Miles to go!

Marketmind

Having driven to the same destination about a year ago, my teenage son and I were keenly looking forward to an exhilarating driving experience on this 'showcase' highway in northern India and to a delightful weekend in one of the major heritage cities of India.

Our exhilaration turned into deep disappointment at finding that the highway has deteriorated dramatically with several long stretches pock marked with pot-holes (and sections exist where the road has almost disappeared).

For bulk of the distance, the left lane showed unmistakable signs of rapid wear and tear presumably due to its being used largely by heavier transport traffic.

If this is an example of the much touted 'Golden Quadrilateral' project design and execution, we can almost be certain that by the time the first phase itself comes to a completion, we may need to start construction all over again from where the first phase began!

The heritage city of Jaipur continues to deteriorate "" with practically no signs of any improvement in infrastructure or its local economy as compared to the years gone by, and with practically no visible indication that the national economic growth of the last decade has made any serious impact beyond what can be seen in the metros and mini metros.

The markets looked decrepit, the merchandise substantially lower end, and the tourist spots virtually uninviting with unbearable filth right at their entrance!

Yet, at the same time, as per the stock markets and the financial press, the economy is showing signs of a mega boom once again! It is good to have the 'feel-good' factor back again but it is unbelievable how almost the entire nation has started believing that an unprecedented 'prosperity' is raining with these monsoons!

India has had a good monsoon "" sometimes for almost a decade at a stretch like in late-80s and most of 90s "" in the past but many of us are behaving as if it is the first time that we have seen an abundance of rain!

Many companies have shown good results (and will perhaps continue to show good results for the next few quarters) largely on account of a very substantial reduction in their cost of borrowing due to the significantly lower interest rates as well as some improvement in operational efficiencies and better 'other incomes'.

However, competition is also increasing and hence the pressure on margins for most of these companies will continue to intensify "" implying that most of them will have to be extremely innovative in the years to come if the same levels of profitability are to be maintained.

Most importantly, if India's growth does not extend beyond the select metros and some other major towns, rural and small town market opportunity will continue to remain one of the many myths in India rather than a promising reality.

What should be done? Unfortunately, there is no getting away from the crucial role the Central and state governments have to play now and in the years to come.

Massive reforms "" whether politically palatable or not "" have to be undertaken and the various chambers of commerce as well as other influential think tanks and individuals have to continue to put their efforts in highlighting the critical need for urgent action on various fronts including high quality infrastructure (road, surface and air transport, utilities), better governance and accountability of public service departments, and creation of a better investment environment across the hinterland of the nation which can lead to creation of more jobs in non-metro/ major town areas.

Unless we as a nation focus on this difficult task ahead, we can easily fall into the illusion of false prosperity as we drive through suburbs of cities like Delhi / Mumbai / Bangalore / Chennai and Hyderabad with their glistening high-rise commercial and residential blocks, swank shopping malls and parking lots full of new relatively high- end cars.

The trickle down effect, if any, of this new found prosperity in the big cities may take a long time to permeate to the rest of India. Till that happens, the fissures between the 'haves' and the 'have-nots' shall continue to increase creating a potentially explosive situation in not so distant future!

To the individual companies, I can only suggest that while they should enjoy the magic of the monsoons, they should not entirely leave the fate of their businesses in the hands of God Indra!

Arvind@ksa-technopak.com