Namaste from India
After 5000 miles, 11 hours and 3 in-flight movies, I arrive in India - a country of a billion people renowned amongst travellers for its sensory overload of exotic sights, smells and sounds. However, upon landing in Chennai (formerly Madras) I’m most struck by an overwhelming sense of déjà-vu, as the massive construction site waiting outside the doors resembles nothing so closely as the current scene at Heathrow’s Terminal Three.
Disembarking in Chennai, it is evident the Airports Authority of India has been at work. In the city, I spot dizzying new flyovers and rising columns – the building blocks of the city’s new Metro system. The previously pothole ridden roads from the city to my ancestral home in the outskirts have been replaced with smooth silken tarmacs precisely divided into lanes. Of course, no one ever stays in them and they’re mostly hidden by the crushing weight of city traffic.
In contrast to developed economies, worrying about pork barrel spending and bridges to nowhere, Indian infrastructure has been in dire need of investment and modernisation. In the last five year plan the government promised to invest $500 billion in building ports, airports, oil and gas pipelines, roads, bridges etc. However, progress in infrastructure development has been sluggish, due to shortfalls in awarding projects, time and cost overruns in the construction phase, and the dearth of funding post-recession. In addition, some projects have been frustratingly short-sighted. A reputable source (and cousin) in the airline industry remarks of the reconstruction of Chennai airport, "I don’t expect the airport to comfortably meet the increase in demand for air travel in ten years time, let alone twenty. The airport could be at full capacity even as soon as 2017."
Once I’ve unpacked, a quick perusal of the daily papers and eavesdropping on conversations of female relatives, friends and street vendors reveals the one topic that is currently dominating all others. The prices of onions, tomatoes and milk even trumps the current melodramatic family feuding in last night’s Tamil soap opera. The price of food stuffs and the accompanying inflation is a significant headache for the Reserve Bank of India with whom Mervyn King will sympathise.
Inflation in India resided in double digits for five consecutive months in 2010 and ended the year at 8.5%. Food price inflation for the last week was reported at 15.5% due to unseasonable rains and weak distribution chains colliding with changing diets and a growing demand for protein products; milk, eggs and meat.
Inflation is not the only story to be garnering column inches here this week, nor is it the only threat to be posed to India’s economic growth. Foreign direct investment into India was reported to have fallen from $10.9 billion in December 2009 to $6.7 billion in December 2010 even as it is increasing in other Asian countries. The RBI blamed environmental issues and local opposition as the main reasons why foreign companies have been unable to start projects or expand. I suspect the Bank may be using the art of distraction to divert attention away from less salubrious reasons such as bureaucratic red tape and the accompanying corruption. An outlook CNN IBN poll showed that 56% of respondents would not protest when asked for a bribe.
On the occasions when I haven’t been examining the local papers, I have been indulging in some much needed R&R – that’s rest and retail therapy. Browsing the shops in the newly opened city mall déjà-vu struck again, as I passed Accessorize, Mac Cosmetics, Sunglass Hut, Marks and Spencer and Guess. India is already the world’s fifth largest retail market, pegged at around $410 billion, but with organised retail making up only about 5% of total sales, the potential for growth is enormous.
This changing trend in retail is being driven by youth. The median age is a jaw-dropping 27 years, compared to 39.5 years in the UK. The new generation of Indians are experiencing higher rates of urbanisation, a rise in individuality and a growth in income. With all of this comes the rise in aspirations – conspicuous consumption, ever an Indian trait, is driving a broader gamut of the Indian population under the organised retail blanket.
The finance sector is also growing to meet the new generation’s needs for more affordable credit cards, loans and mortgages. The ICICI Bank reported this week that its deposits grew 10% from $43.374 billion to $47.783 billion and it expects loan growth to be 18% higher by the end of the financial year. The Indian stock market is also experiencing higher domestic participation rates thanks to an increasing number of mutual funds.
Indian enterprises are also one of the country’s saving graces. While a large number of Indian companies are still privately held unlisted, there have been some increasingly high profile Indian takeovers of international firms and an expected IPO pipeline of $19.75 billion is lined up for 2011.
As much as I’d like to say that from now on, I’ll be touring the world, and updating you from ever more farfetched places, the lamentable truth is that Mr Urquhart Stewart will (hopefully) be returning as author next week.
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And finally... It has become a source of macho pride in Britain to spice a curry to a degree that isn’t particularly common back in India. However, research from a leading Indian nutritionist has revealed that hot curries have a curative effect on the symptoms of the common cold, while if a significant amount of fenugreek is added to the recipe the effects become even more marked. While this may be true in India, I rather suspect that the vast amounts of beer that ‘traditionally’ acccompany a curry might potentially offset the benefits. However, it’s certainly possible to make the case that if one opts for a particularly hot dish then there are certain side effects that might make a bit of a sniffle seem a trifling matter!
Aparna Ram
Investment Analyst
Seven Investment Management Limited
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