digital thoughts

BusinessWeek published an article about India in the latest issue. This article is very informative. Some Indians won’t like the tone of the article; they may be even offended. But, the fact is a fact. We can’t deny the facts just because we are patriots. The smart thing is to take the criticism and improve ourselves, that’s the only way to grow up.

You can read the complete article here. If you read this post after few weeks, you may find that this link is not working; BusinessWeek moves the past issues to archive section, that is available only for paid subscribers. In that case following summary will be helpful.

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This potholed, four-lane stretch of gritty pavement (Hosur Road)””the primary access to Electronics City””is pure chaos. Cars, trucks, buses, motorcycles, taxis, rickshaws, cows, donkeys, and dogs jostle for every inch of the roadway as horns blare and brakes squeal. Drivers run red lights and jam their vehicles into any available space, paying no mind to pedestrians clustered desperately on median strips like shipwrecked sailors.

Pass through the six-foot-high concrete walls into Electronics City, though, and the loudest sounds you hear are the chirping of birds and the whirr of electric carts that whisk visitors from one steel-and-glass building to the next. Young men and women stroll the manicured pathways that wend their way through the leafy 80-acre spread or coast quietly on bicycles along the smooth asphalt roads.

With virtually no mass transit in Bangalore, Indian technology firm Infosys Technologies Ltd. spends $5 million a year on buses, minivans, and taxis to transport its 18,000 employees to and from Electronics City. And traffic jams mean workers can spend upwards of four hours commuting each day. “India has underinvested in infrastructure for 60 years, and we’re behind what we need by 10 to 12 years,” says T.V. Mohandas Pai, director of human resources for Infosys.

India’s high-tech services industry has set the country’s economic flywheel spinning. Growth is running at 9%-plus this year. The likes of Wal-Mart, Vodafone, and Citigroup are placing multibillion-dollar bets on the country, lured by its 300 million-strong middle class. In spite of a recent drop, the Bombay stock exchange’s benchmark Sensex index is still up more than 40% since June. Real estate has shot through the roof, with some prices doubling in the past year.

But this economic boom is being built on the shakiest of foundations. Highways, modern bridges, world-class airports, reliable power, and clean water are in desperately short supply. And what’s already there is literally crumbling under the weight of progress. In December, a bridge in eastern India collapsed, killing 34 passengers in a train rumbling underneath. Economic losses from congestion and poor roads alone are as high as $6 billion a year, says Gajendra Haldea, an adviser to the federal Planning Commission.

For all its importance, the tech services sector employs just 1.6 million people, and it doesn’t rely on good roads and bridges to get its work done. India needs manufacturing to boom if it is to boost exports and create jobs for the 10 million young people who enter the workforce each year. Suddenly, good infrastructure matters a lot more. Yet industry is hobbled by overcrowded highways where speeds average just 20 miles per hour. Some ports rely on armies of laborers to unload cargo from trucks and lug it onto ships. Across the state of Maharashtra, major cities lose power one day a week to relieve pressure on the grid.

Government officials were shocked last year when Intel Corp. chose Vietnam over India as the site for a new chip assembly plant. Although Intel declined to comment, industry insiders say the reason was largely the lack of reliable power and water in India.

The infrastructure deficit is so critical that it could prevent India from achieving the prosperity that finally seems to be within its grasp. Without reliable power and water and a modern transportation network, the chasm between India’s moneyed elite and its 800 million poor will continue to widen, potentially destabilizing the country. Jagdish N. Bhagwati, a professor at Columbia University, figures gross domestic product growth would run two percentage points higher if the country had decent roads, railways, and power.

The problems are even contributing to overheating in the economy. Inflation spiked in the first week of February to a two-year high of 6.7%, due in part to bottlenecks caused by the country’s lousy transport network. Up to 40% of farm produce is lost because it rots in the fields or spoils en route to consumers, which contributes to rising prices for staples such as lentils and onions.

India today is about where China was a decade ago. Back then, China’s economy was shifting into overdrive, but its roads and power grid weren’t up to the task. So Beijing launched a massive upgrade initiative, building more than 25,000 miles of expressways that now crisscross the country and are as good as the best roads in the U.S. or Europe. India, by contrast, has just 3,700 miles of such highways. It’s no wonder that when foreign companies weigh putting new plants in China vs. India to produce global exports, China more often wins out.

China’s lead in infrastructure is likely to grow, too. Beijing plows about 9% of its GDP into public works, compared with New Delhi’s 4%. And because of its authoritarian government, China gets faster results. “If you have to build a road in China, just a handful of people need to make a decision,” says Daniel Vasella, chief executive of pharmaceutical giant Novartis. “If you want to build a road in India, it’ll take 10 years of discussion before you get a decision.”

