India‘s inept and corrupt government, over-leveraged and corrupt companies, non existent manufacturing capacity etc. have resulted in India becoming one of the biggest importers of oil, electronics, capital equipment etc. Despite having generous resources, good management capability and extremely abundant and cheap labor, India still imports most of its needs. There is no reason for India to be a net importer of cheap low value added goods such as toys and furniture. But thanks to the difficulty and high cost of doing business, India is a huge importer of these goods as well. It runs a massive current account deficit as its misguided government has incentivized consumption over investment through huge subsidies.
India‘s production and growth is massively beyond potential, mainly due to soft factors such as hurdles in getting permits, trading, logistics etc. Massive conglomerates have increased inefficiency by creating artificial competitive barriers through crony capitalism. Now even these giant firms are suffering from the all pervasiveness cronyism and nepotism, as growth figures have crashed. According to IMF India’s growth will fall below 4%, which is quite atrocious when you consider India’s very low per capita income.
India is importing vast amounts of electronics and capital goods due to a government which frankly cares two hoots about the country. The leaders are mostly guided by their own selfish interest and are easily bought. Major corporations are owned by powerful politicians through benami links and twist regulations to favor themselves over the competition. Nira Radia a small time fry supposedly evaded hundreds of millions in taxes. Given her skill set and experience, the only way she could have made so much money was through our convulted and corrupt political system. In India you don’t require management efficiency, what you require is greasing efficiency. A new HSBC study predicts that India will soon become the largest importer of infrastructure goods. Not a surprise that the bank is extrapolating India’s poor manufacturing performance. What might throw a spanner is that India’s currency implodes and growth goes even lower, taking the whole extrapolation thing for a toss.Google+