INDIA:WE LACK IN INFRASTRUCTURE

China's GDP growth may seem too far ahead for India to catch up with. But it might just do so, and infact India could exceed the dragon nation's scorching pace of growth in the next 4 to 5 years. Or so believes Kaushik Basu, India's chief economic advisor. According to him, India's relatively large young population will help increase its savings rate from its current 38% to more than 40% of GDP. This he expects will spur economic expansion at the fast pace needed to overtake China.

However, all else equal, we believe that there is one defining factor that differentiates China from India. This is one thing that can put the proverbial spanner in the wheel for India. And that factor is 'Infrastructure'. Wherever one looks, be it roads, power, land acquisition, transmission and distribution, ports etc., all arterial for the unbridled growth India seeks, there are delays and bottlenecks in capacity expansion. These delays span years sometimes, and growth continues to get hampered. In contrast, China seems to have almost completely mastered its infrastructure needs. Thus, if such myriad issues continuing to stifle infrastructure expansion in India, we don't think it will be realistic to expect that India will overtake China on the GDP growth front even in the next 5 years.