compared to 41 for the United States, 45 for China, and 59 for Brazil