World Trade Magazine has an excellent interview with 2 supply chain executives from Intel on how they are investing in India and the inherent logistical difficulties companies face in India. There’s too much good stuff to excerpt, but one of the items they discussed of great interest to me was India’s infrastructure difficulties:

Kang: In India, the question is the affordability of improvements. China has, over many years, financed its infrastructure development from its accumulated financial reserves; they are now probably sitting on something like $1 trillion in cash, so there’s a lot of money for the central government to spend. In India, the government doesn’t have the money. The rate of infrastructure investment depends primarily on private investors providing the initial capital, building the highway and collecting the toll for some years, before turning it back to the government for permanent ownership.

I think, with highways, that the momentum India had over the past four or five years is slowing down. With road infrastructure, India is about at the 60 percent mark of projects completed, but the remaining 40 percent are waiting to be bid. And, that’s not happening.

At the same time, you do not have nationwide distribution. Especially for the airports, which appear not to be keeping up with the huge domestic growth in passenger traffic, let alone air cargo. Imagine it this way: You have a country that is relatively large, where air transportation infrastructure is not exactly working out. You have two other spokes: surface, which we’ve discussed, or else you literally have to transport cargoes from east to west by putting them on a boat and sailing the ships around to the other side. Frankly, this is a concern for us. Our business growth in India could potentially be hampered by the lack of transportation infrastructure. It is what it is; we are not likely to change the rate of infrastructure development over the next five to ten years.

WT: So these factors combine to complicate doing anything systematic about infrastructure.

Kang: There is an irony here. Because India has a much greater dispersion of consumption ‘hotspots,’ the problems caused by a poor distribution infrastructure become less obvious. You don’t have to funnel large quantities of products through key points, so the problems are less of a life or death situation. The consequence is that instead of coping with a few big problems, you are coping with many small brush fires. These are challenges of a different scale, of a different type, very much driven by the greater dispersion of purchasing power.

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