Blame it partly on India’s revolving-door democracy. Political parties typically hold power for just one five-year term before disgruntled voters, swayed by populist promises from the opposition, kick them out of office. In elections last year in the state of Tamil Nadu, for instance, a new government was voted in after it pledged to give free color TVs to poor families. “In a sanely organized society you can get a lot done. Not here,” says Jayaprakash Narayan, head of Lok Satta, or People Power, a national reform party.

Envisioning a brand-new India is the easy part; paying for it is another matter. By necessity, since the country’s public debt stands at 82% of GDP, the 11th-worst ranking in the world, much of the money for these new projects will have to come from private sources. Yet India captured only $8 billion in foreign direct investment last year, compared with China’s $63 billion. “Having grandiose plans isn’t enough,” says Yale University economics professor T.N. Srinivasan.

Just about every foreign company operating in India has a horror story of the hardships of doing business there. Nokia Corp. saw thousands of its cellular phones ruined last October when a shipment from its factory in Chennai was soaked by rain because there was no room to warehouse the crates of handsets at the local airport. Japan’s Maruti Suzuki says trucking its cars 900 miles from its factory in Gurgaon to the port in Mumbai can take up to 10 days. That’s partly due to delays at the three state borders along the way, where drivers are stalled as officials check their papers. But it’s also because big rigs are barred from India’s congested cities during the day, when they might bring dense traffic to a standstill. Once at the port, the Japanese company’s autos can wait weeks for the next outbound ship because there’s not enough dock space for cargo carriers to load and unload.

India’s summer monsoons wreak havoc, too. Even relatively light rains can choke sewers, flood streets, and paralyze a city, while downpours are devastating. Two years ago, Florida-based contract manufacturer Jabil Circuit Inc. saw shipments of computers and networking gear from its plant near Mumbai delayed for five days after an epic storm. “In our business, five days is a really long time,” says William D. Muir Jr., who oversees Jabil’s Asian operations.

“We believe in manufacturing in India, but we don’t believe in logistics in India””yet,” says Wim Elfrink, Cisco’s chief globalization officer.

Politicians who refuse to play the game pay a steep price. N. Chandrababu Naidu, the former chief minister of the state of Andhra Pradesh, transformed the state capital of Hyderabad from a backwater into a high-tech destination by building new roads, widening others, and aggressively carving out land for factories and office parks.

His reward? Voters tossed him out of office two years ago. During his decade in power, Naidu didn’t do enough for rural areas, and his challenger promised to channel state funds into irrigation projects and electricity subsidies. “Naidu thought economics were more important than politics. He was wrong,” says V.S. Rao, director of the Birla Institute of Technology & Science in Hyderabad. Naidu, 56, is plotting a comeback in elections two years hence. This time, he’s preaching a new gospel. “You can’t just target growth,” says a chastened Naidu. “You have to create policies that make the wealth trickle down to the common man.”

One reason little practical help makes it from the seats of power to India’s impoverished villages is that so much money gets siphoned off along the way. With corrupt officials skimming at every step, many public works projects either go over budget or are never completed. “You figure that 25% of the cost goes to corruption,” says Verghese Jacob, head of the Byrraju Foundation, which promotes rural development. “And then they do such a bad job that the road falls apart in one year and has to be patched over again,” Jacob says as he jostles along in a car on a potholed byway outside Hyderabad.

None of the solutions to India’s infrastructure challenges are simple, but business leaders, some enlightened government officials, and even ordinary citizens are chipping in to make things better. The most potent weapon India’s reformers have against corruption is transparency. Last October a new right-to-information law went into effect requiring both central and state governments to divulge information about contracts, hiring, and expenditures to any citizen who requests it. The country is also putting to work its vaunted technology prowess to police the government. Officials in 200 districts are using software from Tata Consultancy Services Ltd. to help monitor a government program that offers every rural household a guarantee of 100 days of work per year. Most of this labor goes into public works. To minimize bribes, the TCS software tracks every expenditure””and makes all of the information available real-time on a Web site accessible to anyone.

Sometimes frustrated Indians take matters into their own hands. Tired of spending four-plus hours a day in traffic, Aruna Newton last fall helped organize something of a women’s crusade to speed up infrastructure improvements. Nearly 15,000 volunteers now monitor key road projects and meet with state officials to press for action. They even enlisted the state chief minister’s mother, who helped get his attention. “It’s about the collective power of the people,” says Newton, a 40-year-old vice-president for Infosys. “I just wish building a road was as easy as writing a software program.”