Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Wednesday, November 12, 2003

10 Reasons to Invest in India

Rediff is carrying a slideshow full of feel-good factoids on why India is a great investment destination. They include...

-->Among the highest rates of returns on investment. Profitability of US investments in India: 19.33% in 2000 (according to US Department of Commerce).
-->2nd largest English-speaking population.
-->Abundant, high-quality, cost-effective, competitive manpower. Over 100,000 IT professionals added each year.
-->India rated as the most attractive destination for offshore business processing by global consultancy A T Kearney.
-->IT Industry $14 billion; growing at 50% p.a. Exports $12 billion; 2008 exports target: $60 billion, to be 35% of India's total exports.
-->Prevalence of foreign technology licensing - Rank 1 in the world.
-->Availability of scientist and engineers - Rank 2.
-->Quality of management schools - Rank 9.
-->Firm level innovation - Rank 12.
-->Firm level technology absorption - Rank 16.
-->Company spending on R&D - Rank 32. (Source: Global Competitiveness Report, 2003)
-->India rated best destination for outsourcing and 6th most attractive destination for FDI, according to AT Kearney.
-->Global competitive report ranks India at first place in terms of prevalence of foreign technology licensing.
-->Among top 10 tourist destinations. Major destination for foreign venture capital funds.

etc etc...

A few observations. I don't think rank 32 on private R&D or 12 for firm-level innovation is any good. It has to be much higher for real innovation to be spurred in India.

The top 10 tourist destination is probably a reference to the CondeNast story on India being one of 10 best destinations to visit. However, if you actually looked at tourist arrivals (or revenues), I am guessing you'll see a very picture. India gets about 3 million tourists a year, I think. Compare that with tourist arrivals in France at over 60 million or even Egypt which gets over 5 million. Everyone in the govt seems to talk about tourism as a growth area, but even today, NRI's and foreigners have to play a HUGE premium (60%+) on everything from airline tickets to hotel rooms. Citizens of practically every country on earth require a visa to visit India (even Sri Lanks offers waivers to 49 countries, including India). Unless such absurd artifacts of the socialist era are removed, I don't think tourism is going anywhere.

This tourism story is very similar to SME sector which is full of entrepreneurs who cannot scale up because of the absurd incentive regime in place for the sector. The Indian govt lowered entry barriers post 1991, but doesn't seem to understand the importance of exit, which if not present can become an entry barrier by itself.

I leave you with the World Bank's Doing Business Index. It takes 88 days to start a business in India, compared with 46 in China and 4 days in the U.S.

No comments: